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Shandong Gold makes offer for Jaguar Mining: sources (MIKE SEGAR/REUTERS)
Shandong Gold makes offer for Jaguar Mining: sources (MIKE SEGAR/REUTERS)

Schizas’ Mailbag

Jaguar Mining’s investors have been mauled Add to ...

Hi Lou,

I hear your comments every single morning and your weekend show on Talk Radio AM640 and enjoy them very much.

I have read your comment about Jaguar Mining and I would like to hear from you concerning Q2, the turn around plan and possibly a takeover.

Thanks in advance,


Hey Aki,

Glad to hear that you are enjoying The John Oakley Show weekday mornings and The Real Money Show on the weekends on AM640.

This will be the second time that I have examined the case for Jaguar Mining Inc. The first was on June 11, 2012 on a request from Doug. He had made some money on anticipation of a takeover then got back in after no deal was concluded. He took a hit as the shares pulled back and closed at $1.42. In the analysis it was outlined that the problem with anticipating a bottom instead of confirming it is that you can find new lows with your money. Unfortunately that is exactly what happened. The shares hit a 52 week low of $0.61 on July 25, 2012.

Second quarter was reported on Aug. 14, 2012 and once again investors were hard pressed to find value in the results. On Aug. 9, 2012 the company reported that the restructuring plan announced in May was moving ahead and that they expected to generate savings of $31-million a year. As far as a takeover of the company I suppose anything is possible but there is nothing in the stream suggesting that JAG is currently a target. Managing the anticipation of a takeover is more of a gamble given that it is an all or nothing call.

A review of the charts will assist in evaluating the risks and opportunities associated with this investment.

The three-year chart illustrates the trail of tears investors have endured in 2012. The breach of support at $4.00 in April set the stage for a crushing sell off that took the shares to $0.61. The gap down in July came as directors left the board and key personnel vacated the executive suite. The shares did catch a bounce off the rock hard July lows and are now trying to hold support at $1.00.

The six-month chart isn’t providing investors with much comfort. Both the MACD and the RSI are turning lower suggesting that it may prove difficult for JAG to hold support at $1.00. If you have a huge appetite for risk you could take a position at these levels and see if what appears to be a pennant that has formed leads to a continuation of the advance off the July lows. If you are more conservative keep your powder dry for an opportunity with a lower risk profile.

Make it a profitable day and happy capitalism!

Have your own question for Lou? Send it to lschizas@globeandmail.com.

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Follow on Twitter: @louschizas

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