Jangada mines (LSE:AIM), a platinum group metals (PGM) play with its flagship project in Brazil recently raised £2.1m in a fundraise at 3p. Some of the funds are to be used to further prove up the Pedra Branca asset including the production of a robust bankable feasibility study (BFS). Today the shares are trading below the placing price at 2.85p. It’s worth noting that 1-for-1 warrants were issued in the fundraise, with an exercise price of 6p. It’s not uncommon for some investors to participate in a placing with a view to bagging a ‘free ride’ with risk-free warrants. In such cases, the investor may have opted to sell the stock at breakeven, or even at a slight loss. This may explain why Jangada has slipped below 3p.
A look at the share price chart shows a clear price channel (black), with the stock price currently hugging the bottom. With little to gain from selling much deeper, I would anticipate this support line will hold firm – although it is gradually decreasing so some further downside during consolidation is possible. The range of price action is starting to narrow into a wedge formation, so it does appear the stock is preparing itself to make a decisive move in the not too distant future.
The Relative Strength Index (RSI) also reflects this coiling up effect and indicates the stock is very oversold. There is, however, a placing overhang, so a move will be reliant on that clearing. Once 3p is broken the stock will be back in its previous price channel (blue). Key resistance will likely be encountered at the top of its existing channel and the previous trend channel, currently at 4.4p and 4.65p respectively. These values will obviously come down to meet the price over in the meantime.
With funding now available news on progress is expected to flow over the coming months, the first post-raise being the announcement earlier this week that approval of the environmental license has been received.
At the current platinum price of $819, payback for the proposed processing plant is estimated to be just over 2 years. This dips to just 1.64 years should platinum return to its 2018 highs. With platinum currently in the doldrums with the rest of the precious metals, Jangada will be in a position to benefit from a much-anticipated reversal in commodity prices if and when it finally arrives.