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WELCOME!

The Gold Stock Strategist analyzes leading junior gold producers and major gold mining companies.

Comments are welcomed!

Monday, March 31, 2008

Jaguar Update

I read Jaguar Mining's 3/24/08 release with Q407 production costs ($405 per oz.)--up considerably from what I used in my model for 2008 and 2009 ($306 per oz. for 2009 as indicated in JAG's February 2008 presentation). Here is a link to the press release.

March 24 Jaguar Mining Press Release

I have updated my short-run cash flow model tonight and have new price targets for JAG.

Here is what I get out of my model after reading the press release more carefully. Refinements and constructive critiques are welcome.

I get $0.95 cash flow per share in 2008; $1.96 per share in 2009. At 10x-13x cash flow, that translates into a range of $9.55 to $12.42 per share valuation in 2008; and $19.60 to $25.53 per share in 2009.

I use 10x to 13x cash flow metric to value junior gold miners. These are appropriately conservative valuation multiples in my opinion. Blackmont uses 15x in their March 13 analysis of Jaguar Mining and have a $18.25 per share 12 month price target.

My G&A projections are $14 million in 2008 and $16 million in 2009. 4Q07 G&A was $3.5 million. $3.5m x 4 equals $14m.

Jaguar did have some so called "one time" G&A having to do with listing on the NYSE and other. My sense is that they will continue to have G&A equal to 4Q07 in 2008.

Price of gold assumptions are $925 in 2008 and $1000 in 2009.

Production costs per ounce are assumed to be $410 in 2008 and $420 in 2009.

I remember Jaguar management mentioning that production costs are in US$, so it didn't surprise me that a falling dollar in Q4 was partially responsible for increasing cash costs per ounce. A declining value of the US$ would increase production costs in 2008 as well though I haven't accounted for that.

Total cash cost used to estimate production costs per ounce is equal to cash operating costs plus royalties (if any) and production taxes.

Total cash cost does not include capital expenditures for exploration (projected to be $90 million in 2008 and $98 million in 2009 by Jaguar management).

Good luck to us all!

Saturday, March 29, 2008

It's a Company, Not an Index

Yesterday, there was an interesting article written by Roland Watson entitled, "Gold and Silver Stocks vs. Bullion Investing " at Seeking Alpha lamenting the fact that precious metal mining stock prices have lagged bullion prices. He also argues that the price of silver stocks, and by extension gold stocks, depend on two factors:

(1) the stock market; and,
(2) the price of the precious metal.

Watson suggests that if both factors go up, precious metal mining stock prices go up. If one of the factors is going down, then silver/gold stocks go down.

It is a convincing article. The article makes it sound like holding gold stocks in the current environment is a "no-win" situation given stock market weakness and the recent sharp drop in the price of gold. To make matters seem even worse, the author even expects a sharper correction in the price of gold!

However, the author does provide a narrow relief scenario from what I call his overall "factor rule" thesis where gold stocks outperformed bullion. His relief scenario is counting on an anomaly in the 1980s when the "factors rule" didn't hold in 1983. The following is the chart he used to demonstrate his point. The light green line is the price of gold over the time period 1970-1983. The dark blue line is a gold stock index.



Here is the rub. The article uses a stock index, the Barron’s Gold Mining Index (BGMI) to make the point. I don't know anything about the BGMI or anything useful about technical analysis or charting of stocks or indexes. But I do know this. The companies I highlight on the Gold Stock Strategist are unique and should be less correlated with gold stock indexes than large cap gold mining stocks over the next year. The emerging producer junior gold miners are primarily event driven, not macro driven. Oh sure, the macro environment does have an effect on the long-run value of emerging producer junior gold miners. But the main event is that these companies are moving from NEGATIVE cash flow and earnings (like all mining explorers) to POSITIVE cash flow and earnings based on the commencement of PRODUCTION.

So when you read articles about "gold stocks" or "the price of gold" in reference to technical analysis or charting, it is important to remember the fundamental event that should drive junior gold miners highlighted on the Gold Stock Strategist--positive cash flow and earnings from new production. Such articles might be interesting, but they likely don't apply to these "event driven" stocks.

That doesn't mean these junior gold miners are a sure deal. There are still lots of risks--mill equipment can break down, additional resources may not prove up, labor shortages may delay production, management can make poor decisions, etc.. At the end of the day, junior gold miners are speculative plays. But the potential rewards are significant IMHO.

Cheers!

Friday, March 28, 2008

Out of San Gold, Into Gold-Ore

I sold all my San Gold Corp. shares this week. The reason for selling is that San Gold is far less undervalued compared to other junior gold miners just entering production—in particular Gold-Ore (GREXF) and Metanor Resources (MEAOF). This action demonstrates the importance of periodically assessing the relative valuation of different companies an investor holds or is interested in holding.

The following analysis is what drove my decision to sell San Gold. Note that Gold-Ore and Metanor have similar Target/Current Price Multiple valuations and San Gold’s multiple is much lower.

San Gold Corporation
CURRENT PRICE: 1.46
2009 TARGET PRICE (10x Projected Cash Flow): $2.04
Target/Current Price Multiple: 1.4x

Gold-Ore Resources
CURRENT PRICE: $0.76
2009 TARGET PRICE (10x Projected Cash Flow): $3.27
Target/Current Price Multiple: 4.3x

Metanor Resources
CURRENT PRICE: $0.99
2009 TARGET PRICE (10x Projected Cash Flow): $4.12
Target/Current Price Multiple: 4.2x

I sold my Nevsun based on lack of movement forward on getting bought out and a sliver of my Jaguar Mining on Yamana’s announcement that they will be more internally focused on operations and less interested in acquisitions. It is hard to believe that Yamana’s Marrone (President) can resist Jaguar. Time will tell.

I added some Gold-Ore shares to my holdings this week. The plan is to add more Gold-Ore shares on price weakness and also bought a starter position in Kinbauri Gold Corp. (KINBF) at $0.92 a share. Kinbauri is projected to enter production in 2010 so this may be a little early. A lot can still go wrong as they move towards production. I bought KINBF because a quick and dirty calculation on resource base showed more than a $6.00 a share value. A more complete analysis will be forthcoming.

The following are the current junior gold miner holdings by weight in my portfolio.

Metanor Resources (27%)
Jaguar Mining Inc. (14%)
Gold-Ore Resources (6%)
European Minerals Inc. Warrants (3%)
Golden Queen Mining (2%)
Minefinders Corp. (2%)
Kinbauri Gold Corp. (2%)

Have a great weekend!

Alternative Gold-related Investments

Greetings!

Junior gold miners--even those who have proved up considerable resources and are entering production--seem just too "risky" for many investors. I don't agree. My take is that since the emerging juniors are going from no production and negative cash flow to production leading to positive cash flow, they are hedged against a falling price of gold. Moreover, the juniors run under the radar because risk averse investors like me want to see earnings or cash flow before risking their capital in a company.

That said, junior gold miners are not the only way to invest in gold. I personally have about 1% of my portfolio in the gold bullion ETF with a symbol GLD. Of course, you can also own physical gold in the form of bars, coins, ingots, wire, and shot. About 1% of my portfolio is in physical gold bars and collectible coins.

The following are alternative investments to junior gold miners for investors interested in greater diversity in their gold holdings.

Mutual Funds
There are 21 families of gold related mutual funds with about 50 separate gold mutual funds
See: http://www.eaglewing.com/fundlist.html

Physical Gold ETF
State Street's streetTRACKS Gold Shares (NYSE: GLD)
iShares Comex Gold Trust (AMEX: IAU)

GLD is the most popular and liquid gold ETFs, GLD is also the oldest and the biggest of these funds. It lets investors participate in the gold bullion market without having to physically hold the metal, Each share representing one-tenth of an ounce of gold. Launched at the beginning of 2004, GLD has ~$19 billion in assets. Expense ratio is 0.40%.

IAU was launched in Jan. 2005, one year after GLD. IAU has more than $1 billion in assets 0.40% expense ratio.

Gold Miners ETF
Van Eck's Market Vectors Gold Miners ETF (AMEX: GDX)

GDX tracks the performance of the Amex Gold Miners Index, which is made up of 38 stocks. Started in May 2006 with ~$2 billion in assets. The fund yields around 1.4%. Its expense ratio is 0.55%. Canada makes up 60% of assets. South Africa accounts for about 20%, while the U.S. is 16%. Large-cap companies account for about 70% of the fund, while medium caps make up 28%, and small caps are slightly less than 10%.

TOP 10 HOLDINGS

COMPANY (Symbol) % Assets
AGNICO EAGLE MINES (AEM) 4.87
ANGLOGOLD ASHANTI LT (AU) 4.58
BARRICK GOLD CP (ABX) 16.1
BUENAVENTURA MINING CO. (N/A) 4.74
GOLD FIELDS LTD ADS (GFI) 4.36
GOLDCORP INC COM NPV (GG) 10.28
HARMONY GOLD MNG A (HMY) 3.96
KINROSS GOLD CORP COM NPV (KGC) 5.61
NEWMONT MIN CP HLDG (NEM) 9.62
YAMANA GOLD INC COM (AUY) 5.14

Gold Futures ETF
PowerShares DB Gold Fund (AMEX: DGL)

DGL began January 2007. The fund is designed to track the Deutsche Bank Liquid Commodity Index-Optimum Yield Gold Excess Return, which is composed of futures contracts on gold. $84+ million in assets. This fund invests in gold futures, collateralizes futures contracts primarily with short-term Treasuries. The fund's Treasury investments generate interest income. DGL's expense ratio is 0.50%.

Wednesday, March 26, 2008

Gold-Ore

CURRENT PRICE: $0.72
TARGET PRICE RANGE: $3.27 to $6.57

Gold-Ore Resources Inc. is a Canadian-based mining and exploration company with one operating gold mine and additional exploration properties, all in Sweden. Gold-Ore owns a portfolio of positive cash-flowing mines and growth oriented exploration properties.

On December 31, 2007 Gold-Ore completed the acquisition of their flag-ship property -- the Bjorkdal Gold Mine located in Vasterbotton County, Sweden. During 2007 the Bjorkdal mine produced 19,200 ounces of gold and is projected to produce 36,000 oz. of gold in 2008.

Historically, Bjorkdal has produced over 900,000 ounces of gold and, given the size of the mineralized system, Gold-Ore believes the mine will continue to produce gold for many years to come.

Gold-Ore is exploring and developing new resources, near the open pit and also at other high-quality targets on their properties.

Gold-Ore is a publicly traded company on the TSX Venture Exchange trading under the symbol GOZ. The Company’s shares also trade on the U.S. Over-the-Counter (OTC) market under the symbol GREXF.

GOLD-ORE SUMMARY

TSX: GOZ

OTC: GREXF

Shares Outstanding: 75.3 Million (81.9 million fully diluted)

Market Capitalization: ~$54 million

Telephone: 604-687-8884

Gold-Ore has recently initiated a feasibility study, tracking four gold mineralization veins.

Gold-Ore is probably one of the most undervalued junior gold miners in the universe of emerging gold producers. Sweden is a mining friendly country. I don't expect Gold-Ore to stay at this price level much longer and intend to add shares if it stays this low.

Gold-Ore Web Site

Presentation:

Production for Gold-Ore is projected to be 36,000 oz. in 2008; 60,000 oz. in 2009; 70,000 oz. in 2010. In 2007, production totaled 19,500 oz. gold.

Gold-Ore production is not hedged.

Gold-Ore has no long-term debt.

Cash currently available as of September 2007 = ~$5 million,

The following methods are what I use to value Gold-Ore Resources Ltd. for my investment purposes and provide a range of short-run and potential long-run value.

SHORT-RUN CASH FLOW SHARE VALUE

$3.27 per share in 2009 (2009 reflects Gold-Ores’s full production profile relative to 2008) using a cash flow model valuation and assuming the following:

10x cash flow
$1,000 per oz. price of gold
$450 per ounce production cost
60,000 ounces of production in 2009 (~36,000 oz. projected in 2008)
$1.5 million G&A
$5 million capital expenditures
81,900,000 shares outstanding (fully diluted)

POTENTIAL LONG-RUN RESERVE SHARE VALUE

$6.57 per share based on current and projected resource base.. The majors are paying about $280 an ounce for buyouts at $950 an ounce POG. Gold-Ore currently has about .9 million ounces (M&I&I) and if they can prove up another 1.0 million that equals 1.9 million. 1.9 million times $280 an ounce equals $5.32 million. $532 million divided by 81.0 million shares equals $6.57 per share.

DIRECTORS AND OFFICERS

Glen D. Dickson, Chairman of the Board, Director
Robert S. Wasylyshyn, President, Director
Maricruz Alvarado, Chief Financial Officer
Alvin W. Jackson, Director
Ron A. Ewing, Director
Donald A. Sawyer, Director
David F. Mullen, Director
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Full disclosure: I own shares in Gold-Ore Corp.. The information provided in this post is believed to be correct, but not guaranteed. Investing in junior gold miners entails risks. Readers are responsible for their investment decisions. Do your own due diligence.

Monday, March 24, 2008

San Gold

CURRENT PRICE: $1.43
TARGET PRICE RANGE: $2.04 to $2.51

San Gold Corporation is engaged in the exploration of gold primarily in the Bissett area of Manitoba, Canada. During the year ended December 31, 2006, the Company concentrated on developing its two active mining properties: the Rice Lake (Bissett Mine) located about 100 kilometers (kms) west of Red Lake on the Western Uchi sub-province. The Company has also developed a new mine, the San Gold 1 Mine, located three kms east of Bissett. Importantly, San Gold has recently purchased the nearby Timmons property, adding to their potential resource base.

San Gold Corporation is a publicly traded company on the TSX Venture Exchange trading under the symbol SGR. The Company’s shares also trade on the U.S. Over-the-Counter (OTC) market under the symbol SGRCF.

SAN GOLD SUMMARY

TSX: SGR

OTC: SGRCF

Shares Outstanding: 200.0 Million (249.9 million fully diluted)

Market Capitalization: ~$250 million

Telephone: 800-321-8564

San Gold Web Site

Presentation:

San Gold Corp. has a portfolio of properties with over 1.6 Million oz of measured, indicated, and inferred gold resources.

San Gold Corporation is a Canadian gold mining company focused on in the Rice Lake Greenstone Belt in SE Manitoba, Canada. The Company’s Rice Lake Gold Project includes two mines, the deep underground, high-grade Rice Lake mine and the nearby near-surface ramp accessed San Gold #1 (SG-1) deposit. A third nearby deposit, the recently discovered Cartwright gold deposit is slated for development in 2008. Production from both the Rice Lake and SG-1 mines, feeding the centrally located 1250 ton per day mill at Bissett, is expected to be achieved in early 2008

The Company also owns or controls nearly 15,000 hectares of exploration lands in the prime areas of the Rice Lake Greenstone Belt of SE Manitoba. The Company has increased its ore resources from 550,000 gold ounces when it acquired the Rice Lake Project in 2004 to over 1,600,000 ozs gold by the end of 2006. The Company developed the SG-1 deposit as a result of its exploration activities since 2004 and also discovered the Cartwright deposit in 2006.

The Rice Lake region is next door to the Red Lake mining belt where Gold Corp. grew from a small miner into one of the largest and most profitable gold mining companies in the world.

San Gold is likely to take a lot of effort to aggressively drill their properties to prove up more gold resources. Cash flow from production will likely be increasingly used to prove up resource. That’s not a bad thing. If they hit a lot of solid mineralization, the long-run share price will benefit greatly. And the Greenstone Belt of SE Manitoba holds good promise. In that respect, San Gold resembles more of a promising exploration company than a producer. San Gold has had some labor issues that have delayed progress in the past year. But they should prove up enough reserves over the next 12-24 months to raise the share price. In short, the real value in this play is a speculative one that San Gold can prove up considerable resources over time.

Production for San Gold is projected to be 50,000 oz. in 2008; 100,000 oz. in 2009; 100,000 oz. in 2010.

San Gold production is not hedged.

San Gold has ~$108 million in “royalty payments” and other long term liabilities.

Cash currently available as of March 2008 = ~$35 million,

The following methods are what I use to value San Gold Corp. for my investment purposes and provide a range of short-run and potential long-run value.

SHORT-RUN CASH FLOW SHARE VALUE
$2.04 per share in 2009 (2009 reflects San Gold’s full production profile relative to 2008) using a cash flow model valuation and assuming the following:

10x cash flow
$1,000 per oz. price of gold
$400 per ounce production cost
100,000 ounces of production in 2009 (~50,000 oz. projected in 2008)
$1.2 million G&A
$8 million capital expenditures
$109 million in long term liabilities
249,900,000 shares outstanding (fully diluted)

POTENTIAL LONG-RUN RESERVE SHARE VALUE
$2.51 per share based on current resource base.. The majors are paying about $280 an ounce for buyouts at $950 an ounce POG. San Gold currently has about 1.6 million ounces (M&I&I) and if they can prove up another 1.0 million that equals 2.6 million. 2.6 million times $280 an ounce equals $628 million (net of $108 liabilities). $628 million divided by 249.9 million shares equals $2.51 per share.

DIRECTORS AND OFFICERS

Hugh Wynne - Director and Executive Chairman
Dale Ginn, B.Sc., P.Geol. - Director and CEO
Richard Boulay, B.Sc. - Director
Courtney Shearer, B.Sc., MBA - Director
David Filmon, LLB - Director
Ben Hubert, B.Sc., M.Sc., MBA - Director
Gestur Kristjansson, BA, MBA, CA - Chief Financial Officer
-------------------------------------------------------------

Full disclosure: I own shares in San Gold Corp.. The information provided in this post is believed to be correct, but not guaranteed. Investing in junior gold miners entails risks. Readers are responsible for their investment decisions. Do your own due diligence.

Saturday, March 22, 2008

Near and Emerging Production Junior Gold Miners

There are well over 600 publicly traded junior gold miners. Most of them are explorers engaging in discovery of gold mineralization and are not planning for produciton in the near term. Only a handful are near production or emerging producers.

Below are 31 near and emerging producer junior gold mining companies I follow.

There are another half dozen or so that should be within 12 months of production over the next year. As soon as these stocks are within the 12 month window, I will add them to my formal watch list.

Alexis Minerals Corp. (TSX:AMC; OTC:AMSMF)
Anatolia Minerals Development Ltd. (OTC:ALIAF)
Atna Resources Ltd. (TSX:ATN; OTC:ATNAF)
Axmin Inc. (TSX:AXM; OTC:AXMIF)
CGA Mining Ltd. (TSX:CGA; OTC:CGAFF)
Crystallex International Corp.(TSX:KRY; AMEX:KRY)
Dynasty Metals & Mining Inc. (TSX:DMM; OTC:DMMIF)
European Goldfields Ltd.(TSX:EGU)
European Minerals, Inc.(TSX:EPM; OTC:EPMCF)
Gabriel Resources Ltd. (TSX:GBU; OTC:GBRRF)
Jaguar Mining, Inc. (TSX:JAG; NYSE:JAG)
Gold Reserve Inc. (TSX:GRZ; AMEX:GRZ)
Gold-Ore Resources Ltd. (TSX:GOZ; OTC:GREXF)
Golden Queen Mining Comp. (TSX:GQM; OTC:GQMNF)
Great Basin Gold Ltd. (TSX:GBG; AMEX:GBN)
International Minerals Corp. (TSX:IMZ; OTC:IMZLF)
Jinshan Gold Mines Inc. (TSX:JIN; OTC:JINFF)
Lake Shore Gold Corp. (TSX:LSG; OTC:LSGGF)
Metallica Resources, Inc. (TSX:MR; AMEX:MRB)
Metanor Res. Inc. (TSX:MTO; OTC:MEAOF)
Minefinders Corp. Ltd. (TSX:MFL; AMEX:MFN)
Moto Goldmines Ltd. (TSX:MGL; OTC:MTOGF)
Nevsun Resources Ltd. (TSX:NSU; AMEX:NSU)
NovaGold Resources Inc. (TSX:NG; AMEX:NG)
Orezone Resources Inc. (TSX:OZN; AMEX:OZN)
Pacific Rim Mining Corp. (TSX:PMU; AMEX:PMU)
Petaquilla Minerals Ltd. (TSX:PTQ; OTC:PTQMF)
Rusoro Mining Ltd (TSX:RML; OTC:RMLFF)
San Gold Resources Corp. (TSX:SGR; OTC:SGRCF)
Timmins Gold Corp. (TSX:TMM; OTC:TMGOF)
Western Goldfields (TSX:WGI; AMEX:WGW)

Please comment on those companies with which you are familiar or add any others I may be missing as a comment to this post.

Thank you.

Wednesday, March 19, 2008

Minefinders

CURRENT PRICE: $12.48
TARGET PRICE RANGE: $17.88 to $21.32

Minefinders Corp. is a precious metals mining and exploration company. The company is in the final stages of building the multi-million ounce Dolores gold and silver mine in Mexico. The mine is expected to have a 15-year life open pit mine with additional potential as a high-grade underground mine in the future.

Mining operations at Dolores commenced during the fourth quarter of 2007, with full commercial production expected in the second quarter of 2008. They expect their first pour in Q1 of 2008. Minefinders also has a pipeline of three additional advanced exploration projects in Mexico.

The common shares of Minefinders are listed on the Toronto Stock Exchange under the symbol MFL and the American Stock Exchange under the symbol MFN.

MINEFINDERS SUMMARY

TSX: MFL

AMEX: MFN

Shares Outstanding: 49.0 Million (60.4 million fully diluted)

Market Capitalization: ~$600 million

Telephone: (604) 687-6263

Minefinders Web Site

Presentation

Minefinders Mining has a portfolio of properties with over 3.25 Million oz of gold resources and 155 million ounces of silver( NI 43-101).This is about 4.6 Million oz. of gold equivalent resource.

Minefinders owns four properties in Mexico (Dolores, Real Viejo, Planches de Playa). Dolores is the crown jewel with 2.45 million ounces of measured and indicated gold resources and 129 million silver resources),

Production is projected to be 70,000 oz. in 2008; 120,000 oz. in 2009; 120,000 oz. in 2010.

Minefinders production is not hedged.

Minefinders has ~$48 million in debt.

Cash currently available as of February 2008 = ~$26 million in working capital, plus a $50 million revolving credit facility.

The following methods are what I use to value Minefinders for my investment purposes and provide a range of short-run and potential long-run value.

SHORT-RUN CASH FLOW SHARE VALUE

$17.88 per share in 2009 (2009 reflects Minefinder’s full-year production profile relative to 2008) using a cash flow model valuation and assuming the following:

10x cash flow
NEGATIVE per ounce production cost (due to silver credits)
120,000 ounces of production in 2009 (~70,000 oz. projected in 2008)
$2 million G&A
$10 million capital expenditures
60,400,000 shares outstanding (fully diluted)

POTENTIAL LONG-RUN RESERVE SHARE VALUE

$21.32 per share based on current resource base.. The majors are paying about $280 an ounce for buyouts at $950 an ounce POG. Minefinders currently has about 4.6 million ounces (gold equivalent) times $280 an ounce equals $1,288 million. $1,288 million divided by 60.4 million shares equals $21.32 per share.

DIRECTORS
Mark H Bailey, Director, President and CEO
Robert Leclerc, Q.C., Chairman of the Board of Directors
James M. Dawson, P.Eng., Director
H. Leo King, P.Geo., Director
Tony Luteijn, B.Sc.; M. Eng., Director

MANAGEMENT
Mark H Bailey, Director, President and CEO
Tench C. Page M.Sc., Vice President, Exploration
Greg Smith, CA, Chief Financial Officer
Gregg Bush, B.Sc., Vice President, Operations

-------------------------------------------------------------

Full disclosure: I own shares in Minefinders. The information provided in this post is believed to be correct, but not guaranteed. Investing in junior gold miners entails risks. Readers are responsible for their investment decisions. Do your own due diligence

Saturday, March 15, 2008

Metanor Interview

The following is a recent interview of Metanor Resources' officers, Mr. Ghislain Morin (President, COO) and Mr. Ronald Perry (Treasurer) on IDNR-TV's "Face the Analyst" with Jay Taylor (Editor of J. Taylor's Gold & Technology Stocks).

Recent interview of Metanor Resources


Metanor Resources is developing an increasingly compelling story.

Enjoy!

Thursday, March 13, 2008

Jaguar

CURRENT PRICE: $13.61
TARGET PRICE RANGE: $17.32 to $27.17

Jaguar Mining is an exploration, development, and producer of gold and headquartered in Concord, New Hampshire with mines in Brazil. Jaguar intends to become a Tier II gold producer with yearly production of 300,000 ounces in 2009 and further expand production in years ahead.

Jaguar's properties are located near Yamana Gold Inc. properties in Brazil. Yamana is the 5th largest gold miner in the world by market cap ($14.6 billion) and is also in my portfolio (about 1.5% of holdings). I expect Yamana to make a buyout play for Jaguar later in 2008 at a price ranging from $19 to $23 a share. Yamana is an extremely aggressive acquirer. However, Yamana is still integrating two other recent acquisitions and will have their hands full for the first half of 2008 with that activity.

The common shares of Jaguar are listed on the Toronto Stock Exchange and the NYSE Arca Exchange under the symbol JAG.

JAGUAR SUMMARY

TSX: JAG

NYSE: JAG

Shares Outstanding: 63.7 Million (71.6 million fully diluted)

Market Capitalization: ~$830 million

Telephone: 603-224-4800

Jaguar Web Site

PDF Presentation

Jaguar Mining has a portfolio of properties with over 2.9 Million oz of resources ( NI 43-101) and Proven and Probable reserves of 1.0 Million oz.

Jaguar owns four properties in Brazil (Sabara’, Pacienca, Caete’, and Turmalina). Turmalina is the crown jewel with 1.13 million ounces of measured and indicated resources, followed by Paciencia (0.82 million oz.), Caete’ (0.66 million oz.), and Sabara’ (0.26 million oz.).

Production is projected to be 160,000 oz. in 2008; 270,000 oz. in 2009; 349,000 oz. in 2010.

Jaguar production is not hedged.

Jaguar has $92.6 million in debt.

Cash currently available as of February 2008 = ~$48,800,000

There are several ways to value junior gold miners. Jaguar is unique in that it is moving quickly from a junior miner to a mid-tier miner.

The following methods are what I use to value Jaguar for my investment purposes and provide a range of short-run and potential long-run value.

SHORT-RUN CASH FLOW SHARE VALUE
$17.32 per share in 2009 (2009 reflects Jaguar’s fast growing production profile relative to 2008) using a cash flow model valuation and assuming the following:

13x cash flow (mid-tier valuation rather than lower tier producer = 10x cash flow) $1,000 per ounce POG
$306 per ounce production cost
270,000 ounces of production
$2 million G&A
$90 million capital expenditures
71,600,000 shares outstanding (fully diluted)

POTENTIAL LONG-RUN RESERVE SHARE VALUE
$27.17 per share if Jaguar can prove up another 5 million ounces of gold.The majors are paying about $280 an ounce for buyouts at $950 an ounce POG. Assuming Jaguar can prove up 7.2 million ounces times $280 an ounce equals $2.037 million. $2.037 million divided by 71.6 million shares equals $27.17 per share. Jaguar’s current market cap is about $830 million.

DIRECTORS

  • Andrew C. Burns
  • Gil Clause
  • William E. Dow
  • Juvenil T. Felix
  • Gary E. German (Chairman)
  • Anthony F. Griffiths
  • Daniel R. Titcomb

OFFICERS

  • Daniel R. Titcomb-President & CEO
  • Juvenil T. Felix-Chief Operating Officer
  • James M. Roller-Chief Financial Officer and Treasurer
  • LĂșcio Cardoso-VP Operations
  • Adriano Luiz do Nascimento-VP Exploration & Engineering
  • Robert J. Lloyd-Secretary

-------------------------------------------------------------

Full disclosure: I own shares in Jaguar Mining. The information provided in this post is believed to be correct, but not guaranteed. Investing in junior gold miners entails risks. Readers are responsible for their investment decisions. Do your own due diligence

Wednesday, March 12, 2008

Metanor

CURRENT PRICE: $1.03
TARGET PRICE RANGE: $2.86-$6.91

Metanor Resources is an exploration, development, and producer of gold. Metanor is headquartered in Val d' Or, Quebec, Canada.

Metanor recently had their first pour on February 21, 2008, a 700+ ounce bar of gold and they are projected to be pouring a bar every 10 days (listen to David Bond share his experience at Metanor's first pour).


In addition, Metanor is acquiring properties adjacent to their existing properties and aggressively drilling to prove up resources. Just today, they announced an acquisition of a property near the Barry deposit. On March 5, they announced a diamond drilling program of 15,000m on the Barry property.

I have met Serge Roy (Chairman & CEO), Ghislain Morin (President & COO), and Ron Perry (Treasurer) on two occasions. They have impressed me as a passionate and determined team.

METANOR SUMMARY

TSX: MTO

U.S. OTC: MEAOF

Shares Outstanding: 66.6 Million (81 million fully diluted)

Market Capitalization: ~$68 Million

Telephone: 819-825-8678

Metanor Web Site

PDF Presentation

Metanor has a portfolio of properties with over 1 Million oz of resources ( NI 43-101 ).

Metanor has potential of a further 1.5M oz in a radius of 100 km of the mill (historical resources not compliant with NI 43-101).

Metanor owns seven properties, 6 in Quebec (Bachelor Lake, Barry, Dubuisson,, Opinaca, Nelligan, Vassan) and 1 in Ontario (Wahnapitei). 2008 production is currently based on the Barry property. Bachelor Lake production is projected to come on line by 2009.

Production is projected to be 35,000 oz. in 2008; 50,000 oz.in 2009; 65,000 oz. in 2010.

Metanor production is not hedged.

Metanor has no debt.

Metanor has the only mill (completely refurbished in 2007) within a 100km radius of the Bachelor Lake camp. Replacement value of infrastructure, including the mill, is $120 million.

Metanor has warrants outstanding that are not trading but should eventually produce cash

- 14,846,056 warrants outstanding
--4,221,056 at $0.55, maturity 2008
--10,625,000 at $1.00, maturity 2012

Cash currently available as of February 2008 = ~$11,000,000 ($6m on February 9 with $5m from Raymond James financing)

There are several ways to value junior gold miners. The following valuation methods are what I use to value Metanor for my investment purposes and provide a range of short-run and potential long-run value.

SHORT-RUN CASH FLOW SHARE VALUE
$2.86 per share in 2008 using a cash flow model valuation and assuming the following:

10x cash flow
$1,000 per ounce POG
$310 per ounce production cost
35,000 ounces of production
$1,000,000 G&A costs
81,000,000 shares outstanding (fully diluted)

POTENTIAL LONG-RUN RESERVE SHARE VALUE
$6.91 per share if Metanor can prove up another 1 million ounces of gold at the Barry Deposit and Bachelor Lake mine through their aggressive drilling program.

The majors are paying about $280 an ounce for buyouts at $950 an ounce POG. 2 million times $280 an ounce equals $560 million. $560 million divided by 81 million shares (fully diluted)equals $6.91 per share. Metanor's current market cap is about $69 million. If Metanor can prove up more than 2 million ounces, the long-run price potential increases even higher.

DIRECTORS
• Serge Roy – Chairman & CEO
• Ghislain Morin – President & COO
• Ronald Perry – Treasurer
• Yves Rougerie – Director
• Malcolm P. Duncan – Director
• Raymond Couture – Director
• Marie-Louis Roy – Director

MANAGEMENT
• Serge Roy – Chairman & CEO
• Ghislain Morin – President & COO
• AndrĂ© Tremblay, P. Eng. – Exploration Manager
• Claude Imbeault –Vice-President Operations and Mine Manager
• Kathy Gagnon – Investor Relations
• Robert Turgeon CFO
-------------------------------------------------------------

Full disclosure: I own shares in Metanor Resources. The information provided in this post is believed to be correct, but not guaranteed. Investing in junior gold miners entails risks. Readers are responsible for their investment decisions. Do your own due diligence.

Monday, March 10, 2008

Why Near Production Junior Gold Miners?

I have been an investor for more than 20 years. For the past 12 years I have earned an annual average return of 35% using a top-down/bottom up, sector rotation approach.

About 60% of my portfolio holdings are now in junior gold miners that are nearing production. What I like about companies at this stage is that they either have or are about to have the resource and infrastructure in place. Now all they have to do is execute according to plan, which can be difficult at times. Going from zero production to millions of dollars in cash flow in the space of a few months can be very profitable for investors. Many of these companies are not on the radar of most investors and have market caps under $100 million. Once these companies begin production, they will be generating positive cash flow and should eventually be recognized by the market with higher share prices.

Junior gold miners in the pre-production phase can also be a hedge against a falling gold price. Though, current trends indicate a rising price of gold in the near future.

Mining is a risky business. A lot can go wrong. But the reward to risk ratio is better than any other investment subsector right now, in my opinion.

I own the following junior gold miners in order of portfolio weighting.

Metanor Resources (25%)
Jaguar Mining (16%)
Gold-Ore Resources (4%)
San Gold Resources (4%)
European Minerals Inc. Warrants (3%)
Minefinders (2%)
Nevsun Resources (2%)
Gold Queen Mining Inc. (2%)

I will be posting my analysis of these companies over the next days and weeks and welcome any comments or questions.

Thank you for visiting the Gold Stock Strategist.

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