We're Set Up for the Greatest Squeeze in the History of Silver: Shawn Khunkhun
What this covers
CEO of Dolly Varden Silver (OTCQX: DOLLF | TSXV: DV) Shawn Khunkhun points out the fact that all silver mined globally will be 100% used in industrial purposes by the end of 2025, resulting in what he believes will be the mother of all supply squeezes. Shawn discusses how Dolly Varden Silver fits into the picture, and breaks down their recent drill results, financing with Eric Sprott, plans for the rest of 2024, and much more.
Dolly Varden Silver: https://dollyvardensilver.com Follow Dolly Varden Silver on X: https://x.com/SilverVarden
Disclaimer: Commodity Culture was compensated by Dolly Varden Silver for producing this interview. Jesse Day is not a shareholder of Dolly Varden Silver. Nothing contained in this video is to be construed as investment advice, do your own due diligence.
Follow Jesse Day on X: https://twitter.com/jessebday
00:00 Introduction 00:37 Historic Silver Squeeze Coming 05:03 Gold at All-Time Highs 08:56 Gold to Silver Ratio 11:39 Health of Silver Mining Sector 17:08 What Role Will Dolly Varden Play? 20:36 Drill Results From Wolf Vein 23:36 Recent Financing With Eric Sprott 27:28 Upcoming Newsflow From Dolly Varden 28:50 Final Words on Dolly Varden Silver
#silver #silverprice #silversqueeze
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Silver is transitioning from a 100-year bear market to an imminent bull market driven by industrial demand exhausting annual mine supply by end of 2025, creating a supply squeeze that will drive prices dramatically higher and make silver exploration equities exceptional value plays.
- Annual silver mining supply of 850 million ounces will be fully consumed by industrial demand by end of 2025, with 250+ million ounce deficits already recorded in recent years
- Gold-silver ratio at 86:1 versus historical 54:1 average means silver is historically undervalued, and investment demand during bull markets is 2-4x higher than the 30% seen during bear markets
- Silver mining equities are trading at historically cheap valuations relative to metal prices, with Dolly Varden positioned as a top-tier primary silver exploration play in a safe jurisdiction
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Gold miners had better profit margins 4 years ago (48%) than they do today (40%), even though gold prices are $400/oz higher now than they were then, suggesting that mine economics have deteriorated despite higher gold prices.
“the miners were more profitable in 2020 than they are today that the margins were better um I think the numbers are you know uh you know 48% margins versus 40% margins if you compare the two periods of time so you could argue that gold mining was more profitable four years ago with a gold price that was $400 an ounce lower than it is today”
Over the last 100 years, 98% of that period we have been in a bear market for silver, with only two bull market moments in 1980 and 2011, both short-lived and driven by investment demand rather than industrial consumption
“in the last hundred years you know 98% of that last 100 years we've been in a bare market for silver um we've had two moments uh 1980 and 2011 where you know we went into a bull market but it was very short-lived”
In 2008 financial crisis, gold fell 30% from January high of $1000+ to $680 in Q4, but other asset classes fell 80-90%, demonstrating gold's relative value preservation during major crashes
“it was very difficult for the story to get picked up because it was so controversial um talking about things that are talked about on CNBC today are talked about in the mainstream press um so I think we've gone from you know in in the last seven years where it would be taboo to talk about some of the you know reasons to own gold um where they're starting to become mainstream and acceptable and recognized but look I think as long as we're in an environment where we've got stock indices at record highs other asset classes at all-time highs and going higher um I don't think gold necessarily needs to be front and center in the conversation um it it reminds me a little bit and again I'm I'm I'm limited to my 43 years on this planet and my 23 my 20 years in the in in in investing in mining um I'm limited to my own experience it resembles 2007 a little bit to me where you had uh stock exchanges real estate prices and gold all trading at a pretty healthy uh value um and it really wasn't until the relative value of gold in in relation to these other asset classes was showing strength even though we saw the price of gold fall in 2008 from a January high of when it first broke a th000 for the first time ever to a low of $680 in Q4 during the the GFC during the the financial crisis so gold was down you know 30% but other asset classes were down 80% 90%”
The 'red line theory' developed by BC geologists Jeff Kaiba and Joanne Nelson identifies a 2-kilometer unconformity between two ages of rocks where fluids rise and deposits form; Dolly Varden is using this theory to guide exploration in the Golden Triangle and has identified repeating patterns.
“we call it the red line Theory up in the Golden Triangle and it was a theory that was developed by two very smart um bcgs BC geological um geologists uh Jeff Kaiba and Joanne Nelson and what they looked at was within the 2 kilometer unconformity of two ages of rocks is where the fluids came up and where the deposits were uh were formed and so we know where to look we know there's a repeating pattern”
In 1980, the price of silver spiked from its prior level to significant highs on the back of the Hunt brothers cornering the market and gold running from $35/oz to over $800/oz, not due to photography or industrial component demand of that era.
“if you go back to 1980 uh the gold was running from $35 an ounce to over $800 an ounce the the Brothers had quartered the market and the price of silver spiked it was not based on uh photography or the big industrial components and usages of the time”
Gold has priced itself out of the average buyer's hands on a relative basis, which is why masses in India and China are turning to silver for precious metal investment
“gold has priced itself out of the average buyer hands and it always has been historically but it's on a relative basis and it's why you see the masses in India in China going to Silver”
Gold has historically been recycled and all ever-mined gold remains in existence, whereas silver is consumed in industrial processes and lost from recycling, making silver structurally scarcer over time despite higher annual production
“you know gold is um you know everything that we've ever mined is still with us where whereas the silver gets consumed it doesn't get recycled”
Gold is currently hitting record highs in all currencies and is in an unequivocal bull market, while silver has beta to gold and will outperform it as it always has during gold bull markets
“when we get into a bull market for precious metals and we are unequivocally in a bull market for gold it's hitting record highs in all currencies and we know Silver's got beta and we know silver will outperform it has every time”
When evaluating mining companies during a commodity bull market, consider comparing a high-grade primary mine in a safe jurisdiction (like Dolly Varden's Kit Sal Valley) against a low-grade open pit mine in Mexico or similar jurisdictions
“at this time when you've got a 90 to1 silver to gold ratio and history tells us that should reasonably be at 30 to1 if not 20 to1 um what company do you want to be positioned in for that coming move do you want a lowgrade open pit mine in Mexico or do you want a highgrade minimal disturbance past producer in the Golden Triangle”
The mining industry has never been healthier, with all major producers now paying dividends and running exceptionally lean operations with strong production profiles
“the industry has never been healthier from a standpoint of this is an industry that now across the board pays a dividend uh it's run exceptionally lean um the production profile is strong um”
Demand for precious metals in the West has been essentially zero, while the primary drivers of precious metals prices since 2000 have been Eastern buying and central bank accumulation
“we've had zero demand out of the West for these Metals zero um we're stting to see a little bit come in recently in the last couple of months but really what's Driven these prices I think since 200000 have been it's been Eastern buying and it's been uh it's been Central Bank buying”
Konun questions the accuracy and transparency of silver supply-demand reporting from institutes and exchanges, noting that the market is not as transparent as it should be but is changing with participation of Shanghai Metals exchange bringing more price discovery to physical markets
“you know I don't always believe in the institutes and the reporting that we're getting if it if is it accurate because um you know really the you know the market is not as transparent as it should be and it's changing you know with with some of like the Shanghai Metals exchange and you know we're starting to see you know more price you know the the paper price the digital price represent more the physical Market but it's it's still got a long way to go”
As long as stock indices and other asset classes are at record highs and moving higher, gold does not necessarily need to be front and center in mainstream conversation because other assets are outperforming it.
“but look I think as long as we're in an environment where we've got stock indices at record highs other asset classes at all-time highs and going higher um I don't think gold necessarily needs to be front and center in the conversation”
Seven years ago it was considered taboo to discuss reasons to own gold in mainstream publications, but talking points about gold that were controversial then are now acceptable and recognized on CNBC and mainstream press
“Frank was telling me a story yesterday about um writing an article uh for a mainstream publication um about why gold should be relevant and this was seven years ago and um it was very very difficult for the story to get picked up because it was so controversial um talking about things that are talked about on CNBC today are talked about in the mainstream press”
Wolf deposit is growing into a 'unicorn asset'—a primary silver mine in a safe jurisdiction—which is exceptionally rare because primary silver mines make up only 28% of market while most silver is produced as byproduct
“the bottom line is we've got this wolf deposit it's growing and what it's growing Jesse is a unicorn asset it's growing a primary silver mine in a safe jurisdiction primary Silver Mines make up 28% of the market most silver gets produced as a byproduct so finding a primary silver mine is super rich finding it in a safe jurisdiction is next to Impossible there's just a handful of these and we happen to have a very large very robust one”
Commodity equities have never been more inexpensive relative to commodity prices in history, making this 'the greatest value opportunity for the investor' and this dynamic is not unique to silver but has been visible recently in uranium
“Equity commodity equities have never been uh more inexpensive relative to commodity price in history so I think this is the greatest value opportunity for the investor and I think this and it's not unique to Silver you know we've seen it play out in other Commodities most recently uranium um”
Staunch silver-centric bulls are beginning to capitulate and throw in the towel, questioning whether historic gold-silver ratio relationships will normalize, which indicates we are closer than ever to that normalization occurring
“I'm starting to hear the most staunch uh silver Centric bulls start to capitulate and start to throw in the towel and start to talk about how we won't you know the relation the historic relationships won't go back and um it it tells me that we are closer than we've ever been to that relationship normalizing”
By the end of 2025 (15-16 months from now), industry will consume 100% of the 850 million ounces of silver mined annually, a dramatic shift from current conditions where industrial demand is growing but not yet consuming all supply
“by the end of 2025 so this is 15 16 months from now industry is going to consume all of Mind silver so the 850 million ounces that we mine as an industry on an annual basis is going to get 100% consumed by the growing industrial demand for silver”
Success in mining comes from being a stock picker, following management teams and groups that have demonstrated success on multiple occasions like Brazinski and Rusenko with Osco Mining, Malartic, and Windfall sales
“you need to be a stock picker you need to follow management teams and groups that have been successful uh a great example is uh a deal that was announced a few weeks ago Osco mining uh there's a group uh with uh brazinski and rusen who have on multiple occasions whether it was the sale of the malartic asset um or this recent sale of uh of windfall um you know they're doing it time and time again”
Gold-silver ratio is currently 86 ounces of silver per 1 ounce of gold, compared to a mean average ratio of 54:1 since 1970, indicating silver is historically undervalued
“we're currently sitting at around 86 o of silver for 1 oce of gold the mean average ratio since 1970 has been around 54”
Recent Wolf deposit drill results include 9 meters averaging over 1,000 grams of silver per tonne (reported August 12) and 16 meters of 600 grams per tonne (August 19), both representing brand new discoveries not included in the previously reported 64 million ounces and 1 million ounces of gold resource.
“we just had a report out on the 12th of August where we drilled not over nine meters of over a thousand grams of silver brand new when I talk about the 64 million ounces of silver that we have and the million ounces of gold we have it doesn't factor in these new discoveries and then we had another hit um on the 19th of August where it was uh 16 M of 600 grams”
Discovery and profitable mining both drive value to mining equity bottom lines, not just commodity prices, exemplified by Kirkland Lake's Swan Zone discovery in Australia driving $1.2 billion value to investor Eric Sprott
“Discovery and profitable mining also drives value to the bottom line uh a great example of this is um a company called Kirkland lake with their Swan Zone in Australia that Swan Zone drove $1.2 billion doar of value to one of our investors Eric spra and that money was then deployed throughout the industry moving a lot of projects forward including the $20 million Eric put into Dolly Varden to advance our kit cell Valley Project”
The silver mining sector has been hesitant to deploy capital despite the bullish setup, leaving significant latent value to be realized in the sector
“when we look to the silver mining space it seems like a place at this moment in time where a lot of people are hesitant to deploy capital I think there's just so much value there waiting to be realized”
Many orphaned mining deals exist that are struggling because the investing public is uncertain whether they will secure the capital needed to advance their projects
“the problem that we have is there's a ton of Orphan deals that are out there that are struggling that the the investing public is uncertain if they're going to get the needed Capital to advance their project”
Dolly Varden is a vehicle for speculation providing investors exposure to rising silver prices, and if the company does nothing but hold its past-producing project with existing resource, equities will go wildly higher—similar to Konun's experience in gold mining in the 2000s
“I have a vehicle for speculation that's what what Dolly Varden essentially is right that's what every Equity is um and and essentially the company uh if it does nothing but give investors exposure to a rising silver price environment you know you know and I experienced this in in gold mining in the 2000s where you know my mentors and my bosses said to me Sean you could sit on your hands and do nothing and these equities are going to go wildly higher and and the same is true for Dolly Varden”
In Q1 of this year, 35% of silver demand came from China alone, with most of this driven by solar energy applications—meaning one country consuming one-third of global silver market demand
“when we look to the silver mining space it seems like a place at this moment in time where a lot of people are hesitant to deploy capital I think there's just so much value there waiting to be realized um even when we look at the gold miners at this point in time aside from the majors we haven't seen huge moves in the developer in the junior mining stocks the Explorers but when it comes to Silver in particular when looking across the silver mining space right now how do you see the health of the sector do you think it's extraordinarily undervalued at this point obviously I'm asking the CEO of a silver Mining Company I can already hear the comments being typed in response to this right now but what are your thoughts on the silver mining sector at present well look I think there's um there's a number of ways to look at it uh number one you could argue that the miners were more profitable in 2020 than they are today that the margins were better um I think the numbers are you know uh you know 48% margins versus 40% margins if you compare the two periods of time so you could argue that gold mining was more profitable four years ago with a gold price that was $400 an ounce lower than it is today and so um and maybe that is an explanation why the equities haven't performed as well as the metal um that's one way to look at it but in terms of answering your question about the health of the industry the industry has never been healthier from a standpoint of this is an industry that now across the board pays a dividend uh it's run exceptionally lean um the production profile is strong um so look I think that you need to be a stock picker you need to follow management teams and groups that have been successful uh a great example is uh a deal that was announced a few weeks ago Osco mining uh there's a group uh with uh brazinski and rusen who have on multiple occasions whether it was the sale of the malartic asset um or this recent sale of uh of windfall um you know they're doing it time and time again and if you're an investor in the space and if you're in the right companies um I looked in our neighborhood in the Golden Triangle just a little north of our project to an analog project uh called SK Creek a owned by a company called SK resources the week the Osco deal was announced SK went from $111 excuse me $7 a share to $11 a share it was up about 50% in a trading week”
SK Resources share price moved from $7 to $11 (50% gain) in a single trading week following the Osco Mining acquisition announcement, demonstrating market recognition of takeover candidate valuations and trickle-down capital flows
“I looked in our neighborhood in the Golden Triangle just a little north of our project to an analog project uh called SK Creek a owned by a company called SK resources the week the Osco deal was announced SK went from $111 excuse me $7 a share to $11 a share it was up about 50% in a trading week so if I don't know where else you're going to make 50% a week on planet Earth”
Dolly Varden team has navigated turbulent waters including periods when silver went to $19.14 and when silver went through $30, successfully executing acquisitions and capital raises during both periods
“we've we've gone and we've navigated some turbulent waters you know we we were here when silver silver went to $119 4 cents um and we we pulled off Acquisitions we were here when silver went through 30 and we raised money um you know we're very sensible”
The Wolf deposit at Dolly Varden is located 1.5 kilometers from the Torbert Mine (Canada's third-largest historical silver producer of the 1950s, with 40 million ounces in current mineral inventory), and sits along a geological contact where historical research ('red line theory') predicts mineralization occurs
“the wolf deposit is located about a kilometer and a half away from Canada's thirdd largest silver producing mine throughout the 1950s is the torbert mine which we also own which we have a mineral inventory of almost 40 million ounces just a torbert alone”
Dolly Varden has completed over 50 drill holes but released only a handful of results; upcoming news flow will focus on drill results which have historically driven company value
“we've got a lot of drilling we've completed over 50 holes we've only put out a handful of results so drill results drill results drill results and drill results have driven the value of the company and um so that's what's coming up”
Jesse Day operates the Commodity Culture podcast series focused on commodities and natural resources, and emphasizes that nothing discussed should be considered investment advice
“hello everybody and welcome to commodity culture where our goal is to make you a better investor in the commodity space my name is Jesse day before we dive in as always standard disclaimer nothing here is investment advice do your own due diligence”
Dolly Varden has no warrants and no debt, is 100% focused on silver growth, has strong institutional and strategic shareholder base (Eric Sprott 10%, Hecla 15%, Fury 19%, Institutions 48%, Public 8%), and is fully financed until 2026 with no need to raise additional capital
“this financing puts us in a position where we don't have to go back to Market until 2026 so think about this we're a silver Growth Company okay we have no warrants we have no debt we've got some great shareholders you know Eric's at 10% heck's at 15% Fury's at 19% institutions at 48% so you have 8% in the hands of the public”
Dolly Varden announced a $25 million financing deal (just under 10% dilution for a $300M company) but could have closed on $75 million based on demand, showing record capital availability for the right stories
“we put up a deal um we announced it on the 19th we announced a $25 million deal which for company our size is just under the 10% dilution Mark you know we're a $300 million company we put up a $25 million deal we could have closed on $75 million that was the Demand right weend we ended up trying to be thoughtful and being sensitive to delution so we're looking to close on 32.2”
Dolly Varden continues to evaluate and execute on mergers and acquisitions opportunities as part of ongoing growth strategy
“look for us to um to continue to evaluate and execute on m&a opportunities”
Konun's vision for Dolly Varden is to grow it from an obscure, irrelevant small company to a top 10 silver equity; the company is already a top 30 silver equity, demonstrating progress on this goal.
“I had a vision for the company and the vision was I wanted to take this name that was an obscure irrelevant small name and my goal was to make it a top 10 silver equity and I'm happy to report it's a top 30 silver Equity today so we're on our path to that goal of top 10”