The announced merger between Contango Ore and Dolly Varden Silver represents a strategic consolidation
The announced merger between Contango Ore and Dolly Varden Silver represents a strategic consolidation designed to create a North America–focused precious metals company with near-term cash flow, multiple high-grade development assets, and substantial exploration upside. Structured as a merger of equals, the transaction combines Contango’s operating gold platform in Alaska with Dolly Varden’s large, high-grade silver-gold assets in British Columbia’s Golden Triangle, resulting in a diversified, multi-stage gold and silver company with a pro forma market capitalization approaching $1 billion.
Contango contributes a rare attribute among junior and mid-tier miners: meaningful, recurring free cash flow. Its Manh Choh mine, operated through a joint venture with Kinross, is currently in production and generating approximately 60,000 ounces of gold annually attributable to Contango. The operation utilizes a direct shipping ore (DSO) model, whereby high-grade ore is mined and transported to an existing permitted mill, in this case the Fort Knox facility. This approach avoids the need for on-site milling and tailings infrastructure, significantly reducing capital intensity, permitting complexity, and environmental footprint. In the current year alone, Manh Choh has generated more than $100 million in free cash flow, with estimated life-of-mine free cash flow of approximately $450 million, providing internally generated capital to fund growth without reliance on dilutive equity issuance.
Beyond Manh Choh, Contango has built a pipeline of high-grade, infrastructure-adjacent development projects that follow the same DSO philosophy. The Lucky Shot project, located roughly 20 miles from rail infrastructure, hosts a high-grade gold resource averaging approximately 14.5 g/t. The company is currently executing an 18,000-meter underground drill program with the objective of expanding the resource toward a 400,000–500,000 ounce inventory, from which a mine plan targeting approximately 50,000 ounces of annual production could be developed within the next two years. Johnson Tract, another key asset, contains over one million ounces of gold-equivalent at an average grade of approximately 9.4 g/t, with meaningful silver and base metal credits. The project has recently been added to the U.S. FAST-41 permitting dashboard, which is intended to streamline coordination among federal and state agencies. A prior economic assessment indicates strong economics, including a post-tax NPV of roughly $225 million at conservative metal prices, expanding to well over $600 million at current gold prices, with payback of less than one year under spot pricing assumptions.
Dolly Varden contributes scale, optionality, and silver leverage through its Kitsault Valley project in northern British Columbia. Located along Alice Arm, a fjord directly connected to the Pacific Ocean, the asset benefits from tidewater access, road infrastructure, and a long history of high-grade silver production. The existing resource base includes approximately one million ounces of gold and more than 60 million ounces of silver, with substantial upside from recent drilling. Dolly Varden has completed approximately 56,000 meters of drilling, with roughly 50 drill holes still pending assay results, and an additional 200,000 meters of historical drilling that has not yet been fully incorporated into current resource estimates. Management expects a resource update in the first half of next year, followed by an aggressive 50,000–60,000 meter drill program aimed at upgrading inferred material and advancing development planning.
Strategically, the combination creates a company with production, development, and exploration assets that are sequentially aligned. Near-term cash flow from Manh Choh supports self-funded advancement of Lucky Shot and Johnson Tract, while Kitsault Valley represents a larger, longer-dated silver-gold development opportunity. On a consolidated basis, the combined company is expected to hold more than $100 million in cash with minimal debt, while continuing to generate approximately $100 million per year in operating cash flow. This balance sheet strength provides flexibility to pursue staged development without compromising exploration intensity.
The merger also materially improves market positioning. Post-transaction, the company will retain its NYSE American listing and gain a full TSX listing, expanding its institutional investor base and index eligibility. Management expects inclusion in major mining and small-cap indices, including GDXJ, SIL, SILJ, and the Russell 2000, increasing liquidity and passive fund ownership. Analyst coverage is expected to expand to approximately nine firms on a pro forma basis.
From an investment perspective, management explicitly positions the combined entity—expected to be renamed Contango Silver and Gold—as an emerging mid-tier alternative to established North American precious metals producers such as Hecla Mining. While Hecla operates at a significantly larger scale with a market capitalization near $10 billion, the combined Contango–Dolly Varden platform offers similar jurisdictional exposure to safe North American assets, but at an earlier stage in the value curve, with higher growth optionality and operational leverage.
Governance continuity is maintained through a blended board and management team drawing from both companies, with Contango’s CEO Rick Van Nieuwenhuyse leading the combined entity and Dolly Varden’s CEO remaining as president. Shareholder support appears strong, with voting agreements and commitments already covering a meaningful portion of both share registers, and transaction completion targeted for early next year.
In aggregate, the transaction creates a rare hybrid profile: a precious metals company with meaningful current cash flow, a visible path to doubling production through low-capital, high-grade developments, and a large-scale silver-gold exploration asset with district-level upside. For fund managers seeking exposure to gold and silver in stable jurisdictions, with reduced financing risk and significant embedded growth optionality, the combined Contango Silver and Gold presents a differentiated mid-tier investment proposition positioned between junior explorers and established senior producers.