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.
Shares Outstanding: 63.7 Million (71.6 million fully diluted)
Market Capitalization: ~$830 million
Jaguar Web Site
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.
- Andrew C. Burns
- Gil Clause
- William E. Dow
- Juvenil T. Felix
- Gary E. German (Chairman)
- Anthony F. Griffiths
- Daniel R. Titcomb
- Daniel R. Titcomb-President & CEO
- Juvenil T. Felix-Chief Operating Officer
- James M. Roller-Chief Financial Officer and Treasurer
- Lúcio 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