-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GvAvbME1/kmIeBV5d7NZHVPs5b80hLN/Yw02PxlvEuJVeRKrRhzv7taVshvv3wsf HgtzmC1WEBboE7vlHyewXg== 0001279569-07-001632.txt : 20071109 0001279569-07-001632.hdr.sgml : 20071109 20071109145300 ACCESSION NUMBER: 0001279569-07-001632 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20070930 FILED AS OF DATE: 20071109 DATE AS OF CHANGE: 20071109 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Jaguar Mining Inc CENTRAL INDEX KEY: 0001333849 STANDARD INDUSTRIAL CLASSIFICATION: METAL MINING [1000] IRS NUMBER: 980396253 STATE OF INCORPORATION: A6 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-33548 FILM NUMBER: 071230781 BUSINESS ADDRESS: STREET 1: 48 PLEASANT ST CITY: CONCORD STATE: NH ZIP: 03301 BUSINESS PHONE: 603-224-4800 MAIL ADDRESS: STREET 1: 48 PLEASANT ST CITY: CONCORD STATE: NH ZIP: 03301 6-K 1 jaguar6k.htm FORM 6-K jaguar6k.htm


 
 
FORM 6-K

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 under the
Securities Exchange Act of 1934

For the month of November, 2007
Commission File Number 001-33548

JAGUAR MINING INC.

48 Pleasant St.
Concord, New Hampshire 03301
(603) 224-4800

(Address of principal executive offices.)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F o
Form 40-F x

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes o
No x

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-  _____ 
 
 
 



 

EXHIBIT INDEX
 
 
Description of Exhibit
     
99.1
 
Jaguar Mining Third Quarter Interim Financial Statements
99.2
 
Jaguar Mining Third Quarter Management's Discussion and Analysis
99.3
  CEO Certificate
99.4
  CFO Certificate
 


SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
JAGUAR MINING INC.
 
       
Date: November 9, 2007
By:
/s/ Robert J. Lloyd    
    Name: Robert J. Lloyd  
    Title: Corporate Secretary  
       

 
EX-99.1 2 ex991.htm THIRD QUARTER INTERIM FINANCIAL STATEMENTS ex991.htm
Exhibit 99.1
 


 




JAGUAR MINING INC.


Interim Consolidated Financial Statements
 
September 30, 2007
 
(Unaudited)


 


JAGUAR MINING INC.
 
Interim Consolidated Balance Sheets
(Expressed in thousands of U.S. dollars)
 
September 30, 2007
(Unaudited)             
   
September 30,
   
December 31,
 
   
2007
   
2006
 
             
Assets
           
Current assets:
           
    Cash and cash equivalents
  $
67,046
    $
14,759
 
    Accounts receivable
   
6,422
     
1,742
 
    Inventory
   
8,416
     
5,297
 
    Prepaid expenses and sundry assets (Note 3)
   
8,869
     
4,812
 
    Unrealized foreign exchange gains (Note 11(b))
   
1,938
     
-
 
     
92,691
     
26,610
 
                 
    Prepaid expenses and sundry assets (Note 3)
   
11,379
     
9,657
 
    Unrealized foreign exchange gains (Note 11(b))
   
215
     
709
 
    Net smelter royalty (Note 2)
   
1,462
     
1,535
 
    Restricted cash (Note 12)
   
3,100
     
6,027
 
    Property, plant and equipment (Note 4)
   
72,386
     
39,162
 
    Mineral exploration projects (Note 5)
   
51,423
     
40,430
 
    $
232,656
    $
124,130
 
                 
Liabilities and Shareholders' Equity
               
    Current liabilities:
               
    Accounts payable and accrued liabilities
  $
13,267
    $
6,625
 
    Notes payable (Note 6)
   
10,846
     
5,274
 
    Asset retirement obligations
   
259
     
289
 
    Forward sales derivative liability (Note 11(a))
   
6,924
     
3,388
 
     
31,296
     
15,576
 
                 
    Forward sales derivative liability (Note 11(a))
   
6,046
     
6,828
 
    Notes payable (Note 6)
   
81,751
     
10,550
 
    Future income taxes
   
1,446
     
421
 
    Asset retirement obligations
   
2,839
     
1,380
 
    Total liabilities
   
123,378
     
34,755
 
                 
    Shareholders' equity
               
    Common shares (Note 7(a))
   
138,150
     
106,834
 
    Warrants (Note 7(b))
   
811
     
4,072
 
    Stock options (Note 7(c))
   
13,571
     
8,745
 
    Contributed surplus
   
1,150
     
1,149
 
    Deficit
    (44,404 )     (31,425 )
     
109,278
     
89,375
 
    Commitments (Notes 11and 13)
               
    Subsequent event (Note 11(a))
               
    $
232,656
    $
124,130
 
 
See accompanying notes to interim consolidated financial statements.
 
On behalf of the Board:
 
 
Gary E. German   Director
     
Daniel R. Titcomb   Director
 

 
1

JAGUAR MINING INC.
 
Interim Consolidated Statements of Operations, Comprehensive Income and Deficit
(Expressed in thousands of U.S. dollars, except per share amounts) 
 

 
(Unaudited)
                       
   
Three Months
   
Three Months
   
Nine Months
   
Nine Months
 
   
Ended
   
Ended
   
Ended
   
Ended
 
   
September 30,
   
September 30,
   
September 30,
   
September 30,
 
   
2007
   
2006
   
2007
   
2006
 
                         
Gold sales
  $
14,962
    $
7,279
    $
32,919
    $
14,875
 
Production costs
    (8,818 )     (4,527 )     (17,450 )     (9,407 )
Other cost of goods sold (Note 14)
    (1,705 )    
-
      (2,160 )    
-
 
Depletion and amortization
    (1,860 )     (407 )     (3,027 )     (1,991 )
Gross profit
   
2,579
     
2,345
     
10,282
     
3,477
 
                                 
Operating expenses:
                               
    Exploration
   
722
     
65
     
1,561
     
172
 
    Stock-based compensation (Note 7(c))
   
610
     
130
     
4,851
     
2,926
 
    Administration
   
2,591
     
1,495
     
6,805
     
5,116
 
    Management fees (Note 9(a))
   
186
     
186
     
562
     
552
 
    Accretion expense
   
34
     
8
     
68
     
18
 
    Other
   
471
     
101
     
1,513
     
355
 
    Total operating expenses
   
4,614
     
1,985
     
15,360
     
9,139
 
                                 
Income (loss) before the following
    (2,035 )    
360
      (5,078 )     (5,662 )
                                 
Unrealized (gain) loss on forward sales derivatives (Note 11(a))
   
3,767
      (2,292 )    
2,755
     
4,384
 
Realized loss on forward sales derivatives (Note 11(a))
   
1,572
     
-
     
3,333
     
-
 
Unrealized gain on forward foreign exchange derivatives (Note 11(b))
    (891 )     (44 )     (1,444 )     (781 )
Realized gain on forward foreign exchange derivatives (Note 11(b))
    (681 )     (217 )     (1,280 )     (406 )
Foreign exchange (gain) loss
   
152
     
656
      (2,150 )     (2,118 )
Amortization of deferred financing expense
   
-
     
190
     
-
     
507
 
Interest expense
   
3,296
     
43
     
7,647
     
217
 
Interest income
    (1,697 )     (606 )     (3,228 )     (1,285 )
Other non-operating expenses
   
184
     
-
     
184
     
-
 
Total other (income) expenses
   
5,702
      (2,270 )    
5,817
     
518
 
                                 
Income (loss) before income taxes
    (7,737 )    
2,630
      (10,895 )     (6,180 )
Income taxes
                               
    Current income taxes
   
240
     
270
     
982
     
456
 
    Future income taxes (recovered)
   
677
      (81 )    
958
      (72 )
Total income taxes
   
917
     
189
     
1,940
     
384
 
                                 
Net loss and comprehensive income for the period
    (8,654 )    
2,441
      (12,835 )     (6,564 )
                                 
Deficit, beginning of period as reported
    (35,565 )     (27,696 )     (31,425 )     (18,711 )
Adjustment to opening deficit (Note 1(a))
   
-
     
-
     
41
     
-
 
Deficit as restated
    (35,565 )     (27,696 )     (31,384 )     (18,711 )
Shares acquired for cancellation (Note 7(a)(i))
    (185 )    
-
      (185 )    
-
 
Interest income - share purchase loans
   
-
     
8
     
-
     
28
 
                                 
Deficit, end of period
  $ (44,404 )   $ (25,247 )   $ (44,404 )   $ (25,247 )
                                 
Basic and diluted net income (loss) per share (Note 8)
  $ (0.16 )   $
0.05
    $ (0.24 )   $ (0.16 )
                                 
Weighted average number of common shares outstanding -Basic
   
55,238,018
     
45,333,100
     
52,979,291
     
41,508,102
 
Weighted average number of common shares outstanding - Diluted
   
55,238,018
     
46,163,392
     
52,979,291
     
41,508,102
 

See accompanying notes to interim consolidated financial statements.
 
 
2

JAGUAR MINING INC.
 
Interim Consolidated Statements of Cash Flows
(Expressed in thousands of U.S. dollars)
 
 
(Unaudited)
                       
   
Three Months
   
Three Months
   
Nine Months
   
Nine Months
 
   
Ended
   
Ended
   
Ended
   
Ended
 
   
September 30,
   
September 30,
   
September 30,
   
September 30,
 
   
2007
   
2006
   
2007
   
2006
 
                         
Cash provided by (used in):
                       
    Operating activities:
                       
        Net loss and comprehensive income for the period
  $ (8,654 )   $
2,441
    $ (12,835 )   $ (6,564 )
        Items not involving cash:
                               
            Unrealized foreign exchange (gain) loss
   
1,575
     
795
     
3,350
      (1,048 )
            Stock-based compensation
   
610
     
130
     
4,851
     
2,926
 
            Amortization of deferred financing costs
   
878
     
190
     
2,073
     
507
 
            Accretion expense
   
34
     
8
     
68
     
18
 
            Future income taxes (recovered)
   
677
      (81 )    
958
      (72 )
            Depletion and amortization
   
1,860
     
407
     
3,027
     
1,991
 
            Interest on loans receivable
   
-
     
-
     
-
      (102 )
            Write down of inventory (Note 14)
   
554
     
-
     
554
     
-
 
            Unrealized (gain) loss on forward sales derivatives
   
3,767
      (2,292 )    
2,755
     
4,384
 
            Unrealized gain on foreign exchange contracts
    (891 )     (44 )     (1,444 )     (781 )
                                 
    Change in non-cash operating working capital
                               
            Accounts receivable
    (2,023 )     (1,044 )     (4,680 )     (1,818 )
            Inventory
   
981
      (622 )     (1,422 )     (3,073 )
            Prepaid expenses and sundry assets
    (3,440 )     (2,215 )     (6,270 )     (5,314 )
            Accounts payable and accrued liabilities
   
3,271
     
1,682
     
6,642
     
3,460
 
            Asset retirement obligations
    (27 )    
-
      (157 )     (36 )
      (828 )     (645 )     (2,530 )     (5,522 )
    Financing activities:
                               
            Net smelter royalty received
   
-
     
-
     
73
     
-
 
            Issuance of common shares, special warrants and warrants, net
   
109
     
-
     
28,186
     
48,322
 
            Shares purchased for cancellation
    (342 )    
-
      (342 )    
-
 
            Repayment of shareholder loan
   
-
     
200
     
-
     
200
 
            Decrease (increase) in restricted cash
   
244
      (77 )    
2,927
      (5,633 )
            Repayment of debt
    (1,496 )     (419 )     (3,187 )     (1,310 )
            Increase in debt
   
1,600
     
6,419
     
61,850
     
14,316
 
         
115
     
6,123
     
89,507
     
55,895
 
    Investing activities
                               
            Mineral exploration projects
    (7,451 )     (5,481 )     (17,417 )     (16,881 )
            Purchase of property, plant and equipment
    (10,355 )     (9,631 )     (22,543 )     (15,581 )
      (17,806 )     (15,112 )     (39,960 )     (32,462 )
                                 
Effect of foreign exchange on non-US dollar denominated cash and cash equivalents
   
2,586
      (739 )    
5,270
     
982
 
Increase (decrease) in cash and cash equivalents
    (15,933 )     (10,373 )    
52,287
     
18,893
 
Cash and cash equivalents, beginning of period
   
82,979
     
38,799
     
14,759
     
9,533
 
Cash and cash equivalents, end of period
  $
67,046
    $
28,426
    $
67,046
    $
28,426
 
 
Supplemental cash flow information (Note 10)
 
See accompanying notes to interim consolidated financial statements.

3

JAGUAR MINING INC.
 
Notes to Interim Consolidated Financial Statements
(tabular dollar amounts in thousands of U.S. dollars, except per share amounts)
 
Three and nine months ended September 30, 2007
(Unaudited)

 
1.      Significant Accounting Policies:
 
Other than the changes in accounting policies noted below, the interim consolidated financial statements of Jaguar Mining Inc. (the “Company”) follow the same accounting policies and methods of application as the annual audited consolidated financial statements. The interim consolidated financial statements do not contain all disclosures as required by Canadian generally accepted accounting principles for annual financial statements and accordingly should be read in conjunction with the Company’s annual audited consolidated financial statements.
 
Effective January 1, 2007 the Company adopted the new CICA Handbook Standards relating to financial instruments. These new standards have been adopted on a prospective basis with no restatement of prior period financial statements.
 
(a) Accounting Principles Issued and Implemented
 
              (i)
Section 3855, “Financial Instruments - Recognition and Measurement” provides guidance on the recognition and measurement of financial assets, financial liabilities and derivative financial instruments. This new standard requires that all financial assets and liabilities be classified as either: held-to-maturity, held-for-trading, loans and receivables, available-for-sale, or other financial liabilities. The initial and subsequent recognition depends on their initial classification.
 
 
Held-to-maturity financial assets are initially recognized at their fair values and subsequently measured at amortized cost using the effective interest method. Impairment losses are charged to net earnings in the period in which they arise.
 
 
Held-for-trading financial instruments are carried at fair value with changes in the fair value charged or credited to net earnings in the period in which they arise.
 
 
Loans and receivables are initially recognized at their fair values, with any resulting premium or discount from the face value being amortized to income or expense using the effective interest method.  Impairment losses are charged to net earnings in the period in which they arise.
 
 
Available-for-sale financial instruments are carried at fair value with changes in the fair value charged or credited to other comprehensive income.  Impairment losses are charged to net earnings in the period in which they arise.
 
 
Other financial liabilities are initially measured at cost or at amortized cost depending upon the nature of the instrument with any resulting premium or discount from the face value being amortized to income or expense using the effective interest method.
 
 
All derivative financial instruments meeting certain recognition criteria are carried at fair value with changes in fair value charged or credited to income or expense in the period in which they arise.
 
The standard requires the Company to make certain elections, upon initial adoption of the new rules, regarding the accounting model to be used to account for each financial instrument. This new section also requires that transaction costs incurred in connection with the issuance of financial instruments either be capitalized and presented as a reduction of the carrying value of the related financial instrument or expensed as incurred.  If capitalized, transaction costs must be amortized to income using the effective interest method. This section does not permit the restatement of financial statements of prior periods.
 
 
4

JAGUAR MINING INC.
 
Notes to Interim Consolidated Financial Statements
(tabular dollar amounts in thousands of U.S. dollars, except per share amounts)
 
Three and nine months ended September 30, 2007
(Unaudited)

 
1.
Significant Accounting Policies (continued):
 
              (i) (continued:)
 
Following is a summary of the accounting model the Company has elected to apply to each of its significant categories of financial instruments outstanding as of January 1, 2007 and/or September 30, 2007:

Cash and cash equivalents
Held-for-trading
Restricted cash
Held-for-trading
Accounts receivable
Loans and receivables
Forward foreign exchange derivative asset
Held-for-trading
Accounts payable and accrued liabilities
Other liabilities
Forward sales derivative liability
Held-for-trading
Notes payable
Other liabilities
 
In addition, the Company has elected to account for transaction costs related to the issuance of financial instruments as a reduction of the carrying value of the related financial instruments.
 
The adoption of this new section resulted in an adjustment to the carrying value of the Company’s previously recognized financial liabilities and an adjustment in the amount of $41,000 to the opening deficit, a reduction of $2.1 million to deferred financing costs, and a reduction to notes payable of $2.1 million as at January 1, 2007.
 
 
  (ii)
Section 1530, “Comprehensive Income”, along with Section 3251, “Equity” which amends Section 3250, “Surplus”, require enterprises to separately disclose comprehensive income and its components as well as net income in their financial statements.  Further, they require enterprises to separately present changes in equity during the period as well as components of equity at the end of the period, including comprehensive income.  Since the Company does not have any elements of comprehensive income, the adoption of these sections did not have any impact on the Company’s financial statements.
 
 
  (iii)
Section 3865, “Hedges” allows optional treatment providing that hedges be designated as either fair value hedges, cash flow hedges or hedges of a self-sustaining foreign operation.  Since the Company does not currently have hedging programs in place which qualify for hedge accounting, the adoption of this section did not have any impact on the Company’s financial statements.
 
(b) Accounting Principles Issued But Not Yet Implemented
 
             (i)     Financial Instruments- Disclosure and Presentation
 
In December 2006, the CICA published the following two sections of the CICA Handbook: Section 3862 Financial Instruments- Disclosures and Section 3863, Financial Instruments- Presentation. These standards introduce disclosure and presentation requirements that will enable financial statements’ users to evaluate, and enhance their understanding of, the significance of financial instruments for the entity’s financial position, performance and cash flows, and the nature and extent of risks arising from financial instruments to which the entity is exposed, and how those risks are managed.
 
              (ii)    Capital Disclosures
 
In December 2006, the CICA published section 1535 of the Handbook, Capital disclosures, which requires disclosure of (i) an entity’s objectives, policies and processes for managing capital; (ii) quantitative data about what the entity regards as capital; (iii) whether the entity has complied with any capital requirements; (iv) if it has not complied, the consequences of such non-compliance. This information will enable financial statements’ users to evaluate the entity’s objectives, policies and processes for managing capital.
 
 
5

JAGUAR MINING INC.
 
Notes to Interim Consolidated Financial Statements
(tabular dollar amounts in thousands of U.S. dollars, except per share amounts)
 
Three and nine months ended September 30, 2007
(Unaudited)
 
1.
Significant Accounting Policies (continued):
 
(b) Accounting Principles Issued But Not Yet Implemented (continued):
 
              (iii)   Inventories
 
In January 2007, the CICA published section 3031 of the Handbook, Inventories, which prescribes the accounting treatment for inventories. Section 3031 provides guidance on determination of costs and its subsequent recognition as an expense, and provides guidance on the cost formulas used to assign costs to inventories.
 
The company is currently assessing the impact of these new recommendations on its financial statements.  These standards must be adopted by the Company for the fiscal year beginning on January 1, 2008.
 
2.      Net Smelter Royalty:

             
   
September 30, 2007
   
December 31, 2006
 
Net Smelter Royalty
  $
1,462
    $
$ 1,535
 
 
On March 20, 2006, the Company entered into an agreement with Prometálica Mineração Ltda (“PML”) whereby it exchanged the loan receivable from PML for a 1.5% Net Smelter Royalty ("NSR") on its Monte Cristo project for a term of 4.5 years, which is the expected life of the project.  This agreement was executed on May 10, 2006.  PML had the right to buy out the NSR on or before December 31, 2006 for the amount of $1.63 million.  During the first quarter of 2007 the right to buy out the NSR was extended to September 30, 2007. PML did not purchase the NSR as of September 30, 2007. The NSR was recorded on the Company's books at the amount of the receivable, plus accrued interest through March 20, 2006.  During the first quarter of 2007 the carrying value of the NSR was reduced by $73,000 for royalties received on a cash basis. PML’s controlling shareholders are Brazilian Resources, Inc. (“BZI”) and IMS Empreendimentos Ltda, the founding shareholders of the Company. The royalties due from PML relating to the NSR amount to approximately $200,000 as of September 30, 2007, and are expected to be paid in November 2007. When received, the amount would be deducted from the amount of the carrying value of the NSR.
 
3.      Prepaid Expenses and Sundry Assets: 

             
   
September 30, 2007
   
December 31, 2006
 
Balance is made up of:
           
Advances to suppliers
  $
176
    $
331
 
Recoverable taxes (a)
   
19,409
     
11,510
 
Deferred financing fees (Note 1(a))
   
-
     
2,140
 
Sundry receivables from related parties (b)
   
148
     
149
 
Other
   
515
     
339
 
     
20,248
     
14,469
 
Less:
Long term recoverable taxes
   
11,370
     
7,517
 
Long term other prepaid expenses
   
9
     
47
 
Long term deferred finance fees
   
-
     
2,093
 
     
11,379
     
9,657
 
Current portion of prepaid expenses and sundry assets
  $
8,869
    $
4,812
 
 
 
6

JAGUAR MINING INC.
 
Notes to Interim Consolidated Financial Statements
(tabular dollar amounts in thousands of U.S. dollars, except per share amounts)
 
Three and nine months ended September 30, 2007
(Unaudited)
 
3.      Prepaid Expenses and Sundry Assets (continued):
 
 
 
(a)
The Company is required to pay certain taxes in Brazil, based on consumption.  These taxes are recoverable from the Brazilian tax authorities through various methods.  The recoverable taxes are denominated in Brazilian reais (R$).
 
 
(b)
Sundry receivables are due from Prometálica Centro Oeste Mineração Ltda (“PCO”) and PML, related parties (Note 9(c)). PCO is controlled by IMS Empreendimentos Ltda, a founding shareholder of the Company.
 
4.      Property, Plant and Equipment: 
       
   
September 30, 2007
 
   
Cost
   
Accumulated
Amortization
   
Net
 
Processing plant
  $
9,037
    $ (1,386 )   $
7,651
 
Vehicles
   
3,226
      (833 )    
2,393
 
Equipment
   
31,312
      (3,716 )    
27,596
 
Assets under construction
   
14,566
     
-
     
14,566
 
Mining properties
   
25,533
      (5,353 )    
20,180
 
    $
83,674
    $ (11,288 )   $
72,386
 

       
   
December 31, 2006
 
   
Cost
   
Accumulated
Amortization
   
Net
 
Processing plant
  $
5,792
    $ (536 )   $
5,256
 
Vehicles
   
2,215
      (460 )    
1,755
 
Equipment
   
15,372
      (1,338 )    
14,034
 
Assets under construction
   
16,451
     
-
     
16,451
 
Mining properties
   
6,908
      (5,242 )    
1,666
 
    $
46,738
    $ (7,576 )   $
39,162
 
 
In Q2 2007 the Company decided that mining properties in production should be classified in Property, Plant and Equipment (“PPE”). In previous periods all mining properties including those in production were grouped with Mineral Exploration Projects. Effective December 31, 2006 the Sabará property, which has been in production since 2004, was transferred to PPE. Effective January 1, 2007 the Turmalina property, which commenced production in 2007, was transferred to PPE. See Note 5 for a breakdown of costs reclassified.
 
During Q3 2007, the Company decided to re-define the current mineral exploration projects and accordingly, some costs that had been reclassified to PPE during Q2 2007 and as at December 31, 2006 have been reclassified back to mineral exploration projects during Q3 2007.
 
 
7

JAGUAR MINING INC.
 
Notes to Interim Consolidated Financial Statements
(tabular dollar amounts in thousands of U.S. dollars, except per share amounts)
 
Three and nine months ended September 30, 2007
(Unaudited)
 
5.
Mineral Exploration Projects:
 
   
Balance
         
Write-off fully
   
Reclassify to
   
Reclassify to
   
Balance
 
   
December 31,
         
amortized
   
Different
   
Plant and
   
September 30,
 
   
2006
   
Additions
   
property
   
Project
   
Equipment
   
2007
 
(a) Sabará:
                                   
    Acquisition of property
  $
3,195
    $
39
    $
-
    $
-
    $ (3,234 )   $
-
 
    Mine development expenditures, exploration and carrying costs
   
3,908
     
3,970
      (1,570 )     (4,123 )     (2,185 )    
-
 
    Asset retirement obligations
   
452
     
5
      (66 )     (72 )     (320 )    
-
 
    Accumulated amortization
    (5,239 )     (256 )    
1,636
     
20
     
3,839
     
-
 
     
2,316
     
3,758
     
-
      (4,175 )     (1,900 )    
-
 
(b) Paciência Project (Rio De Peixe):
                                               
    Acquisition of mineral rights to the property
   
1,266
     
63
     
-
      (1,329 )    
-
     
-
 
    Exploration expenditures and carrying costs
   
16
     
58
     
-
      (74 )    
-
     
-
 
     
1,282
     
121
     
-
      (1,403 )    
-
     
-
 
(c) Caeté Project (Pilar):
                                               
    Acquisition of property
   
1,114
      (64 )    
-
      (1,050 )    
-
     
-
 
    Mine development expenditures, exploration and carrying costs
   
8,469
     
2,736
      (472 )     (10,733 )    
-
     
-
 
    Asset retirement obligations
   
247
     
-
      (107 )     (140 )    
-
     
-
 
    Accumulated amortization
    (579 )    
-
     
579
     
-
     
-
     
-
 
     
9,251
     
2,672
     
-
      (11,923 )    
-
     
-
 
(d) Paciência project:
                                               
    Acquisition of properties
   
818
      (44 )    
-
     
1,706
     
-
     
2,478
 
    Mine development expenditures, exploration and carrying costs
   
13,985
     
6,479
      (113 )     (6,999 )    
-
     
13,352
 
    Accumulated amortization
    (187 )    
-
     
113
     
74
     
-
     
-
 
     
14,616
     
6,435
     
-
      (5,219 )    
-
     
15,830
 
(e) Turmalina:
                                               
    Acquisition of properties
   
1,883
     
7
     
-
     
-
      (1,890 )    
-
 
    Mine development expenditures, exploration and carrying costs
   
11,925
     
3,644
     
-
     
-
      (14,504 )    
1,065
 
    Asset retirement obligations(Note 6)
   
964
     
-
     
-
     
-
      (964 )    
-
 
    Accumulated amortization
   
-
      (394 )                    
394
     
-
 
    Reclassification to plant and equipment
    (141 )    
-
     
-
     
-
     
141
     
-
 
     
14,631
     
3,257
     
-
     
-
      (16,823 )    
1,065
 
(f) Caeté Expansion Project:
                                               
    Acquisition of property
   
-
     
8,272
     
-
     
1,175
     
-
     
9,447
 
    Mine development expenditures, exploration and carrying costs
   
-
     
3,536
     
-
     
21,427
     
-
     
24,963
 
    Asset retirement obligations
   
-
     
-
     
-
     
212
     
-
     
212
 
    Accumulated amortization
   
-
     
-
     
-
      (94 )    
-
      (94 )
     
-
     
11,808
     
-
     
22,720
     
-
     
34,528
 
Balance December 31, 2006 as reported
   
42,096
     
28,051
     
-
     
-
      (18,723 )    
51,423
 
Less: Sabará property reclassified to PPE
    (1,666 )    
-
     
-
     
-
     
-
     
-
 
Total Mineral Exploration Projects
  $
40,430
    $
28,051
    $
-
    $
-
    $ (18,723 )   $
51,423
 
 
 
8

JAGUAR MINING INC.
 
Notes to Interim Consolidated Financial Statements
(tabular dollar amounts in thousands of U.S. dollars, except per share amounts)
 
Three and nine months ended September 30, 2007
(Unaudited)
 
6.
Notes Payable:

               
     
September 30,
2007
   
December 31, 2006
 
(a)     
Due to AngloGold
        $
350
    $
350
 
(b)(i)  
Due to ABN AMRO
         
211
     
390
 
(b)(ii) 
Due to ABN AMRO
         
600
     
-
 
(c)   
Due to Bank Boston
         
21
     
39
 
(d)  
Due to Banco Volkswagen
         
381
     
444
 
(e)  
Due to Banco Itau S.A.
         
215
     
296
 
(f)     
Due to RMB International
  $
11,200
                 
 
    Less: unamortized discount
    (1,192 )    
10,008
     
14,000
 
(g)(i)  
Due to Banco Bradesco
           
242
     
305
 
(g)(ii)   
Due to Banco Bradesco
           
1,000
     
-
 
(h) 
Private placement notes
   
86,570
             
-
 
 
    Less: unamortized discount
    (15,210 )    
71,360
     
-
 
(i)   
Due to CVRD
   
9,053
             
-
 
 
    Less: unamortized discount
    (844 )    
8,209
         
               
92,597
     
15,824
 
 
    Less:  Current portion
           
10,846
     
5,274
 
              $
81,751
    $
10,550
 

 
(a)
Due to AngloGold
 
Relates to purchase of quota shares of Mineração Turmalina Ltda. (“MTL”). The demand note payable is repayable with interest based on the U.S. consumer price index and is expected to be repaid in 2007.
 
 
(b)
Due to ABN AMRO
 
 
(i)
Relates to a secured credit facility of R$2 million (approximately $1.1 million) for the purpose of purchasing equipment. As at September 30, 2007 R$401,000 ($211,000) was outstanding. The loan bears interest at TJLP (Brazilian government rate) plus 4% (10.25% at September 30, 2007 and 10.85% at December 31, 2006) and is repayable over 36 months. The loan is secured by the equipment purchased.
 
 
            (ii)
Relates to secured notes payable of $600,000 for general working capital. The advance on export contracts bears interest at 6.75% per annum and is repayable February 28, 2008. The note is secured by future gold sales.
 
 
 
(c)
Due to Bank Boston
 
Relates to a secured credit facility of R$1 million (approximately $526,000) for the purpose of purchasing equipment. As at September 30, 2007 R$40,000 ($21,000) was outstanding. The loan bears interest at TJLP (Brazilian government rate) plus 3% (9.25% at September 30, 2007 and 9.85% at December 31, 2006) and is repayable over 36 months. The loan is secured by the equipment purchased.
 
 
(d)
Due to Banco Volkswagen
 
Relates to a secured note payable of R$724,000 ($381,000) at September 30, 2007 for the purpose of purchasing trucks. The loan bears interest at TJLP (Brazilian government rate) plus 2.99% (9.24% at September 30, 2007 and 9.84% at December 31, 2006) and is repayable over 48 months. The loan is secured by the trucks purchased.
 
 
9

JAGUAR MINING INC.
 
Notes to Interim Consolidated Financial Statements
(tabular dollar amounts in thousands of U.S. dollars, except per share amounts)
 
Three and nine months ended September 30, 2007
(Unaudited)
 
6.
Notes Payable (continued):
 
 
(e)
Due to Banco Itau S.A.
 
Relates to a secured note payable of R$408,000 ($215,000) for the purpose of purchasing equipment. The loan bears interest at TJLP (Brazilian government rate) plus 2.7% per annum (8.95% at September 30, 2007 and 9.55% at December 31, 2006) and is repayable over 36 months. The loan is secured by the equipment purchased.

 
(f)
Due to RMB International
 
Relates to a loan facility agreement with an original principal amount of $14 million.  Effective January 1, 2007 the loan was recorded at the carrying value of $11.9 million (principal outstanding less the unamortized financing fees) in accordance with CICA Handbook Section 3855 (Note1(a)). The loan was used primarily to finance the development, construction and start up of the Turmalina project. $2.25 million of the loan was used for the Sabará project.  The loan bears interest at U.S. LIBOR plus 4% per annum (9.36% at September 30, 2007 and 9.36% at December 31, 2006). The loan also has a commitment fee of 1.25% per annum on undrawn funds, which is payable quarterly.  The loan is repayable in quarterly installments of $1.4 million which commenced June 30, 2007 and continue to September 30, 2009. As at September 30, 2007 $2.8 million had been repaid and $11.2 million was outstanding. The terms of the loan required hedging strategies for gold price and currency protection.  In September, 2007 the Company received an amendment to the Turmalina loan facility from the lender, which allows the Company to close the forward sales contracts, subject to certain conditions (Note 11). The loan is secured by all of the assets of Mineração Turmalina Ltda (“MTL”), including an escrow agreement regarding the cash sweep accounts (through which all Turmalina and Sabará related cash transactions must flow), a pledge by Mineração Serras do Oeste Ltda (“MSOL”) of its quota shares in MTL, the assets of the Sabará Zone A and Zone C projects, a limited recourse guarantee by MSOL, a guarantee by Jaguar, and a negative pledge by Jaguar against disposing or encumbering their quota shares in MSOL.  The arrangement fee included a cash fee of $280,000, issuance of 350,000 listed Jaguar warrants and 1,093,835 unlisted warrants.  300,000 unlisted warrants were also issued to consultants involved in the financing. These warrants valued at $1.7 million were issued in association with the credit facility. The cost of warrants and arrangement fees are included in the carrying value of the loan and are being amortized over the life of the loan using the effective interest method.  The terms of the loan require that financial covenants (primarily in relation to anticipated future cash flows and additional financial indebtedness) be maintained. As at September 30, 2007 the Company is in compliance with these financial covenants. The terms of the loan also required that a minimum of $2.5 million plus accrued interest ($2.7 million as at December 31, 2006) be deposited to a cost overrun account (Note 12). The restrictions on these funds were lifted during the first quarter of 2007.

 
(g)
Due to Banco Bradesco
 
 
(i)
Relates to secured notes payable of R$460,000 ($242,000) for the purpose of purchasing equipment. The equipment loans bear interest at TJLP (Brazilian government rate) plus 2.7% (8.95% at September 30, 2007 and 9.55% at December 31, 2006) and are repayable over 36 months. The loans are secured by the equipment purchased.
 
 
            (ii)
Relates to secured notes payable of $1.0 million for general working capital. The advance on export contracts bears interest at 7% per annum and is repayable February 27, 2008. The note is secured by future gold sales.


10

JAGUAR MINING INC.
 
Notes to Interim Consolidated Financial Statements
(tabular dollar amounts in thousands of U.S. dollars, except per share amounts)
 
Three and nine months ended September 30, 2007
(Unaudited)
 
6.      Notes Payable (continued):
 
 
 
(h)
Private placement notes
 
Relates to notes payable issued in a private placement of 86,250 units on March 22, 2007 for gross proceeds of Cdn.$86.3 million ($86.6 million). Each unit is comprised of a secured note in the principal amount of Cdn.$1,000, bearing a coupon of 10.5%, payable semi-annually in arrears, and 25 common shares of Jaguar (Note 7(a)). The notes are secured by shares of MSOL and are repayable on March 23, 2012. The quota shares of the wholly owned Brazilian subsidiary of the Company, which holds all of the operating assets of the Company, serve as the security for the notes. The Company has full rights to and is in the process of substituting for such security of a wholly owned Brazilian subsidiary of the Company which will hold Paciência and Caeté. At the option of the Company, the notes may be redeemed in whole or in part after March 22, 2010 at 102% of the principal amount, and at 101% of the principal amount after March 22, 2011. In addition, the notes may be redeemed in whole prior to March 23, 2010 at 102% of the principal amount should a change of control occur.
 
The Company allocated a portion of the private placement proceeds to common shares based on the share price of the common shares on March 8, 2007. The following is a summary of the allocation of the proceeds from private placement notes and reconciliation to the carrying value outstanding as at September 30, 2007:

   
Notes Payable
 
Gross proceeds
  $
74,508
 
Allocation to common shares
    (11,362 )
Allocation to call option
   
74
 
Finance fees
    (2,842 )
Net
   
60,378
 
Amortization of finance fees
   
1,121
 
Period end foreign exchange adjustment
   
9,861
 
Net carrying value of private placement notes
  $
71,360
 

 
(i)
Due to CVRD
 
Relates to purchase of mineral rights for the Roça Grande and the Pilar properties.   The demand notes payable are non-interest bearing and are expected to be repaid by 2009.
 
Pursuant to a property acquisition agreement dated November 19, 2003, the Company acquired the Pilar gold property from Companhia Vale do Rio Doce, “CVRD”. The Company paid $1.1 million for the actual known measured and indicated gold resources. Under the terms of the agreement, upon exercise of the option, Jaguar will pay an additional $7.48 per ounce for 173,147 ounces or $1.3 million for resources indicated during the two year exploration period.
 
The Company also acquired an option to obtain mineral rights at the Roça Grande gold property from CVRD under an agreement dated November 28, 2005 for 3.5% of the market value of CVRD’s estimated resources plus 2.5% of any additional resources determined by Jaguar less expenses associated with the transfer.  Jaguar completed its audit of CVRD’s resource estimate and expects to purchase the mineral rights for approximately $7.7 million of which $1.9 million will be due 30 days after the Notice of Exercise and $5.8 million will be due one year after the Notice of Exercise.  The company is planning to exercise this option during Q4 2007.  The option expires at the end of the first quarter of 2008.  CVRD retains certain iron ore exploration rights on the properties and retains a 70% back-in right if the Company has more than five million ounces of gold reserves on the properties by November 2010.  The contract grants corresponding rights for CVRD to explore a property owned by the Company for iron and to acquire iron mineral rights on the property until November 2008.
 
 
11

JAGUAR MINING INC.
 
Notes to Interim Consolidated Financial Statements
(tabular dollar amounts in thousands of U.S. dollars, except per share amounts)
 
Three and nine months ended September 30, 2007
(Unaudited)
 
6.      Notes Payable (continued): 
 
   (i)      Due to CVRD (continued):
 
 
According to CICA Handbook Section 3855 the notes payable were recognized at their fair value and the discount will be amortized to expense using the effective interest method.  As at September 30, 2007 the notes were recorded as follows:
 
   
Pilar
   
Roça Grande
   
Total
 
 Gross Payable
   
1,295
     
7,758
     
9,053
 
 Discount
    (42 )     (802 )     (844 )
 Net Notes Payable
   
1,253
     
6,956
     
8,209
 
 

7.      Capital Stock:
 
 
(a)
Common shares:
 
 
Authorized and issued:
 
The Company is authorized to issue an unlimited number of common shares.  The Company has issued the following common shares.
             
   
Number
   
Amount
 
Balance, January 1, 2007 (i)
   
47,916,908
    $
106,834
 
Early warrant exercises (Note 7(b))
   
5,122,428
     
21,948
 
Stock issuance costs related to early warrant exercise  (Note 7(b))
   
-
      (1,361 )
Exercise of stock options (Note 7(c))
   
4,000
     
11
 
Private placement notes (Note 6(h))
   
2,156,250
     
11,507
 
Stock issuance costs related to private placement notes (Note 6(h))
   
-
      (524 )
Balance, March 31, 2007
   
55,199,586
    $
138,415
 
Warrants exercised (Note 7(b))
   
100
     
1
 
Warrants forced out (Note 7(b))
   
66,913
     
71
 
Adjustment to equity portion of private placement (Note 6(h))
   
-
      (132 )
Additional share issuance costs related to early warrant exercise (Note 7(b))
   
-
      (186 )
Balance, June 30, 2007
   
55,266,599
    $
138,169
 
Warrants exercised (Note 7(b))
   
10,000
     
51
 
Warrants forced out (Note 7(b))
   
298
     
1
 
Exercise of stock options - cashless, shares to be issued (Note 7(c))
   
6,145
     
22
 
Reduction in stock issuance costs related to early warrant exercise
   
-
     
63
 
Shares acquired under normal course issuer bid and cancelled
    (62,400 )     (156 )
Balance, September 30, 2007
   
55,220,642
    $
138,150
 


                  (i)
In August 2006, Jaguar received approval from the TSX for a normal course issuer bid to purchase up to the lesser of 2,291,655 common shares, being 5% of the issued and outstanding common shares of Jaguar at that time, or the number of common shares equal to a maximum aggregate purchase price of $1 million. The normal course issuer bid commenced on August 25, 2006 and terminated on August 24, 2007. During the fourth quarter of 2006, Jaguar purchased 1,000 common shares at an average price of Cdn. $4.65 per common share.
 
During August 2007 the Company purchased an additional 62,400 shares at an average price of Cdn.$5.80 per common share. These shares have been cancelled.

12

JAGUAR MINING INC.
 
Notes to Interim Consolidated Financial Statements
(tabular dollar amounts in thousands of U.S. dollars, except per share amounts)
 
Three and nine months ended September 30, 2007
(Unaudited)
 
7.      Capital Stock (continued):
 
 
(a)
Common shares (continued):
 
In August 2007, Jaguar received approval from the TSX for a second normal course issuer bid to purchase up to the lesser of 2,760,224 common shares, being 5% of the issued and outstanding common shares of Jaguar at that time, or the number of common shares equal to a maximum aggregate purchase price of Cdn.$5.25 million. The normal course issuer bid commenced on August 30, 2007 and will terminate on August 29, 2008.  As at September 30, 2007 the Company had not purchased any of its common shares as a result of the second normal course issuer bid. Shares purchased under the normal course issuer bid in the future, will be scheduled for cancellation.
 
Shareholder Rights Plan
 
On January 31, 2007 the Company adopted a Shareholder Rights Plan (“Rights Plan”) to ensure the fair treatment of shareholders in connection with any take-over bid for common shares of Jaguar. Rights issued under the Rights Plan will become exercisable upon the announcement of an intention to acquire beneficial ownership of 20% or more of the outstanding shares of the Company without complying with the Permitted Bid provisions in the Rights Plan or without approval of the board. These rights will entitle shareholders to purchase additional common shares at a substantial discount to the market price at that time.  The Rights Plan has been approved by the Toronto Stock Exchange and was ratified by the shareholders on May 10, 2007.
 
 
 
(b)
Warrants:
 
             
   
Number
   
Amount
 
Balance, January 1, 2007
   
5,741,300
    $
4,072
 
Exercise of purchase warrants
    (4,818,852 )     (3,183 )
Balance, March 31, 2007
   
922,448
    $
889
 
Warrants exercised
    (100 )    
-
 
Warrants forced out
    (224,403 )     (71 )
Balance, June 30, 2007
   
697,945
    $
818
 
Warrants exercised
    (10,000 )     (6 )
Warrants forced out
    (1,000 )     (1 )
Balance, September 30, 2007
   
686,945
    $
811
 
 
The following is a summary of the warrants date of issue, exercise price and expiry date at September 30, 2007:

Number
Outstanding
 
 
Date of Issue
Exercise Price
Expiry Date
 
343,895
 
December 31, 2004 to December 20, 2005
Cdn. $4.50
December 31, 2007
 
343,050
 
March 27, 2006
Cdn. $5.25
March 27, 2008
 
686,945
       

On February 27, 2007, the Company filed a final short form prospectus to issue up to 340,090 common shares to the holders of 5,398,250 common share purchase warrants, upon early exercise of its listed warrants. Each warrant entitles the holder to acquire one common share of the Company at a price of Cdn.$4.50 on or before December 31, 2007. Under the early exercise program the holder could acquire an additional 0.063 of one common share in the event that such holder exercised the warrants during the 30-day early exercise period that commenced on February 28, 2007 and ended on March 30, 2007. The early exercise warrant transaction was approved by shareholders on February 27, 2007 and by warrant holders on February 28, 2007.
 
 
13

JAGUAR MINING INC.
 
Notes to Interim Consolidated Financial Statements
(tabular dollar amounts in thousands of U.S. dollars, except per share amounts)
 
Three and nine months ended September 30, 2007
(Unaudited)
 
7.      Capital Stock (continued):
 
 
 (b)
Warrants (continued):
 
As of March 30, 2007, 4,818,852 warrants were exercised for gross proceeds of $18.8 million in exchange for 5,122,428 shares.  This represented 89.3% of the listed warrants outstanding on February 28, 2007 thereby forcing each remaining listed warrant (579,398) to be exchanged for 0.2982 common shares of the Company by April 30, 2007 (except those warrants held by U.S. warrant holders who are not accredited investors or who are accredited investors but who did not deliver a subscription form and representation letter pursuant to the program).  As at September 30, 2007, 225,403 of the remaining listed warrants were exchanged for 67,211 common shares.
 
 
(c)
Stock options:
 
During 2003, the Company established The Jaguar Stock Option Plan (the “Plan”). Under the Plan the Company may grant options to directors, officers, employees, and consultants of the Company, and its subsidiaries. The maximum number of Company shares that have been reserved under this plan is 10,500,000. Options granted after February 17, 2004 do not have any specific vesting provisions.
 
Effective October 22, 2004, the Plan was amended to allow a cashless exercise of the options.  Under this amendment, an option holder can elect to have the Company withhold a number of shares of stock issued as payment of the exercise prices, based on the price of the shares at the close of trading on the day preceding the day of exercise of the options, with the net shares issued to the optionee in connection with the exercised options.  During the nine month period ended September 30, 2007, 15,000 options were exercised using the cashless method (1,388,300 for the nine months ended September 30, 2006).
             
   
Number
   
Amount
 
Balance, January 1,  2007
   
5,269,000
    $
8,745
 
Stock based compensation
   
-
     
203
 
Options exercised - conventionally
    (4,000 )     (3 )
Unvested options expired upon termination
    (5,000 )     (2 )
Balance, March 31, 2007
   
5,260,000
    $
8,943
 
Stock based compensation
   
-
     
4,058
 
Options granted, vesting immediately
   
1,051,666
     
-
 
Options granted, subject to vesting
   
83,334
     
-
 
Unvested options expired upon termination
    (20,000 )     (18 )
Balance, June 30, 2007
   
6,375,000
    $
12,983
 
Stock based compensation
   
-
     
632
 
Options granted, vesting immediately
   
118,500
     
-
 
Options granted, subject to vesting
   
315,000
     
-
 
Options exercised - cashless
    (15,000 )     (22 )
Unvested options expired upon termination
    (30,000 )     (22 )
Balance, September 30, 2007
   
6,763,500
    $
13,571
 


14

JAGUAR MINING INC.
 
Notes to Interim Consolidated Financial Statements
(tabular dollar amounts in thousands of U.S. dollars, except per share amounts)
 
Three and nine months ended September 30, 2007
(Unaudited)
 
7.      Capital Stock (continued):
 
 
(c)
Stock options (continued):

                   
Common share options
 
Number
   
Weighted Average Exercise Price US
   
Weighted
Average Exercise Price Cdn.
 
                   
Balance, January 1, 2007
   
5,269,000
    $
1.03
    $
4.80
 
Options exercised in US$
    (4,000 )    
2.00
     
-
 
Options expired
    (5,000 )    
-
     
4.41
 
Balance, March 31, 2007
   
5,260,000
    $
1.00
    $
4.80
 
Options granted
   
1,135,000
     
-
     
5.94
 
Options expired
    (20,000 )    
-
     
4.03
 
Balance, June 30, 2007
   
6,375,000
    $
1.00
    $
5.01
 
Options granted
   
433,500
     
-
     
6.33
 
Options exercised in Cdn$
    (15,000 )    
-
     
4.25
 
Options expired
    (30,000 )    
-
     
4.85
 
Balance, September 30, 2007
   
6,763,500
    $
1.00
    $
5.10
 

                       
Exercise
price
     
Outstanding
September 30,
2007
   
Weighted Average Remaining Life in Years
   
Number Exercisable
 
                       
$
1.00
       
155,000
     
.93
     
155,000
 
$
3.75
 
Cdn.
   
190,000
     
1.10
     
190,000
 
$
4.05
 
Cdn.
   
685,000
     
1.64
     
605,000
 
$
4.25
 
Cdn.
   
120,000
     
1.71
     
120,000
 
$
4.00
 
Cdn.
   
157,500
     
2.06
     
157,500
 
$
3.47
 
Cdn.
   
757,500
     
2.39
     
697,500
 
$
3.65
 
Cdn.
   
212,000
     
2.44
     
-
 
$
3.29
 
Cdn.
   
40,000
     
3.19
     
40,000
 
$
5.47
 
Cdn.
   
1,010,000
     
3.61
     
1,010,000
 
$
4.41
 
Cdn.
   
418,000
     
3.75
     
-
 
$
6.40
 
Cdn.
   
1,010,000
     
4.17
     
1,010,000
 
$
4.72
 
Cdn.
   
50,000
     
1.09
     
50,000
 
$
5.25
 
Cdn.
   
50,000
     
1.58
     
50,000
 
$
6.00
 
Cdn.
   
50,000
     
2.09
     
-
 
$
5.25
 
Cdn.
   
200,000
     
1.98
     
200,000
 
$
4.60
 
Cdn.
   
100,000
     
1.98
     
100,000
 
$
5.94
 
Cdn.
   
1,135,000
     
4.47
     
1,051,666
 
$
4.62
 
Cdn.
   
36,000
     
3.92
     
36,000
 
$
6.48
 
Cdn.
   
387,500
     
4.94
     
82,500
 
           
6,763,500
             
5,555,166
 
 
 
15

JAGUAR MINING INC.
 
Notes to Interim Consolidated Financial Statements
(tabular dollar amounts in thousands of U.S. dollars, except per share amounts)
 
Three and nine months ended September 30, 2007
(Unaudited)
 
8.      Basic and Diluted Net Loss per Share: 
 
   Dollar amounts and share amounts in thousands, except per share amounts.

   
Three Months
 
 
Three Months
   
Nine Months
   
Nine Months
 
   
Ended
 
 
Ended
   
Ended
   
Ended
 
   
September 30,
   
September 30,
   
September 30,
   
September 30,
 
   
2007
   
2006
   
2007
   
2006
 
                         
Numerator
                       
Net income (loss) for the period
  $ (8,654 )   $
2,441
    $ (12,835 )   $ (6,564 )
                                 
Denominator
                               
    Weighted average number of common shares outstanding
   
55,238
     
45,833
     
52,979
     
42,008
 
    Common shares-share purchase loan (Note 7(a)(i))
   
-
      (500 )    
-
      (500 )
Basic
   
55,238
     
45,333
     
52,979
     
41,508
 
Dilutive effect of options and warrants
   
-
     
830
     
-
     
-
 
Diluted
   
55,238
     
46,163
     
52,979
     
41,508
 
                                 
Basic net earnings (loss) per share
  $ (0.16 )   $
0.05
    $ (0.24 )   $ (0.16 )
Diluted net earnings (loss) per share
  $ (0.16 )   $
0.05
    $ (0.24 )   $ (0.16 )

For the three and nine month periods ended September 30, 2007 and the nine month period ended September 30, 2006, the determination of the weighted average number of shares outstanding for the calculation of diluted net loss per share does not include the effect of outstanding warrants and options since they are anti-dilutive.
 
9.
Related Party Transactions:
 
 
         (a)
The Company incurred fees of $562,000 for the nine months ended September 30, 2007 ($552,000 for the nine months ended September 30, 2006) from IMS Engenharia Mineral Ltda ("IMSE"), a company held by several officers of the Company, who provides operating services to the Company's Brazilian subsidiaries. The fees are included in management fees in the statement of operations.  Accounts payable and accrued liabilities as at September 30, 2007 includes $nil owing to IMSE (as at December 31, 2006 -$nil).
 
 
         (b)
The Company incurred occupancy fees of $90,000 for the nine months ended September 30, 2007 (nine months ended September 30, 2006 - $90,000) to Brazilian Resources, Inc. (“BZI”), a corporate shareholder, for use of administrative offices. The Company will occupy new administrative office space which will be ready for occupancy on or about December 1, 2007. The term will be three years beginning on the date of occupancy. The Company paid $50,000 during September 2007 and $108,000 during October 2007 for leasehold improvements at the new administrative office space. The Company also incurred consulting fees and administrative service charges of $399,000 from BZI for the nine months ended September 30, 2007 ($249,000 for the nine months ended September 30, 2006). The occupancy costs, consulting fees and administrative service fees are included in the statement of operations. As at September 30, 2007 $50,000 of leasehold improvements are included in property, plant & equipment (December 31, 2006 - $nil).  As at September 30, 2007 accounts payable and accrued liabilities includes $35,000 (December 31, 2006 - $14,000) due to BZI.
 
 
16

JAGUAR MINING INC.
 
Notes to Interim Consolidated Financial Statements
(tabular dollar amounts in thousands of U.S. dollars, except per share amounts)
 
Three and nine months ended September 30, 2007
(Unaudited)
 
9.
Related Party Transactions (continued):
 
 
         (c)
The Company realized rental income of $173,000 from PML and $110,000 from PCO for the nine months ended September 30, 2007 (nine months ended September 30, 2006 - $nil) for temporarily idle equipment and the use of administrative offices.  PCO is controlled by IMS, a founding shareholder of the Company. As at September 30, 2007 prepaid expenses and sundry assets includes $128,000 receivable from PML, and $20,000 from PCO (as at December 31, 2006 - $112,000 from PML and $37,000 from PCO) (Note 3(b)).
 
The above related party transactions are in the normal course of operations and have been measured at the exchange amount between the related parties.
 
10.
Supplemental Cash Flow Information:
 
                         
   
Three months ended
September 30,
2007
   
Three months ended
September 30,
 2006
   
Nine months ended
September 30,
2007
   
Nine months ended
September 30,
2006
 
Equipment purchased on issuing note payable (Note 6(b)(c)(d))
  $
-
    $
284
    $
-
    $
649
 
Equipment purchased on eliminating loan receivable
  $
-
    $
327
    $
-
    $
327
 
Warrants issued in conjunction with the offering
  $
-
    $
-
    $
-
    $
584
 
Conversion of loan receivable into NSR (Note 2)
  $
-
    $
-
    $
-
    $
1,535
 
Mineral rights purchased on issuing note payable to CVRD (Note 6(i))
  $
9,053
    $
-
    $
9,053
    $
-
 
 
During the nine months ended September 30, 2007, the Company paid $3.4 million (nine months ended September 30, 2006 - $217,000) in interest.
 
The Company paid no income taxes during the nine months ended September 30, 2007 (nine months ended September 30, 2006 - $nil).
 
11.
Risk Management Policies:
 
         Derivative Financial Instruments
 
  The company has entered into the following contracts:
 
 
   (a)
Forward sales contracts:
 
In connection with the Turmalina loan facility (Note 6(f)), the Company has entered into forward sales contracts to manage commodity price exposure on gold sales.  The contracts were matched to a percentage of the anticipated future production of gold by the Turmalina and Sabará mining operations from the first quarter of 2007 to the second quarter of 2009 for a total of 77,002 ounces. The forward sales contracts are to be settled at US$527.10 per ounce at the end of each quarter over the term of the contract against the London PM fix without requirement for the delivery of the gold produced. As at September 30, 2007 forward sales contracts for 55,654 ounces were outstanding.
 
 
17

JAGUAR MINING INC.
 
Notes to Interim Consolidated Financial Statements
(tabular dollar amounts in thousands of U.S. dollars, except per share amounts)
 
Three and nine months ended September 30, 2007
(Unaudited)
 
11.    Risk Management Policies (continued):
 
         (a)
Forward sales contracts (continued):
 
As at September 30, 2007, long term liabilities include $6.0 million (December 31, 2006 - $6.8 million) of unrealized losses related to the forward sales contracts. As at September 30, 2007, current liabilities include $6.9 million (December 31, 2006- $3.4 million) of unrealized losses related to the forward sales contracts. Included in the statement of operations for the nine months ended September 30, 2007, is an unrealized loss on forward sales derivatives of $2.8 million (nine months ended September 30, 2006 - unrealized loss of $4.4 million ) and a realized loss on forward sales derivatives of $3.3 million (nine months ended September 30, 2006 - $nil)
 
In Q2 2007, the Company initiated discussions with its principal lender to obtain their consent to close the forward sales contract agreements established in connection with the Sabará and Turmalina operations. The Company initiated the discussions with its lenders as management believed gold prices could rise significantly and adversely impact the Company’s future profitability.  In September, 2007 the Company received an amendment to the Turmalina loan facility (Note 6(f)) from the lender, which allows the Company to close the forward sales contracts, subject to the requirement to reinstate forward sales contracts in similar amounts if the price of gold drops to or below $520 per ounce.
 
Working with advisors, management has begun implementing a program to terminate the forward sales contracts in connection with the Turmalina loan facility. The Company is finalizing the details of the program with the lender, which is expected to include the purchase of exchange traded positions to offset the current lender forward sales contracts. Subsequent to September 30, 2007, the Company has purchased call options covering 55,500 oz of gold at a strike price of $835 per ounce. Management believes it will complete the program during Q4 2007 so that the related costs will be recorded in 2007.
 
         (b)     Forward foreign exchange contracts:
 
As at September 30, 2007, the Company has forward foreign exchange contracts to purchase R$34.1 million (Brazilian reais) for $16.0 million with various settlement dates between August 31, 2007 and December 30, 2008 at a weighted average rate of 2.1298. The terms of the contract require a percentage of the funds to be held on deposit as collateral to cover the contracts. As at September 30, 2007, $3.0 million of cash was restricted for this purpose.  (Note 12).
 
As at September 30, 2007, current assets include $1.9 million and long term assets include $215,000 (December 31, 2006 long term assets include $709,000) of unrealized foreign exchange gains. Included in the statement of operations for the nine months ended September 30, 2007, is an unrealized gain on forward foreign exchange derivatives of $1.4 million (nine months ended September 30, 2006 - $781,000) and a realized gain on forward foreign exchange derivatives of $1.3 million (nine months ended September 30, 2006 - $406,000).
 
The Company is exposed to credit-related losses in the event of non-performance by counterparties to derivative financial instruments, but does not expect any counterparties to fail to meet their obligations. The Company deals with only highly rated counterparties, normally major financial institutions. The Company is exposed to credit risk when there is a positive fair value of derivative financial instruments at a reporting date.
 

18

JAGUAR MINING INC.
 
Notes to Interim Consolidated Financial Statements
(tabular dollar amounts in thousands of U.S. dollars, except per share amounts)
 
Three and nine months ended September 30, 2007
(Unaudited)
 
12.    Restricted Cash:
 
As at September 30, 2007 $3.1 million of cash was restricted (December 31, 2006 - $6.0 million). On September 30, 2007 $3.0 million was restricted as collateral for the foreign exchange contracts (December 31, 2006 - $3.0 million) (Note 11(b)) and $nil was restricted as collateral for equipment loans (Note 6(b), (December 31, 2006 - $0.3 million).  On September 30, 2007 $0.1 million was held in a Certificate of Deposit as collateral for an expense credit line. (December 31, 2006 - $nil). As at December 31, 2006 $2.7 million was restricted due to loan covenants for the Turmalina loan facility (Note 6(f)), (September 30, 2007 - $nil).
 
13.    Commitments:
 
 
(a)
The Company entered into a management agreement with IMSE (Note 9(a)), whereby IMSE will provide certain agreed services to MSOL and will be paid $62,000 per month until December 31, 2008.
 
 
(b)
On February 28, 2007, the Company entered into a Joint Venture agreement with Xstrata plc to explore the Pedra Branca Gold Project in Northern Brazil.  The Company will pay an aggregate fee of $150,000 over the next two years (of which $50,000 was paid during the first quarter of 2007 and $100,000 is subject to continuing with the option), and the Company will have the option to hold a 51% ownership interest in the new enterprise by investing an aggregate of $3.85 million in exploration expenditures within the next four years.  The Company must meet annual exploration expenditure targets for each year in which it maintains the option.
 
As at June 30, 2007 the Company had committed to spend $300,000 for exploration by February 28, 2008.  As at September 30, 2007 the Company has expended $100,000 on exploration.  The Company has the opportunity to increase its ownership interest in certain gold deposits to 60% through further investing $3.0 million by the fifth anniversary of the agreement, subject to the rights of Xstrata to return to their 49% interest through additional contributions to the joint venture for certain properties which have gold deposits of two million ounces or more.
 
14.    Other Cost of Goods Sold:
 
During September 2007, Management had an independent review of inventories and processes at the Turmalina plant. As part of that review, all processes were found to be operating effectively, however, it was agreed that the estimate of gold in lock up at the mill would be reduced by 28 kg ($0.6 million) to achieve a more conservative estimate of the gold to be recovered when the mill is shut down in February and the linings replaced.
 
Included in other cost of goods sold for Q3 2007 is approximately $1.1 million which relates to an optimization program performed at the Turmalina plant during Q3 2007.  This program successfully increased gold metallurgical recovery to 90% by the end of the quarter.  Prior to the optimization effort, gold recovery at the Turmalina plant had dipped below design rates due to the unexpected presence of trace elements, which required modifications to the leaching circuit.  The optimization program is expected to benefit other Jaguar operations in the future.
 
15.    Comparative Figures:
 
 
Certain comparative figures have been reclassified to conform to the current period’s presentation.
 
 
19
EX-99.2 3 ex992.htm THIRD QUARTER MANAGEMENT'S DISCUSSION AND ANALYSIS ex992.htm
 
Exhibit 99.2










JAGUAR MINING INC.

Management's Discussion and Analysis
of Financial Condition and Results of Operations
in respect of the nine months ended September 30, 2007 and 2006

 

 

 

 



All amounts are expressed in US$ unless otherwise indicated.
 
INTRODUCTION
This Management’s Discussion and Analysis has been prepared as of November 8, 2007 and contains certain “Forward-Looking Statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and Canadian Securities laws.  All statements, other than statements of historical fact, included herein, including without limitation statements regarding potential mineralization and reserves, exploration results and future plans and objectives of Jaguar Mining Inc. (“Jaguar” or “the Company”) are forward-looking statements that involve various risks and uncertainties, including those set out in the Company’s Annual Information Form dated December 31, 2006 filed electronically under the Company’s name on the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com, and its filings, including the Company's Annual Report on Form 40-F for the year ended December 31, 2006, with the U.S. Securities and Exchange Commission, which are available at www.sec.gov through EDGAR.  There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements.
 
The following discussion of the operating results and financial position of the Company should be read in conjunction with the interim unaudited consolidated financial statements and the notes thereto of the Company for the nine months ended September 30, 2007 with comparative figures for the nine months ended September 30, 2006 and the consolidated financial statements of the Company and notes thereto for the years ended December 31, 2006 and 2005.  The financial statements have been prepared by management in accordance with accounting principles generally accepted in Canada.  Further information about the Company is available on SEDAR at www.sedar.com and on its corporate website www.jaguarmining.com.
 
The average rates of exchange for the Canadian dollar (Cdn.$) per US$1.00 were 1.04 for Q3 2007, 1.10 for Q2 2007, 1.17 for Q1 2007 and 1.13 for the year 2006.  The average rates of exchange for the Brazilian real (R$) per US$1.00 were 1.92 for Q3 2007, 1.98 for Q2 2007, 2.11 for Q1 2007 and 2.17 for the year 2006.
 
SUMMARY DESCRIPTION OF JAGUAR’S BUSINESS
Jaguar, a corporation existing under the laws of Ontario, is engaged in the acquisition, exploration, development and operation of mineral properties in the Iron Quadrangle region of Brazil, a greenstone belt located east of the city of Belo Horizonte in the state of Minas Gerais.  Jaguar intends to become a mid-size gold producer with production of 300,000 ounces (“oz”) per year beginning in 2009.  Jaguar believes it has the ability to convert its mineral resources to mineral reserves in order to sustain its production goals for ten years or more.  Jaguar is currently producing gold at Sabará and Turmalina.  Jaguar’s objectives are to complete the development of its Paciência and Caeté Projects, expand production, continue to aggressively explore the properties it controls in Brazil and control costs to enhance shareholder value.  Jaguar believes it has the necessary funds to complete the build-out of its two projects under development and reach the 300,000 oz production target for 2009.  Once Jaguar reaches this level of production, the Company believes it will have a cost structure that will place it in the lower quartile of all primary gold producers.  Jaguar also has the potential to find additional gold deposits at its 72,000 acres of prime exploration properties in the Iron Quadrangle as well as through its joint venture with Xstrata plc (“Xstrata”) in Northern Brazil where exploration at the Pedra Branca Project has begun.
 
Jaguar has measured and indicated resources of 17,572,460 tonnes (“t”) with an average grade of 5.12 g/t containing 2,894,860 oz of gold and 5,923,300 t of inferred resources with an average grade of 4.46 g/t containing  850,210 oz of gold. Jaguar’s proven and probable mineral reserves, which are included in total resources, are 7,229,160 t with an average grade of 4.90 g/t containing 1,138,870 oz of gold.
 
RESULTS OF OPERATIONS
Summary of Quarterly Results
(unaudited) (in thousands of $, except per share amounts)
 Quarter ended
 
30-Sep
   
30-Jun
   
31-Mar
   
31-Dec
   
30-Sep
   
30-Jun
   
31-Mar
   
31-Dec
 
 Year
 
2007
   
2007
   
2007
   
2006
   
2006
   
2006
   
2006
   
2005
 
 Net sales
  $
14,962
    $
11,415
    $
6,542
    $
6,304
    $
7,279
    $
5,471
    $
2,125
    $
1,543
 
 Net income (loss)
  $ (8,654 )   $ (3,685 )   $ (496 )   $ (6,181 )   $
2,441
    $ (2,841 )   $ (6,164 )   $ (6,808 )
  - per share basic
  $ (0.16 )   $ (0.07 )   $ (0.01 )   $ (0.13 )   $
0.05
    $ (0.06 )   $ (0.18 )   $ (0.21 )
  - per share diluted
  $ (0.16 )   $ (0.07 )   $ (0.01 )   $ (0.13 )   $
0.05
    $ (0.06 )   $ (0.18 )   $ (0.21 )
 
Summary of Key Operating Results
   
Q3 2007
   
YTD 2007
   
Q3 2006
   
YTD 2006
 
 Sales ($000)
  $
14,962
    $
32,919
    $
7,279
    $
14,875
 
 Oz sold
   
21,546
     
48,608
     
11,957
     
24,506
 
 Average realized price $ / oz
  $
694
    $
677
    $
608
    $
607
 
 Gross profit ($000)
  $
2,579
    $
10,282
    $
2,345
    $
3,477
 
 Net income (loss)  ($000)
  $ (8,654 )   $ (12,835 )   $
2,441
    $ (6,564 )
  - per share basic
  $ (0.16 )   $ (0.24 )   $
0.05
    $ (0.16 )
  - per share diluted
  $ (0.16 )   $ (0.24 )   $
0.05
    $ (0.16 )
 Weighted avg. shares outstanding
   
55,238,018
     
52,979,291
     
45,333,100
     
41,508,102
 
 Diluted shares outstanding
   
55,238,018
     
52,979,291
     
46,163,392
     
41,508,102
 


1



Q3 2007 Compared to Q3 2006 and YTD 2007 compared to YTD 2006
Revenue in Q3 2007 and YTD 2007 increased from the corresponding periods in 2006 due to both an increase in oz sold and an increase in the average realized gold price.  These increases resulted in increases in gross profit.
 
Review of Certain Operating Expenses and Other Income and Expenses
(in thousands of $)
   
Q3 2007
 
YTD 2007
 
Q3 2006
 
 YTD 2006
 
 Stock based compensation
$
610
$
4,851
$
130
$
2,926
 
 Administration
$
2,591
$
6,805
$
1,495
$
5,116
 
 Unrealized forward sales derivative (gain) loss
$
3,767
$
2,755
$
(2,292)
$
4,384
 
 Realized forward sales derivative loss
$
1,572
$
3,333
$
-
$
-
 
 Unrealized forward fx derivative (gain)
$
(891)
$
(1,444)
$
(44)
$
(781)
 
 Realized forward fx derivative (gain)
$
(681)
$
(1,280)
$
(217)
$
(406)
 
 Foreign exchange loss (gain)
$
152
$
(2,150)
$
656
$
(2,118)
 
 Amortization of deferred financing expenses
$
-
$
-
$
190
$
507
 
 Interest expense
$
3,296
$
7,647
$
43
$
217
 
 Interest income
$
(1,697)
$
(3,228)
$
(606)
$
(1,285)
 
 
Stock based compensation expense varies depending upon when stock options vest.
 
Administration costs increased from $1.5 million in Q3 2006 to $2.6 million in Q3 2007 (and increased from $5.1 million for the nine months ended September 30, 2006 to $6.8 million for the same period in 2007.) The increases were mainly due to legal and other costs related to certain strategic initiatives conducted during the quarter, and increased staffing needs related to the management of the engineering, procurement and construction (EPC) department as a result of Jaguar’s expansion of operations in Brazil.  In addition, costs increased due to the strengthening of the R$ against the US$, consulting fees related to the assessment of internal controls and procedures and management incentive payments.
 
During Q3 2007, the Company recognized an unrealized loss of $3.8 million on forward sales contracts, as required by the Turmalina loan facility, to manage the commodity price exposure on gold sales versus a gain of $2.3 million in Q3 2006.  During the nine months ended September 30, 2007 the Company recognized an unrealized loss of $2.8 million versus an unrealized loss of $4.4 million for the same period in 2006.  During Q3 2007, the Company recognized a realized loss of $1.6 million on forward sales contracts versus $nil for Q3 2006 and a realized loss of $3.3 million for YTD 2007 versus $nil for the YTD 2006 (See Risk Management Policies - Hedging).
 
The Company recognized unrealized gains of $891,000 for Q3 2007 and $44,000 for Q3 2006 on forward foreign exchange contracts used to manage currency exposure on the R$ (and unrealized gains of $1.4 million for YTD 2007 and $781,000 for YTD 2006).  The Company also recognized realized gains of $681,000 for Q3 2007 and $217,000 for Q3 2006 on forward foreign exchange contracts. For the nine months ended September 30, 2007 the Company recognized $1.3 million versus $406,000 for the YTD 2006 (See Risk Management Policies - Hedging).
 
Foreign exchange losses of $152,000 were recognized in Q3 2007 ($2.2 million exchange gain YTD 2007) and $656,000 in Q3 2006 ($2.1 million exchange gain YTD 2006) primarily due to unfavorable effects of the R$ and Cdn$ during the Q3 2007 and Q3 2006 quarters and due to the strengthening of the R$ over the US$ during the YTD periods.
 
Commencing in Q1 2006, deferred finance fees relating to the Turmalina loan facility were amortized over the life of the loan.  Deferred finance fees of $190,000 were expensed in Q3 2006 ($507,000 YTD 2006).  Commencing in Q1 2007, the Company adopted Section 3855 of the CICA handbook (Note 1(a)) and deferred finance fees were included in the carrying value of the loan and amortized as interest expense.
 
Interest expense increased from $43,000 in Q3 2006 to $3.3 million in Q3 2007.  The Company incurred interest expense of $7.6 million for the nine months ended September 30, 2007 ($217,000 for the same period in 2006).  The increases were due to an increase in debt and requirements under new accounting standards which require the costs associated with the issuance of the related debt be amortized as interest expense.  A total of $878,000 of debt issuance and related costs were recognized as interest expense during Q3 2007 ($2.1 million YTD 2007).
 
Interest income increased from $606,000 in Q3 2006 to $1.7 million in Q3 2007 ($3.2 million YTD 2007 versus $1.3 million YTD 2006) due to interest earned on higher bank deposits.  Interest income was earned from deposits held in banks in Canada, the U.S. and Brazil.
 

 

 

 

 

 


2


 

 
Production and Operating Performance
Q3 2007 Operating Data
 
   
Ore Processed (t000)
   
Feed
grade (g/t)
   
Recovery
grade (g/t)
   
Production
(oz)
   
Cash Operating cost/t
   
Cash Operating cost/oz
 
 Sabará
   
149
     
1.91
     
1.30
     
6,832
    $
20.9
    $
473
 
 Turmalina
   
98
     
4.95
     
4.25
     
13,502
    $
42.0
    $
280
 
 Total
   
247
     
3.11
     
2.47
     
20,334
    $
29.3
    $
346
 

Q3 2006 Operating Data
 
   
Ore Processed (t000)
   
Feed
grade (g/t)
   
Recovery
grade (g/t)
   
Production
(oz)
   
Cash Operating cost /t
   
Cash Operating cost /oz
 
 Caeté
   
35
     
2.10
     
1.54
     
2,011
    $
39.13
    $
643
 
 Queiroz
   
21
     
3.29
     
2.93
     
1,927
    $
42.89
    $
451
 
 Sabará
   
136
     
3.03
     
2.26
     
8,106
    $
20.18
    $
288
 
 Total
   
192
     
2.83
     
2.16
     
12,044
    $
26.11
    $
373
 

YTD 2007 Operating Data
 
   
Ore Processed (t000)
   
Feed
grade (g/t)
   
Recovery
grade (g/t)
   
Production
(oz)
   
Cash Operating cost/t
   
Cash Operating cost/oz
 
 Sabará
   
363
     
2.19
     
1.47
     
18,143
    $
23.0
    $
436
 
 Turmalina
   
252
     
4.96
     
4.27
     
31,508
    $
37.8
    $
255
 
 Total
   
615
     
3.32
     
2.62
     
49,651
    $
29.1
    $
321
 

YTD 2006 Operating Data
 
   
Ore Processed (t000)
   
Feed
grade (g/t)
   
Recovery
grade (g/t)
   
Production
(oz)
   
Cash Operating cost /t
   
Cash Operating cost /oz
 
 Caeté
   
99
     
2.25
     
1.63
     
4,682
    $
37.64
    $
618
 
 Queiroz
   
66
     
3.82
     
3.44
     
7,146
    $
40.06
    $
357
 
 Sabará
   
322
     
2.66
     
2.01
     
16,745
    $
19.49
    $
305
 
 Total
   
487
     
2.73
     
2.12
     
28,573
    $
25.97
    $
369
 
 
PROJECT DEVELOPMENT REVIEW - OPERATIONS AND EXPLORATION
2007 Production
For the quarter ending September 30, 2007, the Company produced 20,334 oz of gold at an average cash operating cost of $346 per oz for its Sabará and Turmalina operations with 66% of the production from Turmalina at a cash operating cost of $280 per oz.
 
Management estimates gold production for 2007 is expected to total approximately 75,000 oz at an average cash operating cost between $320 and $330 per oz. Given the trend in global exchange rates, the Company’s current estimate incorporates an average annual exchange rate for 2007 between the Brazilian real and the U.S. dollar of R$1.90 = US$1.
A review of operations, project development and exploration during Q3 2007 for the Company is as follows:
 
Turmalina
Operations
During Q3 2007, Turmalina produced 13,502 oz of gold representing 66% of the total production of gold from Turmalina at a cash operating cost of $280 per oz.  During Q2 2007, management implemented an optimization program at Turmalina to increase the overall metallurgical recovery at the operation.  This program was successfully completed during Q3 2007. As a result, gold metallurgical recovery at Turmalina increased to 90%.  In the 30-day period following the completion of the optimization program, the operation achieved internal targets for tonnes processed, metallurgical recovery and ounces produced.  Approximately $1.1 million of special charges were included in other cost of goods sold for Q3 2007 relating to the optimization program. These charges were the result of planned reductions to operating rates at the metallurgical plant for testing and the adjacent mine, consultants employed to assist in identifying the operating issues related to lower-than-design recoveries and other factors. The information Jaguar’s management team obtained from this effort is expected to benefit other Jaguar operations in the future.
 
For 2007, Turmalina is estimated to produce 51,500 oz. Total cash costs of production are estimated to range between $260 and $270/oz based on an average exchange rate in 2007 of R$1.90 per US$1.
 

 


3


 
Turmalina is an underground mine utilizing the “sublevel stoping with paste fill” and “cut and fill” mining methods.  From the beginning of Q4 2007, Turmalina has been processing 1,200 t/day of ore in the CIP (carbon-in-pulp) plant, which is the design operating level.
 
Exploration - Brown Field
Continued exploration work at the Turmalina mine confirms the geology of the ore bodies currently being mined is consistent with major gold mines elsewhere in the Iron Quadrangle.  The mine’s Main and Northeast ore bodies remain open at depth and Jaguar has launched a ‘go-deep’ exploration program to a depth of 1,000 m to confirm the continuity of the mineralization to this depth. Additional exploration efforts in the surrounding area have led to the discovery of a third mineralized area, referred to as the Satinoco structure, where three new areas of mineralization have been identified. The Satinoco structure is located approximately 300 m from the Main ore body at the Turmalina mine.
During Q2 2007, the Company reported the results of a 12,000-m surface in-fill drilling program at Satinoco.  Geological modeling of the drill results led to additional mineral resource estimates for Turmalina, which included measured and indicated resources of 450,700 t with an average grade of 4.72 g/t containing 68,400 oz of gold and 1,856,000 t of inferred resources with an average grade of 3.48 g/t containing 207,700 oz of gold.  Jaguar recently filed a NI 43-101 technical report in connection with these resources, which are only to a depth of 250 m from surface. The mineralization remains open at depth.
 
In October 2007, Jaguar completed the underground cross cut to access the Satinoco structure through the existing ramp developed by the Company to mine Turmalina’s Main and Northeast ore bodies.  The cross cut will be utilized to transport ore from Satinoco out the Turmalina mine entrance.  During the excavation process of the cross cut to the Satinoco structure, economic grades of gold were discovered in channel samples.  As announced by the Company in September 2007, Jaguar is concluding a complementary 12,000 m in-fill diamond drill program as part of the feasibility work to convert resources to reserves for the Turmalina Expansion.  Preliminary engineering to expand the processing circuits above ground at Turmalina is underway with a projected start-up date of Q1 2009. The feasibility study for the expansion of Turmalina is expected to be completed by the end of 2007.
 
Sabará
Operations
During Q3 2007, Sabará produced 6,832 oz of gold at an average cash operating cost of $473 per oz.  Sabará’s costs were higher in Q3 2007 compared to the prior year primarily due to lower ore grades, which were expected.  The Company is currently evaluating a new oxide zone near the Sabará mine to possibly bring into the mine plan during 2008. These new resources could significantly reduce cash operating costs for this operation.
 
Sabará is expected to produce 24,000 oz of gold in 2007 at average cash operating cost ranging between $450 and $460 per oz.  This estimate is based on an average exchange rate in 2007 of R$1.90 per US$1.
 
Sabará is an above ground limited life oxide mine from which ore is processed at a 1,500 t/day CIC (carbon-in-column) plant.
 
Exploration - Green Field
 
During Q3 2007, the Company concluded drilling activities at an oxide zone near the Sabará mining and processing complex.  The Company is in the process of calculating the estimated resources for this new zone as well as preparing the necessary reports required to obtain permits and licenses.
 
In addition, the Company is conducting channel sampling, soil geochemistry and trenching at three different targets near the Sabará operations.  Preliminary results are encouraging and have given rise to a defined drill program, which will be executed in the months ahead.
 
Paciência Project
Development
Construction progress at the Paciência Project remains on budget and on schedule. At mid-October, the overall project was approximately 70% complete and continues on track for a Q1 2008 commissioning date.
 
Jaguar intends to use a cut and fill mining method at the Santa Isabel Mine, which contemplates a treated tailings backfill system. The Santa Isabel mine is approximately 85% complete and on schedule to commence mining operations in Q1 2008.  Ore produced at the Santa Isabel mine will be transported to the CIP processing plant under construction.  The processing facilities will include crushing and grinding circuits followed by a gravity separation circuit, which is expected to initially recover approximately 40% of the available (“free”) gold, along with a leaching and carbon-in-pulp adsorption/desorption/recovery (“CIP-ADR”) plant to process the downstream gravity-removed ore pulp. The metallurgical circuit is expected to raise the overall recovery to an estimated 93%.
 
The Company recently opened a second mine entrance approximately 2 km to the North of the Santa. Isabel mine entrance and has successfully breached the ‘fresh rock’ section where excavation will take place to connect to the ramp system at the St. Isabel mine at the second level.  From this new entrance, 90 m of excavation had been completed by mid-October.  The Company has been granted all of the required permits and licenses for the construction and commissioning phase.

4


During Q3 2007, the Company completed and filed the Paciência Project Santa Isabel Mine feasibility study.  The study was prepared for Jaguar by Ivan C. Machado, M.Sc., P.E., P.Eng. of TechnoMine Services, LLC (“TechnoMine”).   Based on the results of the feasibility study, the pre-tax net cash flow over the initial life of the project is estimated at $123.8 million using the following estimates:
 
Mineral Reserves:
2,714,000 t @ 4.52 g/t Au, containing approximately 394,450 oz of gold
Mill Feed Grade:
4.39 g/t Au
Mining Rate:
400,000 t for 2008;
 
600,000 t for 2009-2011
 
513,700 t for 2012
Process Recovery:
93%
Annual Average Production:
73,300 oz per year
Mine Life:
4.85 years
Start Production:
Q2 2008
Total Investment
$52.3 million
Average Cash Cost:
$252 per oz
Total Production Cost:
$386 per oz, including invested capital
Assumed Exchange Rate:
Construction Period: R$2.0 perUS$1
 
Operating Period: R$2.3 per US$1
Gold Price:
$600
IRR:
26.2%
NPV @ 8%:
$17.8 million after tax
NPV @ 0%:
$49.5 million after tax
 
Through September 2007, Jaguar has invested $25.4 million in exploration, infrastructure and mine development at the Paciência Project and committed a total of $39.3 million toward the overall Project.
 
Exploration - Brown Field
Earlier this year, Jaguar successfully concluded a land swap agreement with another gold producer whereby Jaguar expanded the concession package at the Paciência Project to a contiguous 20 km area adjacent to the São Vicente lineament. This land area was first mined in the 17th century by the Portuguese and the old works are highly visible, even from satellite photography. Jaguar’s exploration efforts today are along this same strike at depths deeper than the Portuguese could access without modern mining equipment.
 
The Company plans to conduct extensive exploration, including drifts for mine development, to add additional tonnes vertically as well as horizontally and further increase the resource base for the Paciência Project.
 
NW01 Target (Marzagão) - Through mid-October, a total of 24 holes have been drilled to depths of 200 m in the NW 01 target, which is located just North of the new mine entrance. Drill results revealed gold intersections ranging from 2.5 g/t to 15.6 g/t. The intervals for these holes ranged from 0.8 to 4.4 m. Of significance, the characteristics of this new mineralized zone are similar to the grades and widths observed at the Santa Isabel mine. During 2008, Jaguar plans to drill an additional 12,000 m at this target with the intent of delineating a resource to meet National Instrument 43-101 standards.
 
Conglomerates - A second zone of mineralization at the Paciência Project, not related to the São Vicente lineament where Jaguar has a resource and reserve base, is referred to as the Conglomerates. The zone entails several concessions, which are located approximately 5 km to the East of the Santa Isabel mine main entrance. In 1989 and 1990, two previous concession owners conducted exploration drilling consisting of 75 underground and surface drill holes and underground development. These efforts gave rise to a third-party-estimated resource of over 200,000 oz based on an average grade of 5.72 g/t. These resources are not included in Jaguar’s latest mineral inventory of gold resources as these efforts pre-dated the NI 43-101 standards. In order to estimate the resources held in the conglomerates consistent with NI 43-101 standards, Jaguar is conducting a 9,000-m in-fill drilling program inside this target zone.  Jaguar currently has four drill rigs operating in the area and has recently completed eight drill holes totaling 1,150 m.
 
Caeté Project
Development
As announced in September, 2007 the Company continues to advance the Caeté Project feasibility study, which has been extended to the end of Q1 2008.  Jaguar previously expected to complete the feasibility study during Q3 2007.  However, new discoveries of deeper mineralized zones at the Roça Grande and Pilar targets, coupled with a revised timing of availability of sufficient power resources required for the new processing plant, extended the time period to develop the feasibility study.  Given the additional capital costs to construct an internal power supply, Jaguar elected to shift the project timetable back by six months rather than maintain the previously announced schedule. The power contract and mine/plant implementation licenses (LI) have been secured for a 2009 start-up.

5


During Q2 2007, Jaguar completed the geological modeling of the exploration campaigns at the Roça Grande and Pilar targets, which gave rise to the following NI 43-101 compliant resources: measured and indicated resources of 3,690,400 t with an average grade of 5.57 g/t containing 661,200 oz of gold and 726,600 t of inferred resources with an average grade of 5.11 g/t containing 119,450 oz of gold.
 
The Company plans to construct a centralized CIL (carbon-in-leach) processing plant to process the sulfide ore from Pilar, Roça Grande and other nearby targets.  This new plant is expected to utilize much of the existing infrastructure located at the recently closed heap leach & CIC facility.  By utilizing the existing Caeté plant site, Jaguar expects to minimize any environmental impact.  The Company received the Implementation License (LI) in July 2007 for the Caeté Project.  Jaguar targets initial annual gold production capacity of 90,000 oz commencing in 2009, expanding to 150,000 oz per year in 2012.
 
Exploration - Brownfield
As part of the Company’s effort to identify and add to the estimated gold resources detailed above, 75,000 m of additional drilling are planned over the next five years in the mineral properties identified to supply the Caeté plant.  During Q4 2007, the Company is planning to drill 22,000 m between the Roça Grande and Pilar targets.  Most of that effort will be conducted at the Roça Grande target, where seven drill rigs are currently in operation. At the Pilar target, where two drill rigs are currently operating, the Company will also conduct drilling to a depth of 800 m to define the continuity of the structure.
 
Management believes the current drilling program will initially identify approximately one million ounces of gold resources as part of the feasibility study. This estimate is based on a total tonnage of approximately 7.0 million tonnes at an average grade of 5.1 g/t.
 
Pedra Branca Project
Exploration - Green Field
Jaguar and Xstrata entered into a Joint Venture agreement for Jaguar to explore the Pedra Branca Gold Project in the State of Ceará in Northern Brazil. The Jaguar-Xstrata joint venture has mineral rights to 37 concessions totaling approximately 159,000 acres in a 65-km shear zone.  The concessions are located in and around municipal areas with good infrastructure.  The area is characterized by relatively dry weather, facilitating year-round operations.
 
Xstrata carried out a preliminary exploration program that covered only 25 km of the shear zone.  The program identified 10 km of soil anomalies, including two large anomalies referred to as Coelho and Mirador.  The relatively shallow work to-date on the Coelho and Mirador targets has provided some promising results with respect to gold mineralization averaging between 2.3-2.5 g/t observed in trenches taken by Xstrata.  For the most part, the mineralized formations uncovered by Xstrata’s preliminary efforts are open along the extremity and lead both companies’ geologists to believe the area has significant potential for gold mineralization, which could include the presence of both oxide and sulfide formations in large structures.
 
The Company is currently conducting a comprehensive exploration program at the Pedra Branca Project.  Jaguar’s work to date, which included soil geochemistry, trenching and channel and rock sampling, confirmed the trend and the main anomalies reported by Xstrata.  During Q3 2007, Jaguar began a diamond drill program to test the continuity of the mineralization at depth.  This program consists of 25 drill holes totaling 2,000 m.  To date, 8 drill holes totaling 600 m have been completed.
 
FINANCIAL CONDITION, CASH FLOW, LIQUIDITY AND CAPITAL RESOURCES
Cash Flow Highlights
(in thousands of $)
   
Q3 2007
   
YTD 2007
   
Q3 2006
   
YTD 2006
 
 Operating activities
  $ (828 )   $ (2,530 )   $ (645 )   $ (5,522 )
 Financing activities
  $
115
    $
89,507
    $
6,123
    $
55,895
 
 Investing activities
  $ (17,806 )   $ (39,960 )   $ (15,112 )   $ (32,462 )
 Effect of foreign exchange on non-US dollar denominated cash and cash equivalents
  $
2,586
    $
5,270
    $ (739 )   $
982
 
 Increase (decrease)  in cash for the period
  $ (15,933 )   $
52,287
    $ (10,373 )   $
18,893
 
 Beginning cash balance
  $
82,979
    $
14,759
    $
38,799
    $
9,533
 
 Ending cash balance
  $
67,046
    $
67,046
    $
28,426
    $
28,426
 
 
Cash flow from operating activities consumed $0.8 million of cash during Q3 2007 primarily because of a $1.1 million of special charges recorded for the optimization effort at Turmalina. These same charges accounted for the majority of the $2.5 million of cash consumed in operations for the nine months ended September 30, 2007, versus cash consumption from operating activities in Q3 2006 of $645,000 and $5.5 million for the first nine months of 2006, respectively.
 
Financing activities generated $115,000 of cash in Q3 2007 primarily through the receipt of cash from new credit facilities in the amount of $1.6 million which was offset by the repayment of loans in the amount of approximately $1.5 million.  Financing activities generated $6.1 million in cash in Q3 2006 primarily due to the draw down of the remaining $6.4 million made available under the Turmalina loan agreement.

6


 
Investing activities consumed $17.8 million of cash during Q3 2007 versus $15.1 million during Q3 2006.  The investments were primarily deployed for mineral exploration, projects under development and the purchase of property, plant and equipment.
 
Effect of foreign exchange on non-US dollar denominated cash and cash equivalents was a $2.6 million gain during Q3 2007. This reflects the strengthening of the Brazilian real and Canadian dollar versus the US dollar.
 
 
Balance Sheet Highlights
(in thousands of $)
   
As at September 30, 2007
   
As at June 30, 2007
   
As at March 31, 2007
   
As at December 31, 2006
   
As at December 31, 2005
 
 Total assets
  $
232,656
    $
217,974
    $
213,513
    $
124,130
    $
51,235
 
 Total long term liabilities
  $
92,082
    $
79,373
    $
76,016
    $
19,179
    $
4,895
 
 
 
 During Q3 2007 the primary reason for the increase in total assets and long term liabilities was Jaguar purchased mineral rights for approximately $9 million which was financed through a note payable.
 
Capital Spending Program
Capital Spending in thousands of $
   
YTD 2007
   
Remainder of 2007
   
Total 2007
   
2008
 
 Sabará
   
680
      (680 )    
0
     
0
 
 Caeté Project
   
21,403
     
3,070
     
24,473
     
16,566
 
 Turmalina
   
10,144
      (2,190 )    
7,954
     
15,591
 
 Paciência Project
   
14,330
     
20,392
     
34,722
     
5,254
 
 Central store room and improvements
   
2,456
     
35
     
2,491
     
0
 
 Total capital spending
   
49,013
     
20,627
     
69,640
     
37,411
 
 
Jaguar intends to use cash held in accounts and cash flow generated by operations, which is expected to rise significantly as the operations under development are completed and brought on-line to help finance the expansion at existing operations and the construction of new projects..  Although not envisioned at this time, these projects may also be funded by project debt, equipment financing or other corporate initiatives.
 
Total Capital Spending during the Period in thousands of $
   
Q3 2007
   
YTD 2007
 
 Capital spending - excluding exploration
   
16,942
     
26,612
 
 Capital spending - exploration
   
8,679
     
19,945
 
 Central store room and improvements
   
1,238
     
2,456
 
 Total capital spending
   
26,859
     
49,013
 
                 
 Amount paid in cash
   
17,806
     
39,960
 
 Amount financed
   
9,053
     
9,053
 
 Total capital spending
   
26,859
     
49,013
 
 
Jaguar has identified three primary uses of capital over the 2007-2008 period.  These include:
(a)
new mine development and processing capacity and expansion of existing operations
(b)
exploration at brownfield locations in the Iron Quadrangle
(c)
sustaining capital to maintain existing operations
 

7


Contractual Obligations
Jaguar’s contractual obligations as at September 30, 2007 are summarized as follows:
   
Payments due in $ 000’s
 
 Contractual Obligations
 
2007
   
2008
   
2009
      2010 +  
Total
 
 Financing
                               
 Principal
   
1,960
     
11,064
     
10,249
     
86,570
     
109,843
 
 Interest
   
4,876
     
9,924
     
9,533
     
20,247
     
44,580
 
 Management Agreements1
                                       
 Operations
   
186
     
-
     
-
     
-
     
186
 
 Suppliers Agreements
                                       
 Mine Operations2
   
1,168
     
-
     
-
     
-
     
1,168
 
 Drilling3
   
302
     
-
     
-
     
-
     
302
 
 Asset Retirement Obligations
   
259
     
-
     
-
     
2,839
     
3,098
 
 Joint Venture Agreement4
   
-
     
200
     
-
     
-
     
200
 
 Total
   
8,751
     
21,188
     
19,782
     
109,656
     
159,377
 
1 The management agreement is renegotiated on an annual basis.  See Note 9(a).
2 Jaguar has the right to cancel the mine operations contract with 90 days advance notice.  The amount included in the contractual obligations table represents the amount due within 90 days.
3 Jaguar has the right to cancel the drilling contract with 30 days advance notice.  The amount included in the contractual obligations table represents the amount due within 30 days.
4 Jaguar entered into a formal agreement with Xstrata for Jaguar to explore the Pedra Branca Gold Project in Ceará, Brazil.
 
 
 
Risk Management Policies - Hedging
 
Forward Gold Sales Contracts - Derivative Financial Instruments
Mineração Turmalina Ltda. (“MTL”), a wholly-owned subsidiary of the Company, obtained a $14 million credit facility that required a strategy be put in place to limit the risk against falling gold prices. In Q4 2005, the Company entered into a forward sales contract agreement with the lender to implement a risk management strategy to manage commodity price exposure on gold sales. A portion of the projected gold produced by the Sabará and Turmalina mining operations was hedged with a forward sales contract for each quarter from Q1 2007 to Q2 2009 for a total of 77,002 oz.  As at September 30, 2007 forward sales contracts for 55,654 oz were outstanding.
 
The terms of the forward sales contract are as follows:
All forward sales contracts are priced at $527.10 per oz (flat forward program).
Each contract will be settled in cash at the end of each quarter against the London PM fix (“PM fix”). There is no requirement for delivery of gold.
At each settlement date, if the PM fix is lower than $527.10 per oz, then the lender will make a payment to Jaguar equal to the difference between the PM fix and the $527.10 per oz, multiplied by the gold volume for that period according to the future sales contract. Similarly, if the PM fix is higher than $527.10 per oz, then Jaguar will make a payment to the lender equal to the difference between the PM fix and $527.10 per oz, multiplied by the gold volume for that period.
 
The forward sales contracts are considered derivative financial instruments and are used for risk management purposes and not for generating trading profits.
 
The Company is exposed to credit-related losses in the event of non-performance by the major international financial institution handling the derivative financial instruments, but does not expect this highly rated counterparty to fail to meet its obligations.
 
This derivative financial instrument is not accounted for as a hedge. The unrealized gains and losses are recognized in the operating income of the Company and are a result of the difference between the flat forward contract sales price of the gold and the average forward sales price of gold for the period, adjusted for the time value of money, as at the balance sheet date.
 
As at September 30, 2007, long term liabilities include $6.0 million (December 31, 2006 - $6.8 million) of unrealized losses related to the forward sales contracts. As at September 30, 2007, current liabilities include $6.9 million (December 31, 2006- $3.4 million) of unrealized losses related to the forward sales contracts. Included in the statement of operations for the nine months ended September 30, 2007, is an unrealized loss on forward sales derivatives of $2.8 million (nine months ended September 30, 2006 - unrealized loss of $4.4 million ) and a realized loss on forward sales derivatives of $3.3 million (nine months ended September 30, 2006 - $nil).
 
In Q2 2007, the Company initiated discussions with its principal lender to obtain their consent to close the forward sales contract agreements established in connection with the Sabará and Turmalina operations. The Company initiated the discussions with its lenders as management believed gold prices could rise significantly and adversely impact the Company’s future profitability.  In September, 2007 the Company received an amendment to the Turmalina loan facility from the lender, which allows the Company to close the forward sales contracts, subject to certain conditions.


8


Working with advisors, management has begun implementing a program to terminate the forward sales contracts in connection with the Turmalina loan facility. The Company is finalizing the details of the program with the lender, which is expected to include the purchase of exchange traded positions to offset the current lender forward sales contracts. Subsequent to September 30, 2007, the Company has purchased call options covering 55,500 oz of gold at a strike price of $835 per ounce. Management believes it will complete the program during Q4 2007 so that the related costs will be recorded in 2007.
 
Forward Foreign Exchange Contracts - Derivative Financial Instruments
The Company manages its exposure to changes in foreign exchange rates through the use of forward foreign exchange contracts to hedge certain future transactions denominated in foreign currencies. The Company hedges anticipated but not yet committed foreign currency transactions when they are probable and the significant characteristics and expected terms are identified.  The Turmalina Loan Facility also requires the Company to put in place a strategy to manage the risk of an increase in the value of the R$ relative to the US$.
 
As at September 30, 2007, the Company has forward foreign exchange contracts to purchase R$34.1 million for $16.0 million with various settlement dates between August 31, 2007 and December 30, 2008 at a weighted average rate of 2.1298. The terms of the contract require a percentage of the funds to be held on deposit as collateral to cover the contracts.  As at September 30, 2007, $3.0 million of cash was restricted for this purpose.
The forward exchange contracts are considered derivative financial instruments and are used for risk management purposes and not for generating trading profits.
 
The Company is exposed to credit-related losses in the event of non-performance by the major international financial institution handling the derivative financial instruments, but does not expect this highly rated counterparty to fail to meet its obligations.
 
This derivative financial instrument is not accounted for as a hedge. The unrealized gains and losses will be recognized in the operating income of the Company and are a result of the difference between the spot price of the R$ and the forward currency contract price as at the balance sheet date.
 
As at September 30, 2007, current assets include $1.9 million and long term assets include $215,000 (December 31, 2006 long term assets included $709,000) of unrealized foreign exchange gains.  Included in the statement of operations for the nine months ended September 30, 2007, is an unrealized gain on forward foreign exchange derivatives of $1.4 million (nine months ended September 30, 2006 - $781,000) and a realized gain on forward foreign exchange derivatives of $1.3 million (nine months ended September 30, 2006 - $406,000).
 
RELATED PARTY TRANSACTIONS
The Company incurred fees of $562,000 for the nine months ended September 30, 2007 ($552,000 for the nine months ended September 30, 2006) from IMS Engenharia Mineral Ltda. ("IMSE"), a company held by several officers of the Company, who provides operating services to the Company's Brazilian subsidiaries.  The fees are included in management fees in the statement of operations.  Accounts payable and accrued liabilities as at September 30, 2007 includes $nil owing to IMSE (as at December 31, 2006 -$nil).
 
The Company incurred occupancy fees of $90,000 for the nine months ended September 30, 2007 (nine months ended September 30, 2006 - $90,000) to Brazilian Resources, Inc. (“BZI”), a corporate shareholder, for use of administrative offices. The Company will occupy new administrative office space which will be ready for occupancy on or about December 1, 2007. The term will be three years beginning on the date of occupancy.  The Company paid $50,000 during September 2007 and $108,000 during October 2007 for leasehold improvements at the new administrative office space. The Company also incurred consulting fees and administrative service charges of $399,000 from BZI for the nine months ended September 30, 2007 ($249,000 for the nine months ended September 30, 2006).  The occupancy costs, consulting fees and administrative service fees are included in the statement of operations.  The leasehold improvements are included in property, plant & equipment. As at September 30, 2007 accounts payable and accrued liabilities includes $35,000 (December 31, 2006 - $14,000) due to BZI.
 
With increased activities in the mineral sector, used equipment has become increasingly difficult to acquire in Brazil.  The Company has pursued several opportunities to provide for its mid and long-term equipment needs, including entering a loan agreement with Prometálica Mineração Ltda. (“PML”), a base metal company.  PML’s controlling shareholders are BZI and IMSE, the founding shareholders of the Company.  Loans from Mineração Serras do Oeste Ltda. (“MSOL”), a subsidiary of the Company, to PML allowed PML to purchase processing equipment and properties it had under contract.  The agreement secures the MSOL loan by all PML assets, including mineral rights and equipment. The agreement also grants to MSOL the right to purchase certain equipment from PML at appraised value.  The due date of this loan was December 31, 2005.
 

9


During Q3 and Q4 2005, PML repaid substantially the entire principal amount of the loan.  On March 20, 2006, the Company entered into an agreement with PML whereby it agreed to exchange the amount receivable from PML for a 1.5% Net Smelter Royalty ("NSR") on its Monte Cristo project for a term of 4.5 years, which was the expected life of the project.  This agreement was executed on May 10, 2006.  As part of the agreement, the Company agreed to place a moratorium on interest accruing on the loan during Q4 2005.  Commencing on January 1, 2006, the interest rate on the loan was adjusted to the monthly CDI rate in Brazil.  Also as part of the agreement, the Company accepted a transfer of certain mining equipment from PML as partial payment on the loan.  The mining equipment was transferred in Q3 2006.  It was appraised by an independent engineering firm at the time of the agreement and was valued at $327,000.  PML had the right to buy out the NSR on or before December 31, 2006 for the amount of R$3.5 million (approximately $1.8 million as at September 30, 2007).  During Q1 2007, the right to buy out the NSR was extended to September 30, 2007. PML did not purchase the NSR as of September 30, 2007. The NSR was recorded on the Company's books at the amount of the receivable, plus accrued interest through March 20, 2006.  Included in the Company’s long term assets as at September 30, 2007 is a Net Smelter Royalty of $1.5 million (December 31, 2006 - $1.5 million). The royalties due from PML relating to the NSR amount to approximately $200,000 as at September 30, 2007, and are expected to be paid in November 2007. When received, the amount will be deducted from the amount of the carrying value of the NSR.
 
The Company realized rental income of $173,000 from PML and $110,000 from Prometálica Centro Oeste Ltda. (“PCO”) for the nine months ended September 30, 2007 (nine months ended September 30, 2006 - $nil) for temporarily idle equipment and the use of administrative offices.  PCO is controlled by IMS, a founding shareholder of the Company.  As at September 30, 2007 prepaid expenses and sundry assets includes $128,000 receivable from PML, and $20,000 from PCO (as at December 31, 2006 - $112,000 from PML and $37,000 from PCO).
 
CHANGES IN ACCOUNTING POLICIES INCLUDING INITIAL ADOPTION
Effective January 1, 2007 the Company adopted the new CICA Handbook Standards relating to financial instruments.  These new standards have been adopted on a prospective basis with no restatement of prior period financial statements.
 
 
(a)
Section 3855, “Financial Instruments - Recognition and Measurement” provides guidance on the recognition and measurement of financial assets, financial liabilities and derivative financial instruments.  This new standard requires that all financial assets and liabilities be classified as either: held-to-maturity, held-for-trading, loans and receivables, available-for-sale, or other financial liabilities.  The initial and subsequent recognition depends on their initial classification.
 
 
Held-to-maturity financial assets are initially recognized at their fair values and subsequently measured at amortized cost using the effective interest method. Impairment losses are charged to net earnings in the period in which they arise.
 
 
Held-for-trading financial instruments are carried at fair value with changes in the fair value charged or credited to net earnings in the period in which they arise.
 
 
Loans and receivables are initially recognized at their fair values, with any resulting premium or discount from the face value being amortized to income or expense using the effective interest method.  Impairment losses are charged to net earnings in the period in which they arise.
 
 
Available-for-sale financial instruments are carried at fair value with changes in the fair value charged or credited to other comprehensive income.  Impairment losses are charged to net earnings in the period in which they arise.
 
 
Other financial liabilities are initially measured at cost or at amortized cost depending upon the nature of the instrument with any resulting premium or discount from the face value being amortized to income or expense using the effective interest method.
 
 
All derivative financial instruments meeting certain recognition criteria are carried at fair value with changes in fair value charged or credited to income or expense in the period in which they arise.
 
The standard requires the Company to make certain elections, upon initial adoption of the new rules, regarding the accounting model to be used to account for each financial instrument.  This new section also requires that transaction costs incurred in connection with the issuance of financial instruments either be capitalized and presented as a reduction of the carrying value of the related financial instrument or expensed as incurred.  If capitalized, transaction costs must be amortized to income using the effective interest method.  This section does not permit the restatement of financial statements of prior periods.
 

10


Following is a summary of the accounting model the Company has elected to apply to each of its significant categories of financial instruments outstanding as of January 1, 2007 and/or September 30, 2007:

Cash and cash equivalents
Held-for-trading
Restricted cash
Held-for-trading
Accounts receivable
Loans and receivables
Forward foreign exchange derivative asset
Held-for-trading
Accounts payable and accrued liabilities
Other liabilities
Forward sales derivative liability
Held-for-trading
Notes payable
Other liabilities
 
In addition, the Company has elected to account for transaction costs related to the issuance of financial instruments as a reduction of the carrying value of the related financial instruments.
The adoption of this new section resulted in an adjustment to the carrying value of the Company’s previously recognized financial liabilities and an adjustment in the amount of $41,000 to the opening deficit, a reduction of $2.1 million to deferred financing costs, and a reduction to notes payable of $2.1 million as at January 1, 2007.
 
 
(b)
Section 1530, “Comprehensive Income”, along with Section 3251, “Equity” which amends Section 3250, “Surplus”, require enterprises to separately disclose comprehensive income and its components as well as net income in their financial statements.  Further, they require enterprises to separately present changes in equity during the period as well as components of equity at the end of the period, including comprehensive income.  Since the Company does not have any elements of comprehensive income, the adoption of these sections did not have any impact on the Company’s financial statements.
 
 
(c)
Section 3865, “Hedges” allows optional treatment providing that hedges be designated as either fair value hedges, cash flow hedges or hedges of a self-sustaining foreign operation.  Since the Company does not currently have hedging programs in place which qualify for hedge accounting, the adoption of this section did not have any impact on the Company’s financial statements.
 
ACCOUNTING PRINCIPLES ISSUED BUT NOT YET IMPLEMENTED
 
 
(a)
Financial Instruments- Disclosure and Presentation
 
 
In December 2006, the CICA published the following two sections of the CICA Handbook: Section 3862 Financial Instruments- Disclosures and Section 3863, Financial Instruments- Presentation. These standards introduce disclosure and presentation requirements that will enable financial statements’ users to evaluate, and enhance their understanding of, the significance of financial instruments for the entity’s financial position, performance and cash flows, and the nature and extent of risks arising from financial instruments to which the entity is exposed, and how those risks are managed.
 
 
 (b)
Capital Disclosures
 
 
In December 2006, the CICA published section 1535 of the Handbook, Capital disclosures, which requires disclosure of (i) an entity’s objectives, policies and processes for managing capital; (ii) quantitative data about what the entity regards as capital; (iii) whether the entity has complied with any capital requirements; (iv) if it has not complied, the consequences of such non-compliance. This information will enable financial statements’ users to evaluate the entity’s objectives, policies and processes for managing capital.
 
 
(c)
Inventories
 
 
In January 2007, the CICA published section 3031 of the Handbook, Inventories, which prescribes the accounting treatment for inventories. Section 3031 provides guidance on determination of costs and its subsequent recognition as an expense, and provides guidance on the cost formulas used to assign costs to inventories.
 
The company is currently assessing the impact of these new recommendations on its financial statements.  These standards must be adopted by the Company for the fiscal year beginning on January 1, 2008.
 
FINANCING
Early Exercise of Warrants
On February 27, 2007, the Company filed a final short form prospectus to issue up to 340,090 common shares to the holders of 5,398,250 common share purchase warrants, upon early exercise of its listed warrants.  Each warrant entitles the holder to acquire one common share of the Company at a price of Cdn.$4.50 on or before December 31, 2007.  Under the early exercise program, the holder could acquire an additional 0.063 of one common share in the event that such holder exercised the warrants during the 30-day early exercise period that commenced on February 28, 2007 and ended on March 30, 2007.  The early exercise warrant transaction was approved by shareholders on February 27, 2007 and by warrant holders on February 28, 2007.

11


As at March 30, 2007, 4,818,852 warrants were exercised for gross proceeds of $18.8 million in exchange for 5,122,428 shares.   This represented 89.3% of the listed warrants outstanding on February 28, 2007 thereby forcing the remaining listed warrants (579,398) to be exchanged for 0.2982 common shares of the Company by April 30, 2007 (except those warrants held by U.S. warrant holders who are not accredited investors or who are accredited investors but who did not deliver a subscription form and representation letter pursuant to the program).  As at September 30, 2007, 225,403 of the remaining listed warrants were exchanged for 67,211 shares.
 
Private Placement
On March 22, 2007, the Company closed a private placement of 75,000 units.  The units were sold by a syndicate led by TD Securities Inc. and included Blackmont Capital Inc., BMO Capital Markets and RBC Capital Markets.  The underwriters exercised their option to purchase an additional 15% of the number of the units offered to cover over-allotments, resulting in aggregate gross proceeds of Cdn.$86.3 million ($74.5 million) from the sale of 86,250 units.
 
The units are comprised of a secured note in the principal amount of Cdn.$1,000, bearing a coupon of 10.5%, payable semi-annually in arrears, and 25 common shares of Jaguar.  The quota shares of the wholly owned Brazilian subsidiary of the Company, which holds all of the operating assets of the Company, serve as security for the notes. The Company has full rights to and is in the process of substituting for such security the quota shares of a wholly owned Brazilian subsidiary of the Company which will hold the Paciência and Caeté projects only.  A total of 2.16 million new shares were issued relating to the private placement. The notes were listed on the Toronto Stock Exchange (“TSX”) on July 26, 2007 under the symbol JAG.NT.  See Note 6 (h).
 
NORMAL COURSE ISSUER BID
In August 2006, Jaguar received approval from the TSX for its proposed normal course issuer bid to purchase up to the lesser of 2,291,655 common shares, being 5% of the issued and outstanding common shares of Jaguar, or the number of common shares equal to a maximum aggregate purchase price of $1 million.  The normal course issuer bid commenced on August 25, 2006 and terminated on August 24, 2007.  This was the first normal course issuer bid undertaken by Jaguar, and Jaguar has not previously purchased securities of its own issue.
 
In August 2007, Jaguar received approval from the TSX for a second normal course issuer bid to purchase up to the lesser of 2,760,224 common shares, being 5% of the issued and outstanding common shares of Jaguar at that time, or the number of common shares equal to a maximum aggregate purchase price of Cdn.$5.25 million. The normal course issuer bid commenced on August 30, 2007 and will terminate on August 29, 2008.  As at September 30, 2007 the Company had not purchased any of its common shares as a result of the second normal course issuer bid.
 
Jaguar decided to engage in a normal course issuer bid because it believes that, from time to time, the market price of its common shares may not reflect fully the underlying value of its business and future business prospects.  In such circumstances, Jaguar believes the outstanding common shares represent an attractive investment, since a portion of Jaguar’s excess cash can be invested for an attractive risk adjusted return on capital through its bid.
 
As at September 30, 2007, Jaguar had purchased 1,000 common shares under the August 2006 normal course issuer bid at an average price of Cdn. $4.65 per share.  During August 2007 the Company purchased an additional 62,400 shares under the August 2007 normal course issuer bid at an average price of Cdn.$5.80 per common share. These shares have been cancelled, and any shares purchased under the normal course issuer bid in the future, will be scheduled for cancellation.
 
SHAREHOLDER RIGHTS PLAN
On January 31, 2007, the Directors of the Company adopted the Rights Plan which is intended to ensure the fair treatment of shareholders in connection with any take-over bid for common shares. The Rights Plan was not being adopted in response to any proposal to acquire control of the Company.  The Rights Plan seeks to provide shareholders with adequate time to properly assess a take-over bid without undue pressure.  It also is intended to provide the Directors with more time to fully consider an unsolicited take-over bid and, if considered appropriate, to identify, develop and negotiate other alternatives to maximize shareholder value.
 
The rights issued under the Rights Plan will become exercisable only when a person, including its affiliates and associates and persons acting jointly or in concert with it, acquires or announces its intention to acquire beneficial ownership of common shares which when aggregated with its current holdings total 20% or more of the outstanding common shares (determined in the manner set out in the Rights Plan) without complying with the Permitted Bid provisions of the Rights Plan or without approval of the Board.  Under the Rights Plan, those bids that meet certain requirements intended to protect the interests of all shareholders are deemed to be Permitted Bids.  Permitted Bids must be made by way of a take-over bid circular prepared in compliance with applicable securities laws and, among other conditions, must remain open for at least 60 days.  In the event a take-over bid does not meet the Permitted Bid requirements of the Rights Plan, the rights will entitle shareholders, other than the person making the take-over bid and its affiliates and associates and persons acting jointly or in concert with it, to purchase additional common shares at a substantial discount to the market price of the common shares at that time.
 
The TSX accepted notice of the Rights Plan, which was ratified by the shareholders on May 10, 2007.
 

12


 
NON-GAAP PERFORMANCE MEASURES
The Company has included the non-GAAP performance measures listed below in this document.  These non-GAAP performance measures do not have any standardized meaning prescribed by GAAP and, therefore, may not be comparable to similar measures presented by other companies.  The Company believes that, in addition to conventional measures prepared in accordance with GAAP, certain investors use this information to evaluate the Company’s performance.  Accordingly, they are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared with GAAP.  The Company has included Cash Operating Cost per tonne processed and Cash Operating Cost per ounce processed  because these figures are a useful indicator to investors and management of a mine’s performance as they provide: (i) a measure of the mine’s cash margin per tonne/ounce, by comparison of the cash operating costs per tonne/ounce to the price of gold; (ii) the trend in costs as the mine matures; and, (iii) an internal benchmark of performance to allow for comparison against other mines. The definitions for these performance measures and reconciliation of the non-GAAP measures to reported GAAP measures are as follows:
 
Summary of All Plants Cash Operating Cost per tonne processed
   
Q3 2007
   
YTD 2007
 
 Production cost per statement of operations
  $
8,818,000
    $
17,450,000
 
 Change in inventory1
  $ (1,588,000 )   $
425,000
 
 Production cost of tonnes processed2
  $
7,230,000
    $
17,875,000
 
 divided by
               
 Tonnes processed
   
247,000
     
615,000
 
 equals
               
 Cost per tonne processed
  $
29.30
    $
29.10
 
 
Sabará Plant Cash Operating Cost per tonne processed
   
Q3 2007
   
YTD 2007
 
 Production cost per statement of operations
  $
3,586,000
    $
8,152,000
 
 Change in inventory1
  $ (472,000 )   $
197,000
 
 Production cost of tonnes processed2
  $
3,114,000
    $
8,349,000
 
 divided by
               
 Tonnes processed
   
149,000
     
363,000
 
 equals
               
 Cost per tonne processed
  $
20.90
    $
23.00
 
 
Turmalina Plant Cash Operating Cost per tonne processed
   
Q3 2007
   
YTD 2007
 
 Production cost per statement of operations
  $
5,232,000
    $
9,298,000
 
 Change in inventory1
  $ (1,116,000 )   $
228,000
 
 Production cost of tonnes processed2
  $
4,116,000
    $
9,526,000
 
 divided by
               
 Tonnes processed
   
98,000
     
252,000
 
 equals
               
 Cost per tonne processed
  $
42.00
    $
37.80
 
 
Summary of All Plants Cash Operating Cost per oz processed
   
Q3 2007
   
YTD 2007
 
 Production cost per statement of operations
  $
8,818,000
    $
17,450,000
 
 Change in inventory1
  $ (1,805,000 )   $ (1,505,000 )
 Production cost of gold produced2
  $
7,013,000
    $
15,945,000
 
 divided by
               
 Gold produced (oz)
   
20,334
     
49,651
 
 equals
               
 Cost per oz processed
  $
346
    $
   321
 
 


13


Sabará Plant Cash Operating Cost per oz processed
   
Q3 2007
   
YTD 2007
 
 Production cost per statement of operations
  $
3,586,000
    $
8,152,000
 
 Change in inventory1
  $ (354,000 )   $ (242,000 )
 Production cost of gold produced2
  $
3,232,000
    $
7,910,000
 
 divided by
               
 Gold produced (oz)
   
6,832
     
18,143
 
 equals
               
 Cost per oz processed
  $
473
    $
 436
 
 
Turmalina Plant Cash Operating Cost per oz processed
   
Q3 2007
   
YTD 2007
 
 Production cost per statement of operations
  $
5,232,000
    $
9,298,000
 
 Change in inventory1
  $ (1,451,000 )   $ (1,263,000 )
 Production cost of gold produced2
  $
3,781,000
    $
8,035,000
 
 divided by
               
 Gold produced (oz)
   
13,502
     
31,508
 
 equals
               
 Cost per oz processed
  $
280
    $
 255
 
 
1 Under the Company’s revenue recognition policy, revenue is recognized when legal title passes. Since total cash operating costs are calculated on a production basis, this change reflects the portion of gold production for which revenue has not been recognized in the period.
2 The basis for calculating cost per oz produced includes the change to gold in process inventory, whereas the cost per tonne processed does not.  
 
 
DESIGN OF INTERNAL CONTROLS OVER FINANCIAL REPORTING AND DISCLOSURE CONTROLS AND PROCEDURES
 
The CEO and CFO have assessed the design of the Company’s disclosure controls and procedures and internal control over financial reporting as at September 30, 2007, pursuant to the certification requirements of Multilateral Instrument 52-109. The Company had previously communicated that a weakness existed in the design of internal control over financial reporting in that not all critical policies and procedures, including accounting policies, had been formally documented and/or formally communicated within the Company. The Company had also anticipated to complete the remediation of this weakness with appropriate communication by the end of Q3 2007. As at September 30, 2007 the Company formally completed the documentation and communication of all critical policies and procedures.
 
SUBSEQUENT EVENTS
On October 17th, the Company provided an update of operations, exploration and certain strategic initiatives in a general press release. Within that press release, the Company stated the following:
 
Company Signs Confidentiality Agreements with Gold Producers
Over the past few months, the Company has signed confidentiality agreements with several gold producers to provide such companies access to information concerning the Company's exploration program, operations, financial, legal and other pertinent information. The Company emphasizes that entering into agreements of this nature is quite common in the industry and investors should not consider the presence of such agreements as an indication that the Company is undertaking any efforts to sell the Company or that any takeover of the Company may be forthcoming.

14


OUTSTANDING SHARE DATA
 
Common shares and convertible securities outstanding at November 8, 2007 are:


         
Common
   
Expiry
Exercise
Securities
Shares on
Security
 
Date
Price
Outstanding
Exercise
           
Common Shares
     
55,426,511
55,426,511
           
Warrants
 
31-Dec-07
CAD 4.50
336,995
336,995
           
Agents Options
 
27-Mar-08
CAD 5.25
144,081
144,081
           
Options
 
4-Sep-08
USD 1.00
155,000
155,000
Options
 
5-Nov-08
CAD 3.75
190,000
190,000
Options
 
19-May-09
CAD 4.05
685,000
685,000
Options
 
15-Jun-09
CAD 4.25
120,000
120,000
Options
 
21-Oct-09
CAD 4.00
157,500
157,500
Options
 
17-Feb-10
CAD 3.47
757,500
757,500
Options
 
10-Mar-10
CAD 3.65
212,000
212,000
Options
 
8-Dec-10
CAD 3.29
40,000
40,000
Options
 
10-May-11
CAD 5.47
1,010,000
1,010,000
Options
 
30-Jun-11
CAD 4.41
418,000
418,000
Options
 
30-Nov-11
CAD 6.40
1,010,000
1,010,000
Options
 
21-Sep-09
CAD 5.25
200,000
200,000
Options
 
21-Sep-09
CAD 4.60
100,000
100,000
Options
 
31-Oct-08
CAD 4.72
50,000
50,000
Options
 
30-Apr-09
CAD 5.25
50,000
50,000
Options
 
31-Oct-09
CAD 6.00
50,000
50,000
Options
 
19-Mar-12
CAD 5.94
1,135,000
1,135,000
Options
 
1-Sep-11
CAD 4.62
36,000
36,000
Options
 
7-Sep-12
CAD 6.48
387,500
387,500
           
Fully diluted common shares
       
62,671,087

November 08, 2007


 
Daniel R. Titcomb
 
James M. Roller
President and CEO
 
Chief Financial Officer



15


FORWARD-LOOKING STATEMENTS
Certain statements in this Management’s Discussion and Analysis (“MD&A”) constitute "Forward-Looking Statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and Canadian securities legislation. This MD&A contains Forward-Looking Statements, including statements concerning  Jaguar's future objectives, the measured and indicated resources, their average grade, the commencement period of production, cash operating costs and completion dates of feasibility studies, gold production and sales targets, capital expenditure costs, future profitability and growth in reserves.  Forward-Looking Statements can be identified by the use of words, such as "are expected", "is forecast", "approximately" or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved.  Forward-Looking Statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, or performance to be materially different from any future results or performance expressed or implied by the Forward-Looking Statements.  These factors include the inherent risks involved in the exploration and development of mineral properties, the uncertainties involved in interpreting drilling results and other ecological data, fluctuating gold prices and monetary exchange rates, the possibility of project cost delays and overruns or unanticipated costs and expenses, uncertainties relating to the availability and costs of financing needed in the future, uncertainties related to production rates, timing of production and the cash and total costs of production, changes in applicable laws including laws related to mining development, environmental protection, and the protection of the health and safety of mine workers, the availability of labour and equipment, the possibility of labour strikes and work stoppages  and changes in general economic conditions.  Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking information, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended.  These Forward-Looking Statements represent our views as of the date of discussion.  The Company anticipates that subsequent events and developments may cause the Company's views to change.  The Company does not undertake to update any Forward-Looking Statements, either written or oral, that may be made from time to time by or on behalf of the Company subsequent to the date of this discussion.  For a discussion of important factors affecting the Company, including fluctuations in the price of gold and exchange rates, uncertainty in the calculation of mineral resources, competition, uncertainty concerning geological conditions and governmental regulations and assumptions underlying the Company's Forward-Looking Statements, see the "CAUTIONARY NOTE" regarding Forward-Looking Statements and "RISK FACTORS" as filed in the Company’s Annual Information Form for the year ended December 31, 2006 filed on SEDAR and available at www.sedar.com,  and its filings, including the Company's Annual Report on Form 40-F for the year ended December 31, 2006, with the U.S. Securities and Exchange Commission, which are available at www.sec.gov through EDGAR.
 
This MD&A presents estimates of future "total cash cost per ounce" that are not recognized measures under United States generally accepted accounting principles ("US GAAP"). This data may not be comparable to data presented by other gold producers. These future estimates are based upon the total cash costs per ounce that the Company expects to incur to mine gold at the applicable projects and do not include production costs attributable to accretion expense and other asset retirement costs, which will vary over time as each project is developed and mined. It is therefore not practicable to reconcile these forward-looking non-GAAP financial measures to the most comparable GAAP measure. A reconciliation of the Company's total cash cost per ounce to the most comparable financial measures calculated and presented in accordance with US GAAP for the Company's historical results of operations is set forth in the notes to the financial statements in the Company's Annual Report on Form 40-F for the year ended December 31, 2006 filed with the United States Securities and Exchange Commission, as well as the Company's most recent interim and annual financial statements filed with the Canadian Securities Administrators. 
 
Cautionary Note to U.S. Investors concerning estimates of Inferred and Measured and Indicated Resources
This document includes the term "inferred resources" and "measured and indicated resources".  The Company advises U.S. investors that while such terms are recognized and  permitted under Canadian regulations, the  U.S. Securities and Exchange Commission does not recognize  them.   U.S. investors are cautioned not to assume that any part or all of the mineral deposits in these categories will ever be converted into proven or probable reserves.
 
 "Inferred resources" have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility.  It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category.  Under Canadian rules, estimates of inferred mineral resources may not form the basis of a feasibility or other economic study.  U.S. investors are cautioned not to assume that any part or all of an inferred resource exists or is economically or legally mineable.
 

16


 
GLOSSARY OF MINING TERMS
 
Carbon-in-leach
A gold recovery process in which a slurry of gold-bearing ore, carbon and cyanide are mixed together.  The cyanide dissolves the gold, which is subsequently absorbed by and separated from the carbon.
 
Carbon-in-pulp
Similar to carbon-in-leach process, but initially the slurry is subjected to cyanide leaching in separate tanks followed by carbon-in-pulp. Carbon-in-leach is a simultaneous process.
 
Conversion factors
Weights and measures on this site represent units commonly used in the gold industry.  Conversion factors are provided below:
 
To Convert
Imperial Measurement Units
 
To Metric
Measurement Units
 
Multiply By
Acres
 
Hectares
 
0.404686
Feet
 
Metres
 
0.30480
Miles
 
Kilometres
 
1.609344
Ounces (troy)
 
Grams
 
31.1035
Pounds
 
Kilograms
 
0.454
Short tons
 
Tonnes
 
0.907185
Troy ounces per ton
 
Grams per tonne
 
34.2857
 
Cut-off grade
The minimum metal grade at which a tonne of rock can be processed on an economic basis.
 
Deposit
A mineralized body which has been physically delineated by sufficient drilling, trenching and/or underground work and found to contain a sufficient average grade of metal or metals to warrant further exploration and/or development expenditures; such a deposit does not qualify as a commercially mineable ore body or as containing mineral reserves until final legal, technical and economic factors have been resolved.
 
Development or mine development
Driving openings to access the mineral reserve in an underground mine.
 
Diamond or core drill
A type of rotary drill in which the cutting is done by abrasion rather than percussion.  The cutting bit is set with diamonds and is attached to the end of long hollow rods through which water is pumped to the cutting face.  The drill cuts a core of rock, which is recovered in long cylindrical sections, an inch or more in diameter.
 
Dilution
The effect of waste or low-grade ore being included unavoidably in the mined ore, lowering the recovered grade.
 
Doré
The precious metals product of the smelter, containing mainly gold and silver, that requires additional refining to high purity gold.
 
Drifting
Driving of tunnels through rock usually on a horizontal basis.
 
Feasibility study
A detailed report showing the feasibility of placing a prospective ore body or deposit of minerals within a mineral property into production.  This report typically includes, inter alia, the specific portion or portions of the property that should be included in a development block, conclusions and recommendations regarding any adjustments that should be made to the boundaries of a development block, a description of the work to be performed in order to develop the mineral resources within the development block and to construct a mine or mines and related facilities on the development block, the estimated capital and operating costs thereof, a proposed schedule for the timing of development and mine construction, and an assessment of the impact of the operation and the information obtained and evaluations made in respect thereof.
 
Grade
The amount of gold in each tonne of ore, usually expressed in grams per tonne.
 
Heap leaching
A process whereby gold is extracted by “heaping” broken ore on sloping impermeable pads and repeatedly spraying the heaps with a weak cyanide solution which dissolves the gold content. The gold-laden solution is collected for gold recovery.
 
Mineralization
Mineral-bearing rock; the minerals may have been either a part of the original rock unit or injected at a later time.

17


 
NI 43-101
Canadian National Instrument 43-101, Standards of Disclosure for Mineral Projects of the Canadian Securities Regulators.
 
Ore
Rock, generally containing metallic and non-metallic minerals that can be mined and processed at a profit.
 
Ounce (troy)
All ounces referenced herein are troy ounces.  Despite the world's gradual conversion to the metric system, the troy ounce remains a fixture of the gold industry and the most important basis for expressing quotations of most gold markets.  One troy ounce equals approximately 31.1 grams in weight.  There are 32.15 troy ounces in a kilogram.
 
Ramp
An inclined underground tunnel that provides access to an ore body for exploration, ventilation and/or mining purposes in an underground mine.
 
Refractory Ore
Mineralized rock in which much of the gold is encapsulated in sulphides or other minerals and is not readily amenable to dissolution by cyanide solutions (unlike oxidized ore) even with fine grinding.
 
Reclamation
The process by which lands disturbed as a result of mining activity are reclaimed back to a beneficial land use.  Reclamation activity includes the removal of buildings, equipment, machinery and other physical remnants of mining, closure of tailings impoundments, leach pads and other mine features, and contouring, covering and revegetation of waste rock piles and other disturbed areas.
 
Recovery
A term used in process metallurgy to indicate the proportion of valuable material obtained in the processing of an ore.  It is generally stated as a percentage of valuable metal in the ore that is recovered compared to the total valuable metal present in the ore.
 
Recovery Grade
The actual grade of ore realized after the mining and treatment process.
 
Reserves and Resources
Jaguar’s classification of mineral reserves and resources and the subcategories of each conforms with definitions adopted by the Canadian Institute of Mining, Metallurgy and Petroleum Council on August 20, 2000, which are in accordance with Canadian Securities Administrators' National Instrument 43-101 dated November 17, 2000.
 
Mineral resource
A mineral resource is a concentration or occurrence of natural, solid, inorganic or fossilized organic material in or on the earth's crust in such form or quantity and of such a grade or quality that  has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a mineral resource are known, estimated or interpreted from specific geological evidence and knowledge.
 
Inferred mineral resource
An inferred mineral resource is that part of a mineral resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed but not verified, geological and grade continuity. The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes.
 
Indicated mineral resource
An indicated mineral resource is that part of a mineral resource for which quantity, grade or quality, density, shape, and physical characteristics can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of the economic viability of the deposit.  The estimate is based on detailed and reliable exploration and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed.
 
Measured mineral resource
A measured mineral resource is that part of a mineral resource for which quantity, grade or quality, density, shape and physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters, to support production planning and evaluation of the economic viability of the deposit.  The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological and grade continuity.
 
 


18


 
Mineral reserve
A mineral reserve is the economically mineable part of a measured or indicated mineral resource demonstrated by at least a preliminary feasibility study.  This study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified.  A mineral reserve includes diluting materials and allowances for losses that may occur when the material is mined.
 
Probable mineral reserve
A probable mineral reserve is the economically mineable part of an indicated, and in some circumstances a measured mineral resource, demonstrated by at least a preliminary feasibility study.  This study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified.
 
Proven mineral reserve
A proven mineral reserve is the economically mineable part of a measured mineral resource demonstrated by at least a preliminary feasibility study.  This study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction is justified.
 
Cautionary Note to U.S. Investors concerning estimates of Measured and Indicated Resources
This document includes the terms “measured and indicated resources”.  The Company advises U.S. investors that while these terms are recognized and required by Canadian regulations, the SEC does not recognize them.  U.S. investors are cautioned not to assume that any part or all of mineral deposits in this category will ever be converted into reserves.
 
Inferred
That part of a mineral resource for which quantity and grade or quality can be estimated on the basis of geological evidence, limited sampling, and reasonably assumed, but not verified, geological and grade continuity.  The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, and workings.
 
Qualified Person or QP
An individual who, in accordance with NI 43-101: (a) is an engineer or geoscientist with at least five years of experience in mineral exploration, mine development or operation mineral project assessment, or any combination of these; (b) has experience relevant to the subject matter of the mineral project and the technical report; and (c) is a member in good standing of a recognized professional association.
 
Stockpile
Broken ore heaped on surface or prepared areas underground, pending treatment or shipment.
 
Stope
Working place in an underground mine where ore is extracted.
 
Tailings
The material that remains after all economically recoverable metals or minerals of economic interest has been removed from the ore through milling and processing.
 
Ton
A ton or short ton is a British imperial measure of weight equivalent to 2,000 pounds.
 
Tonne
A tonne or metric tonne is about 10% greater in weight than a short ton and equivalent in weight to 1000 kilograms or 2,205 pounds.
 
Waste
Barren rock in a mine, or mineralized material that is too low in grade to be mined and milled at a profit.
 

19


CORPORATE DIRECTORY

Jaguar Mining Inc. is a Canadian company
incorporated under the laws of Ontario.
 
DIRECTORS
 
Andrew C. Burns1
Gil Clausen3, 4
William E. Dow3
Juvenil T. Felix
Gary E. German1,2,4
Chairman
Anthony F. Griffiths1, 2, 3
Daniel R. Titcomb
1     Audit Committee
2    Compensation Committee
3    Corporate Governance Committee
4    Health, Safety and Environmental Committee
 
OFFICERS
 
Daniel R. Titcomb
President & CEO
 
Juvenil T. Felix
Chief Operating Officer
 
James M. Roller
Chief Financial Officer & Treasurer
 
Lúcio Cardoso
VP Operations
 
Adriano Nascimento
VP Exploration & Engineering
 
Robert J. Lloyd
Secretary
 
ADMINISTRATIVE  OFFICE
 
48 Pleasant Street
Concord, NH  03301 - USA
Phone: (603) 224-4800
Fax:     (603) 228-8045
E-mail: ir@jaguarmining.com
Website: www.jaguarmining.com
 
 
REGISTERED OFFICE
 
40 King Street West, Suite 5800
Toronto, Ontario
Canada  M5H 3S1
 
OPERATING OFFICE
 
Rua Fernandes Tourinho 487, 7th Floor
CEP 30.112-000 - Belo Horizonte - MG
      Brazil
 
AUDITORS
 
KPMG LLP
Toronto, Ontario
Belo Horizonte, Brazil
 
LEGAL COUNSEL
 
Davies, Ward, Phillips &Vineberg LLP
Toronto, Ontario
New York, NewYork
 
Miller Thomson LLP
Toronto, Ontario
 
Hinckley, Allen & Snyder LLP
Concord, New Hampshire
 
BANKS
 
Bank of America
Boston, Massachusetts
 
Royal Bank of Canada
Toronto, Ontario
 
STOCK TRANSFER AGENT
 
Computershare Investor Services Inc.
100 University Avenue, 9th floor
Toronto, ON  M5J 2Y1
Phone: 1-800-564-6253
Fax: 1-866-249-7775
Email: service@computershare.com
 
EXCHANGE LISTING
 
Toronto Stock Exchange: “JAG”, “JAG.NT”
NYSE Arca: “JAG”
 

 
EX-99.3 4 ex993.htm CEO CERTIFICATE ex993.htm
 
Exhibit 99.3
 
Form 52-109F2 - Certification of Interim Filings

I, Daniel R. Titcomb, President and CEO of Jaguar Mining Inc., certify that:

1.  I have reviewed the interim filings (as this term is defined in Multilateral Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings) of Jaguar Mining Inc. (the “issuer”) for the period ending September 30, 2007;
 
2.  Based on my knowledge, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings;
 
3.  Based on my knowledge, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date and for the periods presented in the interim filings;
 
4. The issuer’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures for the issuer, and we have:
 
 
(a)
designed such disclosure controls and procedures, or caused them to be designed under our supervision, to provide reasonable assurance that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the interim filings are being prepared; and
 
 
(b)
designed such internal control over financial reporting, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP; and
 
5.  I have caused the issuer to disclose in the interim MD&A any change in the issuer’s internal control over financial reporting that occurred during the issuer’s most recent interim period that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting.




____________________________
Daniel R. Titcomb
President and CEO

EX-99.4 5 ex994.htm CFO CERTIFICATE ex994.htm
 
Exhibit 99.4
 
Form 52-109F2 - Certification of Interim Filings

I, James M. Roller, Chief Financial Officer of Jaguar Mining Inc., certify that:

1.  I have reviewed the interim filings (as this term is defined in Multilateral Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings) of Jaguar Mining Inc. (the “issuer”) for the period ending September 30, 2007;
 
2.  Based on my knowledge, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings;
 
3.  Based on my knowledge, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date and for the periods presented in the interim filings;
 
4. The issuer’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures for the issuer, and we have:
 
 
(a)
designed such disclosure controls and procedures, or caused them to be designed under our supervision, to provide reasonable assurance that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the interim filings are being prepared; and
 
 
(b)
designed such internal control over financial reporting, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP; and
 
5.  I have caused the issuer to disclose in the interim MD&A any change in the issuer’s internal control over financial reporting that occurred during the issuer’s most recent interim period that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting.



_____________________________________
James M. Roller
Chief Financial Officer

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