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

Comments are welcomed!

Tuesday, April 29, 2008

Jaguar's March 25 Call Transcript

I just had a chance to read the transcript of the Jaguar Mining conference call from March 25 and wanted to share some of the information with Gold Stock Strategist readers. The following is an URL with the full transcript on SeekingAlpha.

Jaguar's March 25 Transcript

Several items stand out for me after reading the transcript.

First is the following:

"The geological setting we’re in leads us to believe that we can have a rolling resorts base of 8,000,000-10,000,000 oz Au under our feet and on strike therefore we’re leveraging the existing infrastructure we have in place."

This is far larger than the 3.6 million reserves Jaguar is currently reporting and if 8-10 million ounces are eventually proven up, this would represent a significant increase in the value of Jaguar Mining.

Second, they are on track with the Paciência property, which is scheduled to begin production in 2008. Currently, the Turmalina mine is the big producer. Bringing Paciência online will be a major milestone and have production equal to Turmalina during 2009. Total production is projected to rise from 160,000 ounces in 2008 to 270,000 by 2009.

Third, even though production costs were up in Q407, Jaguar expects production costs to come back in line with previous projections going forward.

Fourth, there was an angry comment and a question for management on stock based compensation. Managment explained that the large increase in stock price drove the expense significantly higher in Q407. Revenue for the year was $47.8 million and stock compensation expense was $10.8 million. Management indicated that they were unlikely to continue the past level of stock based compensation and that they were not requesting an increase in the number of options. However, they are reviewing their oveall compensation scheme and should be able to report in a few months. I'm not concerned with the one time charge for stock based compensation. Finding talent is very difficult in the mining industry. Compensation is very important to attract and retain talent. As long as Jaguar keeps hitting milestones, delivers on production, and grows cash flow I am comfortable with appropriate compensation schemes--but will carefully assess their new scheme when it is released. The one time charge explanation was acceptable IMHO.

When all is said and done, Jaguar is now extremely undervalued IMHO at $8.64 per share. Given fundamental valuation metrics, Jaguar Mining should be a two-bagger by the end of 2009 IMHO.

Gold Stock Strategist

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

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