Financial Sense Junior Gold Mining Index Review by Frank Barbera 12/10/2007

General Comments

With the US Stock Market gaining nearly 1.60% in the week just past, mining stocks edged higher lagging behind solid gains in the precious metals. For Gold, last week saw prices gain by 1.36%, an advance of $10.70 to end at $794.60, with Platinum up $14.00 per ounce, and Silver up 2.72%, or $.38 per ounce. For the mining stocks, last week saw a mixed performance, with the XAU gaining 1.94%, while the HUI was up 1.38% and the GDX ETF was unchanged. A huge gain of 9.17 points (9%) in shares of FCX, Freeport Copper and Gold, boosted the XAU, while other Gold Indices barely advanced.

On the week, Newmont Mining (NEM) gained from $49.69 to $50.03, while Barrick Gold (ABX) slipped from $40.51 to 39.79, with Goldcorp (GG) gaining from $32.41 to $33.53. Junior Mining stocks “hung in there” pretty well, recording some modest gains with the FSO Junior Mining Index moving from 268.78 the prior week, to a close on Friday of 272.83, a gain of 4.05 index points or 1.50%. For the FSO Junior Mining Index of 40 stocks, the 50 day average ended Friday at 295.24, with the 200 day average at 292.20.

Financial Sense Junior Gold Index™

Mining Index

Above: the FSO Junior Mining Index - 40 stocks

Among the FSO Sub-Indices, the high profile Junior Producers advanced by 7.34 index points from 286.79, to a close of 294.13, a gain of 7.34 index points or 2.55%. IN addition, Development Stocks also gained from 431.11 the prior week to a close of 442.22, an advance of 11.11 index points or 2.57%. For the FSO Junior Producers, the 50 day average ended at 297.38, with the 200 day average at 305.61. For the Development Index, the 50 day average ended at 492.24, with the 200 day average at 554.88. Both Sub-Indices remain entirely below both the 50 and 200 day averages. Finally, Junior Exploration stocks moved higher, ending at 193.98, up .86 from the prior week at 193.12, a gain of less then 1%. For the Exploration Index, the 50 day average ended at 214.68, with the 200 day average at 194.50, this past weeks action just barely undercutting the 200 day line on the Exploration stocks which have been strong leaders all year long.

Financial Sense Junior Gold Index™

Producer Index

Above: FSO Junior Producer Index

Financial Sense Junior Gold Index™

Development Companies

Above: FSO Junior Development Index

Financial Sense Junior Gold Index™

Exploration Companies

Above: The FSO Junior Exploration Index

Financial Sense Junior Gold Index™

Relative Strength Ratio of Juniors to Seniors vs XAU

Above: The Relative Strength Ratio of Juniors to Seniors, the FSO Index versus the XAU.

On a medium term trend basis, Junior Mines still remain weak and have been under-performing with the R/S Ratio making another round of new lows in the week just past. This is a strange element in the current market environment as prices for the precious metals have been ‘stable’ at higher prices for some time. Typically, when metals prices move to a higher level, it improves the confidence of investors in up and coming, developing mines. This is not the case at the current time, as the appetite for taking on risk—perhaps risk of any kind, seems to be evaporating, as investors are not stepping up to aggressively buy these secondary stocks. While this does not mean that value is not still being created and perhaps being created in droves at a number of these smaller companies, it does mean that the portrait of primary trend ‘investment risk’ seems to be holding investors back from efficiently pricing these stocks. When capital retreats in the face of good values, it is often a sign to proceed with great caution as it usually indicates other factors at work, perhaps not readily visible. In time, the situation usually becomes clear, but for right now, the decline and lack of response to higher metal prices on behalf of Junior mines is at least modestly befuddling, as this should not be the case. 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.