Jaguar Mining Inc. (TSX: JAG) It is a gold mining company operating in Brazil and engaged in the acquisition, exploration, development, and operation of gold producing properties. The company produces more than 95,000 ounces of gold annually.

Key highlights

• Q4 2021 Production Results:  On January 10, 2022, the company has posted Q4 2021 gold production to 22,903 ounces which has increased by 2% from Q4 2020 i.e., 22,533 ounces. Total development metres (Primary and Secondary) are 2,615 metres in Q4 2021 which is 3% increase on Q4 2020 development of 2,538 metres. These development rates provide sustainable progress on the ramp, ore development and exploration drives. A table of operating results is given below:

Source: Company Reports     

• Treasury Cash Position: In Q4 2021, the company has treasury cash position of USD 40 million as compared to cash of USD 39 million in Q4 2020, indicating strong generation of free cash flow.
  

• AISC 2022 Guidance: The company has issued guidance for the year 2022 which is 86,000 - 94,000 ounces produced annually at an AISC range of USD 1150 – USD 1250 per ounce.
  

• Investment in Capital Expenditures: The company has invested total capital expenditure of USD 10 million (sustaining capital of USD 6.5 million and growth capital of USD 3.5 million) compared to USD 11 million total capital expenditures in the same period in 2020.
  

Risks associated with investment            

Since the company operates in metals and mining segment. Hence the company is exposed to variety of financial instrument risk, inflation, interest rate risk, currency risk, and high volatility in gold prices also company exposed to mining risk such as environmental hazards, labour disruptions, industrial accidents, metallurgical and other processing problems. 

Financial Overview of for the Period Ended September 2021 (In thousands of USD, except share and per share amounts)

Source: Company’s Filings

• The revenue of the company has increased by 12.16% to USD 40.74 million in Q3 2021 as compared to Q2 2021 of USD 36.33 million, due to 15% increase in gold sales from the sequential quarter i.e., Q2 2021.
• The gross profit of the company has increased to USD 15.76 million in Q3 2021 as compared to USD 13.32 million of Q2 2021.
• The company’s net Income in Q3 2021 is USD 11.41 million which is substantially increased by 283% from USD 2.98 million in Q2 2021, due to recovery of USD 0.8 million in non-operating and finance expenses and reduction of USD 0.7 million in operating expenses.

Valuation Methodology (Illustrative) EV to EBITDA Based

Source: Analysis by Kalkine Group

Stock recommendation

The company is clear that team can operate both mines sustainably and grow the Company’s volume average production rate to 22,500 ounces per quarter. While the price of gold has recently been strong, there can be no assurance that gold prices will remain at such levels or be such that Jaguar’s properties can be mined at a profit also credible industry experts expect that the price of gold has generally peaked during the recent pandemic and the prices will get stabilize in near time. Therefore, based on the above rationale and valuation, we recommend a "Spec Buy" rating at the closing price of CAD 4.31 as on date 10^th January 2022.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Technical Summary Analysis

One-Year Price Chart (as on January 10, 2022). Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

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