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Is Jangada Mines poised for breakout? (JAN)

We highlighted Jangada Mines (LSE:JAN) back in November when it was just sitting above trend channel support. The market took a turn for the worse in December and interest in micro-cap stocks dropped significantly. Jangada was not alone in hitting deep lows but the New Year has seen a decent recovery rally so far. Indeed, the past week has seen many AIM stocks come back to life.

Jangada printed a low of 1.55p but now sits at 1.85p and looks primed to move further. The price action has formed a Falling Wedge Pattern over the past three months and the stock took a look at breaking out yesterday. The price is also bang-on the bottom of the previous trend channel it fell out of last month. A close back in that channel is likely to confirm the stock is in recovery mode. The Relative Strength Index (RSI) is also well positioned for a move north, having put two deep oversold lows. Since we’re starting from a lower base, an initial target might be 2.65-2.95p. However, with the last fundraise held at 3p, and a compelling fundamental story, a rally could drive this higher over the coming months. That is, of course, as long as wider markets remain stable.

As we mentioned in December, the economics for Jangada’s flagship Pedra Branca project look increasingly compelling, particularly against the current climate of lower commodity prices that are likely to recover at some point. Current US Dollar weakness has already given some commodities a boost.

The project is concerned primarily with Platinum Group Metals (PGM), but the asset also contains significant gold mineralisation. We calculated with Platinum at $850 that the payback time on investment for the project is just 1.57 years. Although Platinum is currently lower at $822 today, the calculation did not take into account higher spot prices of Palladium – now $1334 – and gold at $1282.

There is plenty of expected news flow to come as Jangada prepares its Bankable Feasibility Study (BFS) and it’s worth noting that directors aligned their interest with shareholders by participating in the recent fundraise at 3p. Brian McMaster and Luis Azevedo invested £50,000 each. With the share price at a considerable discount to the raise, the potential downside does appear to be limited.

Author: Stuart Langelaan

Disclosure: The author of this piece owns shares in the company mentioned above

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