Precious Metals Developers Enter Into Massive US$812M Silver, Gold Merger Deal

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1. Ownership and Share Structure Information

The information listed above was updated on the date this article was published and was compiled from information from the company and various other data providers.

Dolly Varden Silver Corp. (DV:TSX.V; DVS:NYSEA; DVQ:FSE) and Contango ORE Inc (CTGO:NYSEA) announced on December 8 that they have entered into an arrangement agreement to merge as equals through a statutory plan of arrangement under the Business Corporations Act of British Columbia, per a news release on December 8.

This merger provides investors with a unique opportunity to benefit from a well-funded North American asset portfolio, which includes the cash-generating high-grade Manh Choh gold mine in Alaska and several high-grade silver and gold projects in British Columbia and Alaska, such as the Kitsault Valley and Johnson Tract projects.

"We are very pleased to present this Transaction to the shareholders of Dolly Varden," stated Dolly Varden President and CEO Shawn Khunkhun. "The merger represents a step-change for the company, adding production and combining an exceptional portfolio of projects with the potential for high-grade precious-metal development. The combined company is poised to become a unique, multi-asset platform for silver and gold production, focused exclusively on the United States and Canada. Our respective boards are fully aligned on how to best realize this vision, sharing a commitment to aggressively expand our resource base, accelerate mine exploration and subsequent development across the portfolio and pursue growth-oriented acquisitions."

Contango President and CEO Rick Van Nieuwenhuyse commented, "This merger is an exciting transaction for both Contango and Dolly Varden shareholders given the complementary and synergistic nature of our North American asset portfolios. With the Manh Choh Gold Mine providing significant cash flows in a strong gold and silver price environment, the combined company will have a source of non-dilutive funding to advance development of its high-grade Lucky Shot and Johnson Tract projects in Alaska and Kitsault Valley project in British Columbia." He added that Kitsault Valley and Johnson Tract are "particularly synergistic as both are high grade, have similar metallurgy, are located near tidewater, and fit the Direct Shipping Ore (DSO) model. In addition, both have tremendous exploration upside. With Dolly Varden’s cornerstone land position in the Golden Triangle, one of the most exciting and prospective mining districts in the world, we see great potential to expand resources and advance Kitsault Valley to production. The combined company will be well financed for growth that is expected to continue to deliver long-term value for its shareholders."

Upon completion of the transaction, current shareholders of Contango and Dolly Varden will each own approximately 50% of the outstanding shares of the merged company, or MergeCo, on a fully diluted in-the-money basis. MergeCo will be renamed Contango Silver & Gold Inc., with Nieuwenhuyse as CEO, Khunkhun as President, and Mike Clark as Executive Vice President and CFO. The board of directors of MergeCo will include Clynt Nauman as Chairman, along with Brad Juneau, Darren Devine, Mike Cinnamond, Tim Clark, Rick Van Nieuwenhuyse, and Shawn Khunkhun.

New Co. Boasts Proven Exploration Success Across Its Portfolio

According to the release, key highlights and strategic reasons for the transaction include:

• Complementary Assets: The creation of a North American-focused multi-stage silver and gold company, with an asset portfolio that spans from advanced-stage exploration to current production.
• Well-Funded: The combined entity has over US$100 million in cash, only US$15 million in debt, and generates annual cash flow from the high-grade Manh Choh gold mine in Alaska, operated in partnership with Kinross Gold Corp.
• High-Grade Projects: The company will leverage high-grade development of assets anchored by the Lucky Shot and Johnson Tract projects in Alaska, and the Kitsault Valley silver-gold project in British Columbia, all strategically located near existing infrastructure that supports a Direct Shipping Ore (DSO) approach.
• Shared Capital Expenditure Strategy: Both companies share a development philosophy focused on pursuing low-capex DSO projects that can utilize existing processing facilities.
• Exploration Potential: The combined entity has a proven track record of high-grade exploration success across its portfolio.
• Enhanced Capital Markets Profile: Shareholders of the merged company will benefit from increased critical mass, with a combined market capitalization of approximately US$812 million (CA$1.1 billion), along with improved trading liquidity, potential index inclusion, expanded research coverage, and greater institutional ownership.
• Insider and Institutional Support: All directors and officers of Contango and Dolly Varden, along with significant shareholders of both companies, have signed voting support agreements in favor of the transaction, representing about 22% of the outstanding shares of each company.

Additionally, the merged company will be listed on the NYSE American, with plans to apply for listing on the Toronto Stock Exchange following the transaction's completion.

Transaction Details

Under the Arrangement Agreement, Contango will acquire all issued and outstanding common shares of Dolly Varden at an exchange ratio of 0.1652 shares of Contango for each Dolly Varden share. All restricted share units of Dolly Varden will vest and be settled for shares prior to closing, according to the release. Stock options will be exchanged for options to acquire Contango shares, adjusted to reflect the exchange ratio. Eligible Canadian shareholders of Dolly Varden can opt to receive exchangeable shares in a Canadian subsidiary of Contango.

Upon completion, existing shareholders of both companies will own approximately 50% each of the outstanding shares of the merged entity, on a fully diluted basis, the companies said. The transaction requires approval from the British Columbia Supreme Court, 66 2/3% of votes from Dolly Varden shareholders, and a majority vote from Contango shareholders, with meetings expected in February 2026. Additional regulatory and exchange approvals are required, with closing anticipated in late February or early March 2026.

The Arrangement Agreement has been unanimously approved by Contango's board of directors. Canaccord Genuity Corp. has provided a fairness opinion stating that the exchange ratio is fair from a financial perspective to Contango's stockholders. It has also been unanimously approved by Dolly Varden's board, based on the recommendation of a special committee of independent directors. Haywood Securities Inc. and Raymond James Ltd. have provided fairness opinions stating that the consideration for Dolly Varden shareholders is fair from a financial perspective, the companies noted in the release.

Contango's Key Asset Already in Production

Regarding the merger, Senior Analyst Jeff Valks from TheGoldAdvisor.com remarked, "In mining, much like in sports, some teams are designed to score while others are built for endurance — the merger of Dolly Varden and Contango aims to achieve both. The merger of equals between Contango ORE and Dolly Varden Silver will form a new North American precious-metals company with both production capabilities and significant exploration potential."

What sets this merger apart from many other junior combinations is that one of its key assets — the Manh Choh mine in Alaska — is already operational, Valks noted. Ore from this site is transported to the Fort Knox complex, operated by Kinross. Commercial production began last year. During the first nine months of 2025, Manh Choh produced 173,400 ounces of gold at an all-in sustaining cost (AISC) of US$1,505 per ounce, generating US$87 million for Contango. These cash flows provide a foundation for advancing several high-grade assets without significant equity dilution, a point highlighted by management, Valks said.

First, Lucky Shot in Alaska boasts an Indicated resource of 100,000 ounces at an impressive 14.5 grams per tonne gold (g/t Au). The site is undergoing an aggressive 18,000-meter drill program, with a feasibility decision expected by 2027. Johnson Tract offers both metals and momentum, Valks wrote. The site contains 0.7 million ounces of silver (Moz Ag), 0.6 million ounces of gold (Ag), and 400 million pounds of zinc (Zn), with an Initial Assessment outlining a net present value (NPV) at a 5% discount rate of US$615 million and an internal rate of return (IRR) of 53%. These figures are "very attractive," the writer noted.

Lastly, Dolly Varden's Kitsault Valley in British Columbia remains wide open for exploration. The 2025 program drilled 56,131 meters, hitting 1,422 g/t Ag over 21.7 meters at Wolf and 26.74 g/t Au over 14.76 meters, along with 14.5 g/t Au and 75 g/t Ag over 21.18 meters at Homestake Silver. "You might recall there was past production at Kitsault: more than 20 Moz of silver including operations at the Dolly Varden mine, which historically ran at 1,100 g/t of silver between 1919 and 1923," Valks wrote.

A 'Rare Combination' of Assets

Valks said MergeCo will debut with a market capitalization of about US$812 million, offering increased liquidity, index appeal, and likely more institutional involvement. With the merger "concentrating value in North America and doing so at scale, the stock is a Buy," Valks wrote. "The fundamentals of Dolly Varden haven’t changed, but they’ve now added strong producers to their asset sheet," he noted. "It’s a rare combination of production, grade, district-scale exploration and political safety — all under one roof. Manh Choh cash flow supports drilling, feasibility studies and development across multiple assets without relying solely on equity markets. High grades at Kitsault and meaningful past production give the story major exploration upside." He continued, "Mining can be a game of streaks or a game of seasons — this new company looks designed to win at both."

In an updated research note in Haywood Securities' Morning Brief email on December 8, Analyst Marcus Giannini maintained his Buy rating on the stock with a CA$11.25 target price. "We believe the arrangement makes sense from a strategic perspective, offering non-dilutive capital from cash flow generated from Manh Choh to fund exploration, and eventually potential development at Kitsault Valley," Giannini wrote. "Dolly has continued to showcase uncapped growth upside at Kitsault, and we expect further advancement of the asset to remain a key growth driver of the merged company." Upon closing, "we expect the high-grade, cash flowing asset base will appeal to a wider investment audience, offering a re-rating opportunity," he wrote.

The Catalyst: Gold and Silver in Focus

Gold and silver prices dipped in midday U.S. trading on Monday, as reported by Jim Wyckoff of Kitco News on December 8. Both precious metals faced selling pressure due to concerns that the U.S. Federal Reserve might adopt a hawkish stance in its rhetoric, despite an anticipated rate cut this week. Additionally, the delay of U.S. producer inflation reports for October and November, now postponed until January, has added further uncertainty to the current U.S. inflation scenario. February gold was last down US$27.60 at US$4,215.50, while March silver prices dropped US$0.788 to US$58.28.

The Federal Reserve’s Open Market Committee (FOMC) begins its monetary policy meeting on Tuesday morning, concluding on Wednesday afternoon with an FOMC statement and a press conference by Fed Chair Jerome Powell. Markets are pricing in a 90% likelihood of a 0.25% U.S. interest rate cut at this week’s FOMC meeting, Wyckoff noted. However, there is growing anticipation that the FOMC statement and Powell’s comments may lean hawkish on U.S. monetary policy, primarily due to concerns about persistent inflation.

In other developments, the World Bank reports that China’s central bank increased its gold reserves for the 13th consecutive month, according to data released on Sunday. The People’s Bank of China added 30,000 troy ounces last month, bringing its total to approximately 74.12 million troy ounces. This buying cycle began in November 2024. Central-bank purchases worldwide increased in October after a mid-year lull, according to the Council.

Gold has been in the spotlight this year, but as S'thembile Cele and Jack Ryan reported for Bloomberg on December 3, silver is also drawing significant attention. A supply squeeze has driven the precious metal to double in value by early December, while gold has increased by 60%. Both metals are experiencing heightened demand from investors seeking protection against political instability, inflation, and currency devaluation. Unlike gold, silver is not only rare and appealing but also has numerous practical applications, making it a vital component in various products. With inventories nearing record lows and investor demand remaining strong, there is a potential risk of supply shortages that could impact several industries, the authors noted. "Silver is an excellent electrical conductor that's used in circuit boards and switches, electric vehicles and batteries," they wrote. "Silver paste is a critical ingredient in solar panels, and the metal is also used in coatings for medical devices. Sustained high prices could erode the profitability of industrial users and spur efforts to substitute silver components for other metals."

Ownership and Share Structure¹

Institutional investors own 52% of the company. Along with Hecla Mining Co. (HL:NYSE) holding 13%, other strategic investors include Fury Gold Mines Ltd. (FURY-T) with 12% and Eric Sprott with 9%. The remainder is held by retail investors.

Dolly Varden has 90.88 million outstanding shares and 90.5 million fully diluted shares. Its market cap is CA$591.61 million, with a 52-week range of CA$3.21–CA$7.46 per share.

About 20% of Contango ORE Inc. is owned by insiders, with institutions owning about 26%. The rest is retail. Its market cap is US$392.36 million with 14.96 million shares outstanding. It trades in a 52-week range of US$8.85 and US$26.88.