Jaguar Rockets After Announcing US$25 Million Private Placement

Jaguar Mining (TSX:JAG) rose close to 42 percent on Tuesday (June 18) after proposing a US$25 million non-brokered private placement.

The company plans to use the funds to make strategic changes and to expand its presence in Brazil. Jaguar will offer shares at a discounted rate of C$0.085 each; its last closing price prior to the announcement was C$0.12 and the company ended at C$0.17 in Tuesday’s session.

“Completion of the offering will result in an opportunity to increase developed reserves, improve and update the capital equipment and infrastructure, increase gold production, expand reserves, reduce expenses per ounce of gold produced, improve efficiencies and cash flow, and reduce the financial distress caused by debt,” said Benjamin Guenther, interim CEO of Jaguar.

New York-based Tocqueville Asset Management and investor Eric Sprott, both of which currently hold shares of Jaguar, intend to participate in the offering.

Tocqueville, which owns its shares of Jaguar through its Tocqueville Gold Fund, intends to take on at least 19.6 percent of the offering for close to US$5 million. The Tocqueville Gold Fund currently holds 64,330,707 common shares of Jaguar.

For his part, Sprott plans to invest approximately US$15 million, which would increase his stake in the company to 21.17 percent.

“I am pleased to participate in the offering,” stated Sprott. “The offering represents an opportunity for Jaguar Mining to remedy its operating issues at its Turmalina mine and as a result, improve its overall production profile, operating efficiency and cost structure.”

The Canadian junior’s main assets are in the Iron Quadrangle, a greenstone belt in the Brazilian state of Minas Gerais. They include the Turmalina and Caeté mining complexes.

As mentioned, the private placement money is expected to fix some of the operational problems that have occurred at Turmalina, which include delays related to slot raises, geotechnical issues and lack of flexibility at the asset.

“We continue to focus on executing a turnaround plan at Turmalina that will address operational challenges faced during the quarter,” Guenther said in an operational update at the end of May. 

The update indicates that Turmalina is expected to produce 15,000 ounces of gold on a quarterly basis by the end of next year. At the end of 2018, the asset’s total mineral reserve gold ounces stood at 1.4 million tonnes at 5.05 grams per tonne (g/t) for 228,000 ounces.

Also at the end of last year, the Pilar mine, which is part of the Caeté mining complex, had proven mineral reserves of 1.2 million tonnes at 3.79 g/t containing 143,000 ounces. Its probable mineral reserves stood at 0.6 million tonnes at 3.47 g/t containing 68,000 ounces.

Jaguar also owns the Paciência gold mine complex and the Roca Grande mine, but both have been on care and maintenance since 2012 and April 2019, respectively.

The private placement is expected to close on or about July 8, 2019. As of 11:28 a.m. EDT on Wednesday (June 19), Jaguar was trading at C$0.14.

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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.