3 Further Reasons to add Jangada Mines #JAN to your Watchlist
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3 Further Reasons to add Jangada Mines #JAN to your Watchlist

THE CONTENT OF THIS BLOG / WEBSITE (OR CONTENT ASSOCIATED WITH IT) IS NOT INTENDED AS INVESTMENT ADVICE, IT IS FOR INFORMATION PURPOSES ONLY. YOU SHOULD TAKE PROFESSIONAL FINANCIAL ADVICE IN CONNECTION WITH, OR INDEPENDENTLY RESEARCH AND VERIFY, ANY INFORMATION THAT YOU FIND ON THIS BLOG / WEBSITE AND WISH TO RELY UPON, WHETHER FOR THE PURPOSE OF MAKING AN INVESTMENT DECISION OR OTHERWISE. WE ARE NOT REGULATED UNDER UK FINANCIAL SERVICES LAW. THE AUTHOR OF THIS BLOG MAY HOLD AN INTEREST IN THE STOCK FEATURED.

JANGADA MINES #JAN

Share Price: 3.875P
Market Capitalisation: £7.65M

Jangada Mines is focused on developing the Pedra Branca Platinum Group Metals (PGM) Project, one of the largest undeveloped PGM projects outside of Africa.


To read my previous blog on Jangada Mines #JAN click here

3 Further Reasons to add Jangada Mines #JAN to your Watchlist

50% INCREASE IN RESOURCES

On 15th May Jangada released an RNS announcement entitled, “Substantial Resources Increase at Pedra Branca PGM Project”.

These increases included:

o 50% increase in global ore volume to 34.5 million tonnes at 1.3 g/t PGM+Au

o 53% increase in PGM resource to 1.45 million ounces

o 28% increase in nickel resource to 140 million pounds

o 11% increase in copper resource to 26 million pounds

o 4% increase in cobalt resource to 6.7 million pounds

Increase in resources obtained from the inclusion of the Santo Amaro prospect to inferred resources

Six more known targets to be evaluated across the 50,000-hectare licence, providing the potential for additional major upside in future resource figures.

On 31st October 2017 their scoping study revealed:

An internal Rate of Return (IRR) of 80% at a production rate of 34,000 ounces of PGM+Au per annum.

An NPV of US$158.4m at a 10% discount rate

If they’re producing 34,000 ounces of PGM per annum with an 80% IRR and are able to payback the capital expenditure of $38.4m in 1.3 years then this would suggest they’ll be generating $28.8m (£21.9m) of free cash flow per year.

So we can assume this would now be upgraded by around 50%

Making the NPV $237.6m

So 34,000 ounces would become 51,000 ounces produced per year. If we take the PGM price at $900 per gram, this would generate revenue of $45.9m per annum.

At an 80% IRR this would create $36.7m (£27.25m) of free cash flow a year.

 

AN IMPROVED INVESTMENT CASE

When I last wrote about Jangada Mines (November 2017) their market capitalisation £9.14m and their expected production was 34,000 ounces per year PGM. This suggested they would be generating $28.8m (£21.9m) of free cash flow per year.

Therefore, back in October 2017, one year’s free cash flow was more than 2 times their market capitalisation.

Now, even though the project has moved on and their resource size has been upgraded, their share price is lower and so their market capitalisation is £7.65m.

This means, after this upgrade, should they be producing 51,000 ounces per year:

Just one year of free cash flow ($36.7m / £27.25m) is now 3.5 times the size of the entire company.

The NPV, should it come in at $237.6m (£176.3m), is 23 times their current market capitalisation.

 

TIGHTLY HELD SHARES

Just over 77% of the shares are held by significant shareholders.

46.2% are held by directors.

22% are in free float.

Of these holders Brian McMaster, Executive Chairman holds 23.4%.

Matt Wood, Brian’s partner at Garrison Capital, their investment company, holds 23.4%.

Luis Azevedo, Non-Executive hold 22.8%.

Mark Sumner holds 7.6%.

 

How does it fit in with my research model, C.C.A.S.S.H which you can read more about by clicking here

GREEN = POSITIVE

BLACK = NEUTRAL

RED = NEGATIVE

 CAPITALISATION

My favourite sized comanies are sub £10m market capitalisation. If they have the right asset with the right management, it doesn’t take a lot for them to at least double in value.

CHART

Jangada Mines floated on 29th June at 5p and currently at 3.875p their share price is close to an all time low.

ASSETS

One of the reasons Jangada Mines share price has languished of late is because they probably need to raise money to continue their on going work programme. In their interim statement to 31st December 2017, they stated they had $800,000 in cash.

In their previous 6 months they lost $766,ooo so if the same amount and type of work is ongoing you would expect $800,000 to last not much longer than June 2018.

SHAREHOLDERS

Just over 77% of the shares are held by significant shareholders.

46.2% are held by directors.

22% are in free float. Whenever there’s a low supply it doesn’t take a lot of demand to move the share price.

SIGNIFICANT MILESTONE

In their recent announcement on 15th May Chairman, Brian McMaster stated, “Metallurgical test work including flow sheets will be published imminently, which will be closely followed by the publication of further technical assessment.”

This should be closely followed by a pre-feasability study.

HEAD HONCHOS

The board and management possess a great deal of experience in mining, geology and corporate activity.

I am confident they have the wherewithal to take Jangada Mines through to become a very profitable producing mine, should that be the route they wish to take.

You can read about the board by clicking here

Jangada Mines has the potential to be a very highly cash generative business.

It is located in a politically safe, mining friendly jurisdication (as opposed to traditional PGM producers) and will be a low cost operation, boasting an internal rate of return at 80% and a payback period of just 1.3 years.

It also has an impressive multi-commodity ore suite including PGM + Au with additional credits from nickel, copper, chrome and cobalt. Their exploration has also uncovered high-grade vanadium-titanium-iron mineralisation.

On current figures, just one years worth of free cash flow ($36.7m / £27.25m) when the mine will be producing 51,000 ounces of PGM, will be 3.5 times the current size of the entire company.

There’s also potential for further upgrades with six more known targets to be evaluated across their three mining licences and 43 exploration licences which cover an area of 50,000 hectares.

If having skin in the game is any measure of the management’s confidence in their business, then Jandgada’s board are very confident as they hold 46.2% of the shares and overall 77% are held by significant holders.

There maybe some short term downward pressure on the share price, due to an impending fundraise but as an investor I see this as an opportunity to acquire some more stock at a 22.5% discount from the IPO price and at a level that seems to present upside at multiples to its current valuation, should everything go to plan.

TO ADD JANGADA MINES TO YOUR WATCHLIST CLICK HERE AND TAP THE FOLLOW BUTTON

THE CONTENT OF THIS BLOG / WEBSITE (OR CONTENT ASSOCIATED WITH IT) IS NOT INTENDED AS INVESTMENT ADVICE, IT IS FOR INFORMATION PURPOSES ONLY. YOU SHOULD TAKE PROFESSIONAL FINANCIAL ADVICE IN CONNECTION WITH, OR INDEPENDENTLY RESEARCH AND VERIFY, ANY INFORMATION THAT YOU FIND ON THIS BLOG / WEBSITE AND WISH TO RELY UPON, WHETHER FOR THE PURPOSE OF MAKING AN INVESTMENT DECISION OR OTHERWISE. WE ARE NOT REGULATED UNDER UK FINANCIAL SERVICES LAW. THE AUTHOR OF THIS BLOG MAY HOLD AN INTEREST IN THE STOCK FEATURED.

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THE CONTENT OF THIS BLOG / WEBSITE (OR CONTENT ASSOCIATED WITH IT) IS NOT INTENDED AS INVESTMENT ADVICE, IT IS FOR INFORMATION PURPOSES ONLY. YOU SHOULD TAKE PROFESSIONAL FINANCIAL ADVICE IN CONNECTION WITH, OR INDEPENDENTLY RESEARCH AND VERIFY, ANY INFORMATION THAT YOU FIND ON THIS BLOG / WEBSITE AND WISH TO RELY UPON, WHETHER FOR THE PURPOSE OF MAKING AN INVESTMENT DECISION OR OTHERWISE. WE ARE NOT REGULATED UNDER UK FINANCIAL SERVICES LAW. THE AUTHOR OF THIS BLOG MAY HOLD AN INTEREST IN THE STOCK FEATURED.

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