Financial Sense Junior Gold Mining Index Review by Frank Barbera 10/08/2007

General Comments

After moving higher for six weeks in a row, metals and mining stocks took a rest this week and consolidated their recent gains. On the week, spot Gold edged lower, dipping $1.20/oz to close at $742.10, down from $743.30. The small decline, masked an intra-week pull back, which at one point saw spot gold down as much as $13.70 with a low of $720.60. Strong gains during the last two days of the week helped trim the loss. In similar fashion, other metals ended lower, but closed off their worst levels of the week, with nearby spot Silver ending at $13.39, down from $13.74., down $.35 or 2.54% for the week. In the case of spot Platinum, prices have been extremely robust, soaring to new all time highs in recent days with nearby spot Platinum ending at $1372.00, down from $1381 last week, a loss of $9.00 or .006%. With metals prices residing at near record prices, mining stocks found good buying support on the dip, with both the XAU and HUI recovering to close the week with a small gain. For the XAU, prices ended at 171.27, up from last weeks close of 168.70, while for the HUI, prices gained 1.33 to finish the week at 394.03, up from 392.70.

Rounding out our overview of the mining sector, we note that the FSO Junior Mining Indices closed mixed on the week, with selective strength in individual stock names driving the index performance, rather then a more united underlying trend. On the week, the 40 stocks of the FSO Junior Mining Index ended higher by 2.98 index points or 1.02% to finish at 294.55, up from 291.57. Within the FSO 40 universe, the Junior Producers ended lower by 5.12 index points or 1.73% to close at 289.74, down from 294.86. For the first week of October, the big winners were the Development stage stocks, which ended higher by 16.30 index points or 3.06%, to close at 547.42, up from 531.12 while the Exploration Index edged higher by 2.79 index points to finish at 205.15. At the end of this article, we have constructed a table which has all of the historical data going back the last few weeks for each of the indices and their moving averages.

Financial Sense Junior Gold Index™

Mining Index

Above: the FSO Junior Mining Index with vertical dashed line place at end of 2006, horizontal
Line indicating positive/negative territory for 2007.

Financial Sense Junior Gold Index™

Producer Index

Above: FSO Junior Producer Index with same Y-T-D Info.

Financial Sense Junior Gold Index™

Development Companies

Above: FSO Junior Development Index with Y-T-D Info.

Financial Sense Junior Gold Index™

Exploration Companies

Above: FSO Junior Exploration Index with Y-T-D Info

Technically, the current environment is most unusual wherein, Junior Gold’s have lagged behind the price action in Seniors. This is unusual because high quality juniors are in many cases, growing rather rapidly, while senior gold’s are having a hard time generating organic, internal growth. While many do appreciate the full story behind Canada’s Junior Mining Industry is a tale of both technology and intrepid daring, as Canadian Miners have fanned out around the globe in search of new deposits. Over the last twenty years, computer technology has advanced with seismic modeling, and other discovery techniques that geologists in the 1950’s, 1960’s and 1970’s could only dream about. It is a new day in the age of discovery, and Canada’s Juniors are on the cutting edge, worldwide. With many of the Senior Gold’s showing a declining production profile, high quality mining companies with well-delineated resources will be acquisition targets during the new bull phase. As a result, we note that at the moment, the FSO Junior Gold’s show a relative strength ratio that is just about as depressed as ever is seen. The implications for an improving trend are profound. Likewise, the McClellan Summation Index for Junior Mines is just coming off a fully oversold condition, quite the opposite of the overbought and overextended position presently seen in the XAU and HUI. In coming days, a full scale in the Juniors will be confirmed as the A/D Line breaks out above its declining trendline. Already, the A/D line is back above the 200 day and 50 day averages, an encouraging sign.

Financial Sense Junior Gold Index™

XAU Senior Gold Mining Index with 200 day Bollinger Bands

Above: FSO Junior Mining Index relative to the XAU Senior Gold Mining Index with 200 day Bollinger Bands

Financial Sense Junior Gold Index™

Intermediate Term Summation Index

Above: the FSO Junior Mining Index with the Intermediate Term Summation Index gauge.

Financial Sense Junior Gold Index™

Junior Mining Index and the Daily A/D Line

Above: the FSO Junior Mining Index and the Daily A/D Line.

Some of the recent historical data brought up to current values.

That’s all for now,
Frank

*Please note that the individual companies in this index are proprietary and will not be disclosed due to compliance and regulatory issues resulting from the relationship of FinancialSense.com, Puplava Financial Services, Inc., Registered Investment Advisor and Puplava Securities, Inc. Member Firm FINRA/SIPC.