So we get the news this morning that Eric Sprott (and Toqueville) has moved to
bail out once again inject vital and company-enhancing working capital in Jaguar Mining (JAG.v). With the company insisting that the U$25m they’ll collect from the placement (priced at 8.5c) will be enough to inject life and cover capital needs (now where the F have I heard that one before? This company is doing a Groundhog Day on my head), everybody’s congratulating Eric Sprott from getting in this cheaply and now owning over 40% of the company.
Which made me go, “Yeaah, but how much did he pay for his other positions?”, so off to SEDI we go, and…
…the answer is $13.79m. That means with the U$15m coming to C$20m approx today, he’s paid a rounded-up CAD$33.8m for 42.6% of Jaguar Mining, the process having started a little under three years ago. By the end of this very dilutive placement, JAG will have 722.623m shares out and as they are being priced at 17c today on this news (though as this 5 day chart shows, we’re pretty rampy and volatile today and that price could change), a pro-rata market cap of CAD$122.85m.
In other words, Eric Sprott is now on a paper profit of C$18.53m. Good for him. Even better for JAG, who now get to pay those key management salaries for a couple more years. Not so good for those retail shareholders squeezed between the mediocrity of JAG and its serially under-performing mines, and the big swinging benefactor coming in at a deep discount, a year ago this was a 36c stock (it would take a double from here….after a 119% dilution….ahhh, good luck).
This how the industry works if you are the guy tapped for cash by the distressed end of the gold mining world when times are tough. The billionaire goldbug prime target gets to buy his “bargain” and the godawful assets that should have been shuttered years ago keep on churning out gold at cost breakeven levels because their benefactor thinks gold is going to U$1,800/oz and needs to make this type of bet to make any difference to his pile of coins already. This bet is his equivalent of me going to a casino with U$200 and trying my luck for a couple of hours while sipping my freebie margarita.