Japan Gold Corp

Japan Gold Corp (TSXV: JG) is an exploration-stage mining company and is engaged in gold and copper-gold exploration across Japan. The company possesses a total of thirteen separate project areas prospective for high-grade epithermal gold mineralization.

Key Highlights:

• The company informed encouraging geochemical and geophysical results from the Barrick Alliance regional work programs covering the Mizobe Project in the Southern Kyushu Epithermal Gold Province. Following are the results:
  • 84 rock float samples collected with 54 assaying gold greater than 0.5 g/t Au including 22 assaying greater than 4 g/t Au with a peak value of 18.9 g/t Au.
  • Several gravity-high features defined across the project to coincide with at least four clusters of gold in rock float anomalies.
• The group announced the acquisition of the Kanehana Project. The new project is adjoining the west side of Japan Gold's Ikutahara Project.
• Earlier, the company confirmed a progress report on the Barrick Alliance project activities in northeast Hokkaido, Japan wherein, the company collected bulk leach extractable gold (BLEG) and rock float samples. The above project is located in the Kitami Region of northeast Hokkaido and has major epithermal gold provinces with more than 40 historic mines and prospects.

Q2FY20 Financial Highlights: JG announced its second-quarter results, wherein the company posted loss before other items at CAD 1.2 million, marginally higher than CAD 1.11 million in the previous corresponding period (pcp). The quarter was marked by a significantly higher foreign exchange loss and share-based compensation. Management fees remained stable during the quarter while the business witnessed a surge in expenses like investor’s relations and director fees. The company reported higher net loss of CAD 1.3 million compared to a net loss of CAD 1.01 million in pcp.

Q2FY20 Income Statement Highlights (Source: Company Reports)

Risks: The business is an exploration stage and is yet to report revenue. Any negative or undesired outcome from the exploration program would affect the prospect. Further, a higher accumulated deficit on account of subsequent losses would hinder the overall flexibility of the business.

Stock Recommendation: During the first quarter of FY20, the Company announced a country-wide alliance with Barrick Gold Corporation and acquired six new projects in the Southern Kyushu Epithermal Gold Province. The above collaboration covers the entire country of Japan, including 28 out of 30 projects currently held by Japan Gold, and the nearby locations, which reported impressive mining deposits in the past. The Company is conducting drilling activities and is yet to discover any gold deposit, and hence we prefer to remain on the sidelines. The stock gained ~34% in the last six months, respectively as investors were leaning towards the stock due to its collaboration with Barrick Gold Corporation, one of the leading Gold mining companies. Further, the short-term technical indicators are showing a bearish trend in the stock, as the shares declined approximately 4% over the past one month. Also, in the September 28 trading session, JG shares breached down the crucial short-term support level of 50-day SMA, which indicate a bearish sentiment hovering over the stock. Further, its shares traded below the immediate support levels of 5-day, 10-day and 20-day SMAs, making the prevailing trend stronger. Moreover, MACD is hovering below its 9-day SMA signal line, with the difference between 12-day and 26-day EMAs is negative, which is another bearish indicator. Hence, considering the aforementioned facts, we recommend investors to ‘Avoid’ the stock at the closing price of CAD 0.335 on 30 September 2020.

JG Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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