Jaguar Mining Inc. (TSE:JAG
) (NYSE:JAG) stock continues to trade with a substantial premium as traders remain excited about the recent acquisition proposal and the fact that Jaguar might be substantially undervalued.
JAG had held onto new stock value for four consecutive sessions and the trading volumes have dropped significantly ever since. It appears the premium price will stick without any serious correction.
The stock currently trades with a 38.4% premium over the price it had on November 15 before the company was officially offered $785 million for their outstanding stock. The offer was made by China's Shandong Gold Group, the parent of Shandong Gold Mining Co Ltd. It actually translated into $9.30 per share, but as no definitive deal is yet made the market price stays considerably lower.
Shandong is not the only one eager to acquire Jaguar. Another large potential bidder Kinross Gold Corp. (TSE:K) might top the offer in the future as analysts find the $9.30 offering might be undervaluing the business.
Jaguar is attractive for their mining projects, especially the development stage Gurupi project in Brazil. The full potential of this property is yet unknown, but seems promising. The company will be running extensive 30 thousand meter drill program and expects to significantly increase the mineral resource base.
On November 9 Jaguar also released third quarter operating results which showed controversial improvement over the same period in 2010:
- Sales increased 43.8% to $70 million;
- Operating expenses nearly tripled and topped $11 million;
- Booked net loss of $51.3 million compared to $19.2 profit last year;
- Cash flow was negative $23.7 million against $9.4 million decrease in Q3 2010.