Precious warrants

METALS COMMENTARY

San Antonio, Texas — What is really happening in the precious metals sector? You may be surprised.

Market analysts, investment newsletter writers and financial planners are always commenting on how well the precious metals mining sector is doing, which specific mining company stocks show better than average potential; how well the HUI or XAU indices are performing, etc., but they are not telling you the whole story. There is much more happening than such assessments would suggest.

Like the broad market DOW, S&P 500, S&P/TSX and other indices, there are a number of precious metals (gold or otherwise) mining indices that dice and splice the components of the precious metals mining sector to arrive at a wide variety of insights. Not just the two or three that you may be aware of but as many as 42 in all (see the complete list to the left).

The three most popular precious metals mining indices are as follows:

* the Philadelphia Gold & Silver Index (XAU) — a capitalization weighted index composed of 13 companies involved in the gold and silver mining industry. Newmont Mining (NMC-T, NEM-N), Barrick Gold (ABX-T, ABX-N), and AngloGold Ashanti (AU-N) make up 49.38% of the index;

* the Amex Gold BUGS (Basket of Unhedged Gold Stocks) Index (HUI) — a modified equal dollar weighted index of 15 companies involved in gold mining and non-hedging of their gold production beyond 1.5 years. Newmont, Gold Fields (GFI-N, GOF-L) and Freeport-McMoRan Copper & Gold‘s (FCX-N) “B” series shares make up 43.21% of the index; and

* the S&P TSX Gold Index (SPTGD) — an index of the 20 largest gold mining companies trading on the Toronto Stock Exchange.

Only three companies [Goldcorp (G-T, GG-N), Kinross Gold (K-T, KGC-N) and Meridian Gold (MNG-T, MDG-N)] are included in all three indices. AngloGold, Agnico-Eagle Mines (AEM-T, AEM-N), and Pan American Silver (PAA-T, PAAS-Q) are unique to the XAU; Hecla Mining (HL-N) and Golden Star Resources (GSC-T, GSS-X) are unique to the HUI.

But what about the other indices? The accompanying table shows how they performed in 2005.

Never heard of most of these? Most are indeed rather obscure, but one of them is going to change the way you look at investing in the precious metals mining sector. It is no. 1 on the list above — the proprietary Precious Metals Warrants Index (Composite). More than 50 companies in the precious metals mining business offer warrants that are traded in the United States and Canada (in addition to their common stock) and they are now regularly tracked, analyzed and published by PreciousMetalsWarrants.com.

Yes, 2005 was a good year for precious metals with rhodium skyrocketing 125.6%, uranium jumping 76.8%, palladium popping 38.2%, silver leaping 29.5%, ruthenium increasing 27.9%, gold ahead 18.2%, iridium rising 14.7%, and platinum swelling 12.1%, while molybdenum was down 11.7%.

Last year was even better for companies that mined the various minerals, with their stocks up in excess of 40% on average, depending on the index used. But the best way to have played the precious metals market in 2005 was to have been invested in a complete basket of precious metals warrants, which realized an outstanding 51.4% increase.

Then there is the two-fold leverage of warrants but that is another story titled “Why Warrants? Why Now?” (T.N.M., Nov. 4-10/05).

— Based in San Antonio, Tex., the author is founder of www.preciousmetalswarrants.com, a subscription service that provides complete details on all warrants of mining stocks trading in Canada and the U.S. He can be reached at info@preciousmetalswarrants.com.

Precious Metals Warrants Indices

Rank	Index	2005 Increase
1.	Precious Metals Warrants Index (PMWI) (Composite)	51.4%
2.	DJ U.S. General Mining Index	46%
3.	S&P/TSX Capped Diversified Metals and Mining Index	45.2%
4.	CBOE Gold Stock Index	44.6%
5.	FTSE Gold Stocks Index — Africa	42.5%
6.	DJ U.S. Mining Index	41.9%
7.	FTSE Gold Mines Index — Australasia	39.9%
8.	Philadelphia Gold and Silver Index (XAU)	37.%
9.	Barron’s Gold Mining Index	36.2%
10.	DJ Gold Mining Micro Sector Index	33.3%
11.	FTSE Gold Mines Index — America	31.5%
12.	Amex Gold Miners Index	29.1%
13.	Amex Gold BUGS Index (HUI)	28.6%
14.	Dow Jones Precious Metals Index	28.3%
15.	Global Gold Index	28.2%
16.	Shultz Gold Stocks Index	27.8%
17.	ISE Gold Index	27.3%
18.	S&P/TSX Gold Index (SPTGD)	25.8%
19.	Globe Precious Metals Peer Index	23.3%
20.	iUnits Gold Sector Index	22.8%
21.	DJ – AIG Precious Metals Spot Index	21.3%
22.	DJ – AIG Precious Metals Total Return Index	20.4%
23.	DJ U.S. Gold Mining Index	19.7%
24.	Goldman Sachs Commodity (Precious Metals) Index	19.5%
25.	Goldcolony Index of Junior Gold Stocks	18.9%
26.	Gold TRAKRS Index	18.2%
27.	iShares COMEX Gold Trust Index	17.6%
28.	Australian Gold Emerging Producers Index	16.8%
29.	DJ – AIG Precious Metals Index	16.6%
30.	Canadian Gold Producers Index	13.4%
31.	Australian Gold Producers Index	7.4%
32.	Australian Gold Juniors Index	5.9%
33.	DJ U.S. Platinum & Precious Metals Index	2.8%
34.	CBOE Power Packs Gold Index (Started July/05)
35.	IBD Gold Stock Index	N/A
36.	Junior Gold Stock Index (J. Taylor)	N/A
37.	TSI Gold Stock Index	N/A
38.	South African Gold Producers Index	N/A
39.	Financial Sense Junior Gold Index (Composite)	N/A
40.	Financial Sense Junior Gold Index (Junior Producer Cos)	N/A
41.	Financial Sense Junior Gold Index (Junior Development Cos)	N/A
42.	Financial Sense Junior Gold Index (Junior Exploration Cos)	N/A

(Note: The Precious Metals Warrants Index is a Price Weighted Index and includes all warrants which were trading for at least 12 months as of 12/31/05.)