Sector Insight

Pinnacle’s Sector Insight is designed to keep our members up to date with the major developments in the most important sectors. Every successful investor is well informed and diversified in their holdings; that is why we provide this market commentary. If you would like our opinion on any specific sector in the market we would be glad to share it with you. Please use the “Contact Us” link at the top of every page to send us your inquiry.

Sincerely,

The Pinnacle Team

Junior Mining Companies

August 18, 2008

Junior Mining Companies Tight credit conditions create a liquidity crisis for companies, such as the junior mining exploration companies, that are continually dependent upon the capital markets for financing its activities.

When the junior mining sector slumps, it causes investor disinterest and a consequent decline in stock prices, the result being that access to financing dries up. Without cash flow, a company is forced to scale back activities or even curtail operations completely.

Options available to management include cutting back exploration and/or development, mine shut-down, entering into joint venture partnerships (not always on favourable terms), disposal of assets, or outright sale of the company (again, not usually from a position of strength).

In this regard, it has become increasingly difficult for junior mining exploration companies to raise equity in the current market environment and, where efforts have been successful, often the amounts raised are not large.

When times are good, management usually can do no wrong and stock prices escalate. Flush with cash, they often spend money foolishly on