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SUBJECT: Article currently posted at Midas.. Posted By: arcticfox2
Post Time: 10/26/2007 8:14:16 AM 08:14
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EXMIN
Resources
Market
Commentary 25th October 2007

WHY
BUY JUNIOR MINERS (SUCH AS EXMIN)?

The
content of this EXMIN Market Commentary is for informational
purposes only. It expresses the views of the EXMIN
team only. It does not include
material information that
has not been published in previous EXMIN news releases.

The
team at EXMIN Resources Inc. monitors market events
as part of our larger strategy incorporating discipline
and long-term focus. Given ongoing
events in the public markets, we have decided to share
one of our recent team discussion papers with our
investors and potential investors.

A
Watershed Year in 2007?

2007
has easily been the strangest year of the seven since
Precious Metals commenced its generational bull market
in 2000. Gold and silver have risen by 20% and
9%, respectively, the former to a 28-year high and
the latter not far behind. The CRB Commodity
Index, led by Energy, Grains, and Base Metals, has
rallied to an all-time high, while the U.S. Dollar
Index has fallen to an all-time low. The HUI
and XAU indeces of gold mining stocks are up by 20%
and 24%, respectively, both at or near all-time
highs as well. However, junior mining companies,
both producers and explorers, have on average fallen
significantly.

Could
The Markets Shift?

We
examine three factors, starting with the fundamentals
for gold and silver, which are clearly improving at
an increased rate. Supply is declining
significantly (gold production peaked in 2003), with
more declines likely for at least several more years,
while demand is rising dramatically, led by Eastern
Hemisphere regions such as India, Russia, and the
Middle East. Moreover, given the Federal Reserve's
aggressive monetary policy at a time when inflation
is rising sharply (per the CRB index), it seems reasonable
to believe that the trend for the U.S. dollar will
continue downward. Additionally, the U.S.
is not the only country currently printing money
at exponentially high rates. In fact, compared
to other Central Banks such as the ECB, the Bank of
England, and the Bank of China, the U.S.'s 15% M3
growth rate (per John Williams' Shadow Statistics
( http://www.shadowstats.com/cgi-bin/sgs/data))
is quite tame.

Next,
we examine the markets in general.
Be it expectations of a global economic boom, a new
technology revolution, or simply dramatic amounts
of money being filtered into the market via the largest "liquidity
injections" in history, worldwide stock markets have
been on a roll all year (excluding Friday), particularly
in China where shades of internet mania have surfaced.
Consequently, investor focus has not been on
the "safe haven" Precious Metals sector, particularly,
in our view, due to its above average volatility this
year (another time, another article).

Finally,
we examine the gold mining sector specifically,
where nearly all the group's performance has been
weighted toward large cap companies that are
either producing or near production. Movement
into the sector has been rather reluctant all year
long, but given the aforementioned factors (rising
CRB Index, falling Dollar Index, and surging Gold
Price), rotation has clearly picked up in recent months.

The
below article describes just how steep the disparity
has gotten between the valuations of the large cap
producers/resource holders and the juniors, clearly
the largest seen in years, in our view a dichotomy
that will eventually reverse as the Precious Metals
bull intensifies.

http://www.gold-eagle.com/editorials_05/sobolev100807.html

In
our view, the reason for this disparity is the perceived
risk/reward between the two groups, with the larger
companies clearly having lower risk due to their
better capitalizations, larger reserves, and, in some
cases, positive cash flow. But there is a price
for everything, and at the current levels many
junior mining companies have seen their shares fall
so much that reserves are being valued as negligible
and their upside potential nearly nil.

What
Does Market Volatility Mean for EXMIN?

The
merger mania going on among the big caps (such as
FCX/PDG, ABX/PD, ABX/NG, AEM/NTO/MDG, GG/GLG/WTZ,
and now NEM/MNG) is evidence that reserve replacement
via the drill bit is no longer a viable option given
soaring production costs and rapid depletion, and
in our view this trend is just getting started.
Roughly 90% of all producing oil companies in Canada
were acquired over the past decade, with no visibly
positive impact on production, and the same is likely
to occur in Precious Metals over the coming decade.
Aside from this shuffling of the deck chairs, very
little is being found in the way of new reserves,
and what is being found is typically higher cost and
in either politically or geologically difficult areas.
The only known significant source of gold reserves
is in South Africa, but because it is buried so deep
in the ground will not be economic until gold
prices are significantly
higher.

Given
this situation, where will the new reserves come from?
In our opinion, the answer is in
junior exploration companies. Some are
fully or partially owned or funded by larger producers
with EXMIN being a good example, but most work independently
with the goal of eventually becoming a major producer
or selling out to one. Their role in the mining
chain is becoming increasingly more valuable, and
in our view where the next wave of investor money
will be heading as the Precious Metals bull enters
the second phase.

A
major misconception about the group appears to be
that juniors are all "wildcat" exploration companies, in
our view a major misnomer. Many junior
companies explore for reserves next to or around previously
discovered reserves, essentially the same formula
that worked wonders for dozens of small oil exploration
companies over the past decade. Certainly some
wildcatting occurs, but for the most part exploration
programs occur in areas where at some time success
was encountered. Many of those successes occurred
during the late 1970s and early 1980s (even the
early 1990s) when mining economics last peaked, and
presumably many of those same areas will again be
cash cows once mining economics peak again, particularly
for gold and silver. Moreover, many gold and
silver mines produce base metals as well, diversifying
the revenue stream of the mining companies.
That is one of the main premises on which EXMIN Resources
was founded.

So
What About EXMIN?

We
believe EXMIN's equity valuation is extremely
low given our combination of production, previous
exploration success, multiple JV partnerships,
share ownership by larger producers, 43-101 resources
(http://www.exmin.com/news/index.php?&content_id=26),,,
and upside exploration potential. As highlighted
in our September 20th correspondence (available upon
request), we made significant accomplishments
over the summer, and look forward to further improvements
in shareholder value over the next year.

Currently,
Hochschild Ltd. and Industrias Penoles own roughly
17% and 2% of EXMIN's outstanding shares, respectively,
with both currently amidst major JV exploration programs
funded 100% by their exploration departments.
In fact, Penoles commenced a highly prospective 3,000
metre drilling program in September, while our
joint venture with Yale Resources is rapidly
approaching the drilling phase. Most importantly, first
production at our 30%-owned Moris mine commenced in
September, with 2008 production anticipated
to be approximatley 25,000 ounces of gold and 60,000
ounces of silver. Finally, we had initial
drilling success at our 100%-owned Horcon mine this
summer, and at present are debating what our next
moves will be at Horcon and Reyna de Oro, our
other 100%-owned drilling success.

We
continue to aggressively target the growth of shareholder
value through a variety of methods including exploration,
production, project acquisition, and M&A activity. Over
the next year, we see the potential for material
price appreciation, when, for the aforementioned reasons,
capital flows start moving back into the junior
mining sector.

About
EXMIN

EXMIN
Resources Inc. (EXMIN) is currently focused on the
exploration and development of precious metal properties
of exceptional merit in the Sierra Madre gold belt
of Northwestern Mexico as well as in other highly
mineralized areas of Mexico.

For
further information, please contact:

Karl
J. Boltz, President & CEO or Investor Relations
at 1-866-49-EXMIN (39646)

Visit
us on the internet: www.exmin.com or Email us at:
info@exmin.com