Jaguar Mining Inc. (TSX: JAG) is a junior gold mining company based in Brazil that focuses on the acquisition, exploration, development, and operation of gold-producing properties. 

Why Should Investors Book Profit?

• Lower preliminary annual production: Recently the company shared its preliminary annual consolidated gold production for full year 2021, which decreased by 8% to 83,878 ounces compared to 2020 production of 91,118 ounces.

• Rising operating production cost: Despite the lower revenue in Q3 2021, the company’s operating production costs increased to USD 19.4 million in Q3 2021 as compared to USD 14.1 million in Q3 2020. The increase in operating cost is primarily due to local inflationary pressure on wages, mining materials and plant consumables, higher tonnes processed.

• Shrinking free cash flows: On the back of lower performance in Q3 2021, the company also witnessed drop in its free cash flow, which stood at USD 9.8 million for Q3 2021, compared to USD 14.9 million in Q3 2020. Free cash flow was USD 423 per ounce of gold sold in Q3 2021 compared to USD 651 per ounce sold in Q3 2020.

• Exhausted technical indicators: On the daily price chart, the stock has recently experienced a good rally and generated a decent return of 34.78% in last one month. However, the stock has moved close to the upper end of the Bollinger band, indicating that the stock could face some hurdles there and could be due for a price correction or consolidation. Furthermore, the momentum oscillator RSI (14-Period) is trading at ~72.04 levels, which also indicates that the stock is in overbought zone and there is a deep possibility of price consolidation or correction.

One-Year Technical Price Chart (as on March 8, 2022). Source: REFINITIV, Analysis by Kalkine Group 

Valuation Methodology (Illustrative): Price to CF based

Analysis by Kalkine Group

Stock recommendation

The corporation recently released its Q3 2021 financial results, which showed a drop in revenue and a widening of its operating expenses, as a result it witnessed a drop in its net income and free cash flows. All indicating that the firm is losing its luster and may create a difficulty for the company to meet their financial obligations regarding upcoming new drilling programs.

Additionally, recently the management shared its preliminary annual FY2021 production numbers, which were on the lower side compared to the previous corresponding period. Even the technical indicator suggests that stock is perhaps overbought and due for a price correction or a consolidation. Therefore, based on the above rationales and valuation, we recommend a “Sell” rating on the stock at the closing price of CAD 5.27 on March 8, 2022.

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

Disclaimer

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