Gold and silver combine: Breaking down the Contango ORE/Dolly Varden merger
Contango ORE has entered commercial production and sales of gold from the Manh Choh mine in Alaska in 2025 / Photo: Contango ORE/X
Gold exploration and production company Contango ORE and silver miner Dolly Varden Silver announced a merger in late December. The transaction will combine their assets in Alaska and British Columbia. Below is a summary of what investors need to know about the deal, the outlook for the combined company, and its key projects.
About Contango ORE
U.S.-based Contango ORE, with a market capitalization of $433.6 million, is engaged in the exploration and development of gold deposits. In 2025, the company completed the capital-intensive exploration phase and entered commercial production and gold sales from the Manh Choh mine in Alaska. Total cash distributions from this project in the first nine months of 2025 amounted to $87 million.
In 2024, the company strengthened its asset base by acquiring Canada's HighGold Mining, the owner of the Johnson Tract gold project in Alaska. Following the announcement, Contango ORE shares jumped about 6%.
Another core asset is the Lucky Shot Mine gold project in Alaska, where mining permits have already been secured and production is expected to begin by 2027. Successful development of Johnson Tract and Lucky Shot could eliminate the "single-asset discount" currently priced in to Contango ORE shares, according to Freedom analysts.
For the third quarter of 2025, the company reported a 10% year-over-year increase in operating income to $25 million and narrowed its net loss to $5.4 million from $9.7 million a year earlier.
About Dolly Varden Silver
Canada's Dolly Varden Silver, with a market capitalization of $607.2 million, is developing the Kitsault Valley project in British Columbia’s Golden Triangle, a region known for its rich precious metals and copper deposits. The company completed another drilling campaign there in 2025, and the resource continues to be viewed favorably in terms of metal content. Dolly Varden also holds several additional silver and gold projects, including both new and historically producing assets, with further resource-yielding upside.
Dolly Varden continued intensive exploration activity in the third quarter of 2025 but remained unprofitable, posting a net loss of about CAD14 million ($10.1 million), largely due to exploration and evaluation costs of roughly CAD15.2 million ($10.9 million). At the same time, its balance sheet remained solid. As of the end of September, the company held CAD34.5 million ($24.7 million) in cash against current liabilities of CAD8.1 million ($5.8 million), providing sufficient liquidity to continue project development.
Details
The merger is structured as a transaction between equals. Shareholders of each company will own approximately 50% of the combined business. Shares of the merged entity will continue trading on the NYSE under Contango’s CTGO ticker. Contango’s current CEO, Rick van Nieuwenhuyse, will remain CEO of the combined company, while Dolly Varden CEO Shawn Khunkhun will assume the role of president.
Market context
According to Khunkhun, access to capital remains constrained for the sector despite high nominal gold and silver prices. Investors, he said, are increasingly receptive to companies that grow through acquisitions and finance development internally rather than through regular equity issuance.
Stock and liquidity
About 31 million shares of the combined company are expected to be outstanding. The management has said it intends to avoid dilution. Daily trading volume following completion of the merger is expected to be around $10 million.
Shareholder approval
Khunkhun said that prior to announcing the transaction, the companies secured voting support agreements from roughly one third of their major shareholders, which increases confidence in the deal’s approval.
Plans for key projects
Van Nieuwenhuyse said the Manh Choh gold mine generates significant cash flow in a strong gold and silver price environment. This provides the combined company with a reliable funding source to advance the Lucky Shot and Johnson Tract projects in Alaska, as well as the Kitsault Valley project in British Columbia.
Manh Choh
The Manh Choh mine has been producing gold on a regular basis since July 2024, with a target of about 15,000 ounces per quarter. Processing is conducted in batches, which can result in quarterly production volatility. Ore is shipped directly and transported roughly 240 miles for processing at Kinross facilities in Fort Knox, Alaska. The management says this approach was chosen instead of constructing a standalone processing plant, which would have required about $500 million in capex and up to five years to permit.
As for the project's economics, the remaining mine life is estimated at 3-4 years. The management expects Manh Choh to have generated more than $100 million in free cash flow by the end of 2025.
Lucky Shot
The 18,000-meter drilling program is currently underway. The company targets 400,000-500,000 ounces of gold, with 250,000 ounces expected to be confirmed at the feasibility study level to support a production decision. The program is budgeted at about $50 million and is expected to run for roughly two years.
Initial parameters call for production of about 30,000 ounces of gold per year, with potential expansion to 40,000-50,000 ounces. The cost benchmark is around $1,500 per ounce.
Van Nieuwenhuyse said that at a gold price of $3,500 per ounce, the project could generate margins of roughly $2,000 per ounce and about $60 million in annual FCF at 30,000 ounces of production.
Johnson Tract
Johnson Tract contains silver, gold, and zinc, which are classified as critical metals. As a result, the project was included in the FAST-41 Covered Projects program, a federal initiative to accelerate permitting, on December 2. Underground access permits are expected in the first quarter of 2026.
Dolly Varden projects
About 99% of drilling activity is currently concentrated at two fields, Wolf and Homestake, within the Kitsault Valley project. These zones cover roughly 10,000 hectares of the company’s approximately 100,000-hectare land package, meaning about 90% of the area remains largely unexplored despite being located in a historically productive area.
The management has highlighted synergies in ore types across the portfolio. At a meeting with investors, executives noted that ores from the Johnson Tract and Kitsault Valley projects are sulphide ores, which supports the case for processing at similar facilities and for using existing, underutilized infrastructure rather than building new capacity.
Key project risks include:
sensitivity of project economics to gold and silver prices;
permitting and infrastructure timelines at the Johnson Tract project;
the ability to manage costs and execution as the Manh Choh mine approaches the end of its current mine life.
What analysts say
Wall Street analysts are broadly positive on Contango ORE shares. The stock has five “buy” recommendations, with an average target price of $35.20 per share, implying upside of about 26% versus current levels.
Roth Capital Partners, in a December 10 report seen by Oninvest, reiterated a “buy” rating with a $35 per share target price. The firm described the merger as rational and highly synergistic, noting that cash flow from Manh Choh can fund expansion of a diversified portfolio of gold, silver, and base metals projects, which should, thanks to greater scale, reduce risk and improve the company’s attractiveness as an investment.
Freedom Broker has reiterated its “buy” rating with a $41 per share target price, citing the sound strategic logic of the deal and a high likelihood of regulatory approval. It expects the transaction to close in late February or early March.
