"The history of Eureka lies in its future." - Lambert Molinelli, 1878

DISCLOSURE

The author/editor of the Eureka Miner owns common shares of local mining stocks, General Moly (GMO), McEwen Ming (MUX) and Newmont Mining (NEM); together with benchmark miner Freeport-McMoRan (FCX). Please do your own research, markets can turn on you faster than a feral cat.

Thursday, April 30, 2009

Good News for Newmont, Caterpillar and Steel Producers


Morning Miners!

It is 6:58 am and a good news day for Newmont, Caterpillar and steel producers. Let's see if the ole Colonel can melt all this down into something useful for a quick morning read.

Let's throw Newmont into the crucible first with their the first quarter of 2009 results. This morning they reported equity gold sales of 1.27 million ounces at costs applicable to sales of $435 per ounce with an average realized gold price of $906 per ounce. Richard O'Brien, President and Chief Executive Officer said:

"Our operations provided solid results that were in-line with our expectations and this performance sets us up well to deliver on our operating plans for the full year in 2009. Project execution is also going well and is a clear focus for the balance of the year. Completing our Boddington project by mid-year and successfully ramping up to commercial production is a clear driver of our 2009 performance."

Boddington is a project in Australia with a start-up expected in mid-2009 and an anticipated 12-month ramp-up schedule.

Net cash provided from continuing operations is $387 million ($0.82 per share) and net income was $189 million ($0.40 per share) for the first quarter, compared to $365 million ($0.81 per share) in the prior year quarter, primarily due to lower realized gold and copper prices.

Closer to home, Newmont reported;

"Nevada sold 518,000 equity ounces of gold at costs applicable to sales of $509 per ounce during the first quarter. Equity gold sales were higher than expected primarily due to higher throughput at Mill 6 and the Sage Autoclave and higher underground production from Leeville, Chukar and Carlin East, partially offset by lower production at Midas due to the temporary suspension of mining following a ground failure which curtailed production in March but has since resumed as of the end of April 2009...the Company continues to expect 2009 equity gold sales from Nevada of between 1.8 and 2.0 million ounces at costs applicable to sales of between $535 and $575 per ounce."

Fine and dandy. The remainder of our good news comes from better than expected results from China's recent stimulus plan. Caterpillar Inc. Chief Executive James W. Owens says the company's excavator sales in China have returned to record levels in recent months, bouncing back from plummeting sales over the winter. As reported in the Wall Street Journal (4/30/09), he believes China continues to have a great need for infrastructure and that projects there could start much more quickly than could similar projects in the U.S. "It's something like nine months [in the U.S.] versus nine weeks" in China.

China also appears to be one of the few bright spots for the steel industry. Although U.S. steel companies are suffering because of the problems in the auto and construction industries, Lakshmi Mittal, CEO of Arcelor Mittal, the world's largest steelmaker, said on Wednesday that China's stimulus package is finally starting to increase demand for steel. Rising demand in China helps all steelmakers, whether or not they have plants in China, because it keeps excess Chinese steel from flooding the market and depressing prices (WSJ, 4/30/09).

Enough talk, let's walk the walk:

Oil fell $0.22 in early trading to $50.75(June contract). The dollar ("Dixie" or .DXY) is flat at 0.11% at 84.739. The commodity index (.CRB) is down 0.31% to 220.49.

Gold is in retreat $15.7 to $884.8 (June contract); Silver is down $.400 to $12.375; Copper has found its legs with the China news, up $.390 to $204.4 (July contract); Molybdenum is still snoring below $8.

The DOW is up a healthy 105 points to 8,291.10; the S&P 500, up 12.66 points to 886.30 passing smartly the critical resistance level of 870. Gold miners are feeling the slide in gold, other miners are happy campers:

Barrick (ABX) $29.42 down 0.68%
Newmont (NEM) $39.28 down 3.51%
General Moly (GMO) $1.49 up 4.20%
Freeport McMoran (FCX) $43.115 up 5.26% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are zooming (a "tell" for General Moly):

Nucor (NUE) $40.48 up 4.82% - domestic steel manufacturing
ArcelorMittal (MT) $23.97 up 4.49% - global steel producer

Cheers,

Colonel Possum

Wednesday, April 29, 2009

Barrick Beats Expectations, Cortez Hills on Schedule


Morning Miners!

It is 6:30 am and a good day for Barrick. As promised, this report will highlight their earnings report and live Webcast. You can access both by clicking the Barrick link in the "Miner's Corner" to your right.

Barrick beat Wall Street expectations for the first quarter of this year reporting $0.42 earnings per share (EPS) versus a predicted $0.36. The ole Colonel thinks that’s pretty darn good on a morning when the government reported a whooping 6.1% contraction in our Gross Domestic Product (GDP) for the same quarter!

[Correction (5/1/2009): The ole Colonel in the heat of battle mistook $0.42 net income for earnings. The reported earnings per share was $0.34, slightly below the mean analyst projection. Not to worry, the response to Barrick's earnings report was still very positive, Credit Suisse set a 12-month target price at $40 with a sector outperform rating on 4/30/2009.]

The good news was rewarded by a 2% pop in stock price (ABX) in early trading.

In Nevada, Cortez Hills remains on schedule for first production in Q1 2010 assuming the satisfactory resolution of the pending litigation regarding the project and is in line with its capital budget of $500 million. The Cortez property is expected to materially benefit 2010 production, becoming another one million ounce producer for Barrick at total cash costs of $350-$400 per ounce in its first full five years once Cortez Hills comes on line.

Here's a quick summary of their overall performance:

Gold production (thousands of ounces) 1,755 (2008) 1,743 (2009)
Gold sold (thousands of ounces) 1,714 (2008) 1,729 (2009)
Average realized gold price (per oz.) $912 (2008) $925 (2009)
Total production costs (per oz.) $595 (2008) $501 (2009)

Yearly production is expected to increase to approximately 7.7-8.1 million ounces in 2010 at lower total cash costs with the start-up of Cortez Hills scheduled in the first quarter.

The Webcast mentioned the importance of gold investor participation in Exchange Traded Funds (ETF), a common theme of the Eureka Miner's Report. How about a Colonel Yee-ha for Barrick!

Here's a daily reminder of the first quarter conference calls for the big mines in our area:

Barrick (ABX) This report
Newmont (NEM) Tomorrow, Thursday, 4/30 10:00am (ET)
General Moly (GMO) not scheduled

Enough talk, let's walk the walk:

Oil jumped $1.05 in early trading to $50.97(June contract). The dollar ("Dixie" or .DXY) has pulled back 0.78% to 84.507. The commodity index (.CRB) is up 1.03% to 219.45.

Gold is up $3.4 to $897.0 (June contract); Silver is up $.209 to $12.635; Copper is up $.595 to $1.9760 (most-active, July contract); Molybdenum is still asleep below $8.

The DOW is up a healthy 140 points to 8,157.29; the S&P 500, up 16.02 points to 871.18 testing a critical resistance level of 870. Miners are rocking the clock, buckaroos:

Barrick (ABX) $29.64 up 2.31%
Newmont (NEM) $40.54 up 1.30%
General Moly (GMO) $1.45 up 2.84%
Freeport McMoran (FCX) $40.29 up 5.28% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are mixed (a "tell" for General Moly):

Nucor (NUE) $38.53 up 2.75% - domestic steel manufacturing
ArcelorMittal (MT) $23.40 down 2.74% - global steel producer

Cheers,

Colonel Possum

Tuesday, April 28, 2009

Don't Panic...Yet!


Morning Miners!

It is 6:47am, the coffee is hot and if you are the world it might be a good day to call in sick. The ole Colonel is more worried about getting a carburetor kit for my 1973 F-250 than the swine flu. Apparently I'm in the minority, world markets reeled on concerns about the spreading swine virus and the possible need for even more capitalization in major U.S. banks. I heard a mid level government official on CNBC say, "Don't panic...yet!" Boy, that should make everyone feel better.

In the meantime Singapore traders hammered oil futures below the $50 benchmark as the Mexican flu took a trip to Asia. Gold dropped $20 in early trading on the NYMEX, commodity-sensitive currencies are getting clobbered and the dollar and Japanese yen are the flight to safety du jour. Surprisingly, the DOW and S&P are looking pretty resilient after an initial drop at the open.

Nonetheless, analysts are rushing to cover prior optimism about an early global recovery:

"The commodity revival over the last three months is fundamentally a dead cat bounce," said Charles Dumas, director at consultancy Lombard Street Research in London. (WSJ, 4/28/2009)

Phooey. I'm going down to the Eureka Supply to check on that carburetor kit, let's wait until the dust settles from this stampede before we draw too many conclusions.



Here's a daily reminder of the first quarter conference calls for the big mines in our area:

Barrick (ABX) Tomorrow, 4/29 before market open
Newmont (NEM) Thursday, 4/30 10:00am (ET)
General Moly (GMO) not scheduled

Enough talk, let's walk the walk:

Oil dropped $1.02 in early trading to $49.12(June contract). The dollar ("Dixie" or .DXY) has pulled back a little to 85.446. The commodity index (.CRB) is down 0.31% to 217.52 (gee, things are getting better already!).

Gold is down $19.1 to $889.1 (June contract); Silver is down $.555 to $12.400; Copper is down $.595 to $1.9260 (most-active, July contract); Molybdenum is still asleep below $8.

The DOW is up 14.81 points to 8039.81; the S&P 500, up 1.32 points to 858.83 (hmm...someones feeling better). Miners are down a bit:

Barrick (ABX) $29.25 down 0.86%
Newmont (NEM) $40.61 down 1.07%
General Moly (GMO) $1.42 down 0.04%
Freeport McMoran (FCX) $39.17 down 0.51% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are mixed (a "tell" for General Moly):

Nucor (NUE) $38.99 up 0.04% - domestic steel manufacturing
ArcelorMittal (MT) $24.64 down 0.70% - global steel producer

Cheers,

Colonel Possum

Monday, April 27, 2009

Lower Propane Bills and More Gold in China


Morning Miners!

It is 6:00am and our new coffee pot will be brew-ready in a minute! We have two new pieces in the jigsaw puzzle of global recovery to talk about: lower propane bills in Eureka and more gold in China. Our jigsaw is far from complete, but more pieces appear on the table every day. The recent rally in stocks may be approaching an end as concerns about swine flu emerge. For mining interests, copper dropping below the 2-buck benchmark and a Financial Times reporting that ArcelorMittal (MT) is contemplating permanent cuts in steel output are troubling new developments.

Nuts! Let's talk about some good news, your propane bill should be easier on you than last year! The ole Colonel watches five commodities in considerable detail: gold, silver, copper, oil and natural gas (see my charts at the bottom of this blog). I noticed last week that natural gas was hitting 6 1/2-year lows and wondered if propane prices were doing the same. Propane is a derivative product of oil and gas production and indeed follows the latter pretty closely in wholesale price:

2008 PROPANE peak price $1.95/gal (6/08)
2008 PROPANE May contract $1.85/gal
2009 PROPANE May contract $0.64/gal

I filled my propane tank on Christmas Eve for $3/gal (retail, single fill) and one of my faithful readers reports his yearly contract price is $2.50 (July/August renewal). If wholesale prices have fallen 67% from their 2008 peak and 65% on the May contract, I'm going to assume things should get a lot cheaper soon. Propane distributors probably hedge their fuel contracts like airlines so it is difficult to predict actual savings for Eureka. Let the ole Colonel know what you experience.

Our second item today brings us back to China. The Report learned this weekend that China has considerably more gold reserves than originally thought:

"State-run news agency Xinhua quoted Hu Xiaolian, the head of China's foreign-exchange agency, as saying that China's gold reserves had risen by 454 metric tons since 2003 to 1,054 tons, the first public acknowledgment in years that its reserves had changed. Official Chinese data at the end of March had shown the country's gold reserves at 600 tons." (WSJ, 4/25/09)

This puts China on par with present investor holdings in the gold ETF, GLD (1,105 metric tons as of 4/22) and number seven in the gold reserve list (the United states is still number one at 8,133 tons). So now, the awaking dragon is not only the world's largest gold producing country but has also been putting it away on the sly. The good news is that China demand supports gold prices and may offset the potential volatility of large investor holdings. Phew, lot's to think about buckaroos!

Here's a daily reminder of the first quarter conference calls for the big mines in our area:

Barrick (ABX) Wednesday, 4/29 before market open
Newmont (NEM) Thursday, 4/30 10:00am (ET)
General Moly (GMO) not scheduled

Enough talk, let's walk the walk:

Oil dove $2.76 in early trading to $51.19(June contract). The dollar ("Dixie" or .DXY) is up .54% to 85.253. The commodity index (.CRB) is down a big 2.87% to 219.99.

Gold fell back $5.5 to $908.6 (June contract); Silver is up $.070 to $12.990; Copper is down $.710 to $1.9795; Molybdenum is still asleep below $8.

The DOW is down 17 points to 8059.32; the S&P 500, down 4 points to 862.06. Miners are looking so-so:

Barrick (ABX) $30.365 down 0.44%
Newmont (NEM) $41.56 up 0.27%
General Moly (GMO) $1.48 down 0.12%
Freeport McMoran (FCX) $39.78 down 1.15% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are down today (a "tell" for General Moly):

Nucor (NUE) 39.54 down 1.00% - domestic steel manufacturing
ArcelorMittal (MT) 25.88 down 1.35% - global steel producer

Cheers,

Colonel Possum

Friday, April 24, 2009

Canary or Eagle in the Mineshaft?

Morning Miners!

It is 6:36am and my coffee pot is going to be reassigned to wheel chuck duty. If it doesn't snow too bad this weekend, you might see the ole Colonel in WalMart shopping for a new one.

In the past few weeks, we've been using industrial metals as our canary in the global recovery mineshaft. Copper has soared like an eagle and nickel hasn't done too badly either. After nearly five months of plummeting demand there is some evidence that supply and demand are beginning to match for these two. This report covered the Freeport McMoran's conference call this week. They are the largest copper producer in the U.S. and expect copper prices to rise compared to the first three months of this year. Are major countries like China merely restocking or is new demand rising like a Phoenix from the ashes of recession?

OK, enough bird analogies. Copper stalled this week and headed below 2-bucks for a bit yesterday but made it back over this important benchmark in early trading. No clear answer to our question yet. Steel performance (important for General Moly) is even less clear. One of the stocks we track daily is Nucor (NUE) since they are an important domestic steelmaker. They reported their earnings yesterday:

"The demand for steel is virtually nonexistent," says Dan DiMicco, CEO of steelmaker Nucor Corp., which reported a $189.6 million loss and said it expected a wider loss in the second quarter. (WSJ, 4/24/09)

When is bad news good? If the first quarter of this year was the worst for steel, that would be good. If things continue to slide, the answer is murky at best:

"Steelmakers were hoping the first quarter would be its worst, in terms of losses, for 2009. Early signs that the housing market would pick up, that stimulus spending for projects such as bridges would boost consumption, and that an auto bailout would shore up a key steel customer were taken as clues that the steel market was headed for a turnaround." (WSJ, 4/24/09)

Hmm...that's a lot of hoping buckaroos! According to the Wall Street Journal, global crude-steel production fell in March in every major market, including China, which had increased production earlier in the year. The biggest drop was felt in North America, where production fell 52%, while Europe production fell 44%. The ole Colonel will keep his eyes open on this one, you can understand why General Moly is in the "pause" mode.

Let's wrap up with a look at gold. The safe haven aspect of gold has pushed it back over $900 and the rally appears to continue in early trading. Will the Colonel win his beer bet after all? ($929 before $844, on or before 5/15, see the Colonel's "Beer Derby" in the right column of this blog). There is also evidence that gold demand in Asia is picking up some. Real demand is important to offset all the investor interest in gold (holdings in the SPDR Gold Shares ETF stood at 1,105.98 metric tons as of Wednesday, not far from the recent record of 1,127.68). Remember how fickle investors can be (e.g. oil bubble last July); if they cut and run, the ensuing gold price decline could be scary.

Here's a daily reminder of the first quarter conference calls for the big mines in our area:

Barrick (ABX) 4/29 before market open
Newmont (NEM) 4/30 10:00am (ET)
General Moly (GMO) not scheduled

Enough talk, let's walk the walk:

Oil jumped to $51.19(June contract)this morning breaking a key technical level of $50.50, look for oil to head higher. A new Colonel prediction for the beer derby:

"Oil sees $54 before $47 on or before 5/8/09"

The dollar ("Dixie" or .DXY) is down down 0.79% to 84.612. The commodity index (.CRB) is up a healthy 2.33% to 221.87.

Gold continues its rally above $900, up $3.7 to $910.3 (June contract); Silver follows along, up $.105 to $12.860; Copper is back over 2-bucks at $2.0390; Molybdenum is asleep below $8.

The DOW is up 87 points to 8043.95; the S&P 500, up 9 points to 860.95. Miners are looking pretty good:

Barrick (ABX) $30.25 up 0.83%
Newmont (NEM) $39.93 up 1.20%
General Moly (GMO) $1.51 down 0.05%
Freeport McMoran (FCX) $40.63 is up 1.47% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are strong today (good news for General Moly):

Nucor (NUE) 41.00 up 2.50% - domestic steel manufacturing
ArcelorMittal (MT) 27.0695 up 2.81% - global steel producer

Cheers,

Colonel Possum

Thursday, April 23, 2009

Reading the Global Tea Leaves for Eureka

Morning Miners:

It is 6:02am, a little earlier than usual but I need to take my truck in for a checkup and then drop by to give Connie and Christine a hey-howdy at the Eureka Supply. While we're waiting for the coffee to brew, I thought it might be useful to look at some of the ground we've covered over the last few weeks. Markets discount bad news and are for the most part, forward looking. Since mining is a large part of our local economy, we've been looking at commodity, equity and currency markets to try and figure out what's on the horizon for Eureka County. If this search has got you scratching your head with a lot of conflicting information, you've got some company:

"The market's becoming very polarized," said BBY senior trader Peter Copeland in Australia. "There are entrenched bears that think this (rally) is all just smoke and mirrors, and there are bulls who think the bears are wedded to their view in the face of recovery signs." (WSJ, 4/22/09)

The ole Colonel listens to Aussies because they are sitting an a huge hunk of natural resources like ourselves and our neighbors to the north. What happens to the global economy affects them, Eurekans and Canadians in much the same way. Commodity-sensitive economies rely on a healthy and growing global demand and lately it has been a pretty sick puppy. I plan to help you put all this together with upcoming reports.

If you look at the right column of this blog, there is a "Blog Archive" that covers many of the key market events for the months of March and April. You can access present and historical price data for molybdenum, gold and copper by clicking on the InfoMine chart icons in the same column. The "Miner's Corner" provides links to the homepage for the miners in Eureka county and surrounding areas. For new visitors to this site, "Discover Eureka" has links to the county homepage, the historical Opera House with an events calendar and local business and property interests. There is also a link to the National Weather Service for our area complete with satellite imagery.

The ole Colonel will soon report on the first quarter conference calls for the big mines in our area:

Barrick (ABX) 4/29 before market open
Newmont (NEM) 4/30 10:00am (ET)
General Moly (GMO) not scheduled

Everyday there is a summary of relevant market data. Today it will be a midday report.

Enough talk, let's walk the walk:

Oil is up a bit at $49.41 (June contract). If oil prices get above $50.50 look for them to go higher; if not, oil will probably head for $47. The dollar ("Dixie" or .DXY) is down down 0.78% to 85.623. The commodity index (.CRB) is up 0.23% to 219.50.

Gold gets a nice pop above $900, up $13.9 to $906.4 (June contract); Silver follows, up $.435 to $12.740; Copper drops below 2-bucks at $1.9905; Molybdenum still sits below $8.

The DOW is up 26 points to 7909.09; the S&P 500, up 2.18 points to 845.73. Gold miners are looking good:

Barrick (ABX) $29.72 up 4.65%
Newmont (NEM) $39.18 down 2.11%
General Moly (GMO) $1.56 down 1.27%
Freeport McMoran (FCX) $39.35 is down 2.72% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are down today (so-so news for General Moly):

Nucor (NUE) 40.63 up 3.34% - domestic steel manufacturing
ArcelorMittal (MT) 26.48 down 0.27% - global steel producer

Cheers,

Colonel Possum

Wednesday, April 22, 2009

World's Largest Moly Producer Reports

Morning Miners!

I'm listening to the earnings conference call from Freeport McMoran (FCX) as I write this morning's article. Although FCX has no active mining interests in Eureka County, they are an important bellwether company because their operations span copper, gold and they are presently the world's largest producer of molybdenum. The ole Colonel has included an FCX link to the "Miner's Corner" on the right side of this blog. You can find a link to their earnings report for the first quarter of 2009 on the FCX homepage.

Here is a brief summary comparing their year-to-year production and sales:

Copper production down 15.5% sales down 10.7%
Gold production down 53.8% sales down 48.6%
Moly production down 22.2% sales down 50.0%

FCX reports these declines in the face of global downturn but remains very positive about copper and moly when the recovery gets new legs. They didn't commit to a time frame but cited the importance of China for both copper and moly, a common theme of this report. If you have the time, checkout their presentation for an insightful account of what the future may hold for the metals that are so important to Eureka.

Here are some upcoming first quarter conference calls for the big mines in our area:

Barrick (ABX) 4/29 before market open
Newmont (NEM) 4/30 10:00am (ET)
General Moly (GMO) not scheduled

Enough talk, let's walk the walk:

Oil is pretty flat at $48.62 (June contract). The dollar ("Dixie" or .DXY) is down down 0.43% to 86.128. The commodity index (.CRB) is down 0.26% to 217.74.

Gold is continuing to move up slowly, up $3.7 to $886.4 (June contract); Silver stays above $12 at $12.24; Copper is steady at $2.084; Molybdenum still meanders below $8.

The DOW is up 52 points to 8020.85; the S&P 500, up 6.7 points to 856.79. Miners are mixed, FCX is up nicely which is a very good sign for the metals:

Barrick (ABX) $28.72 up 1.81%
Newmont (NEM) $38.77 down 0.26%
General Moly (GMO) $1.541 down 3.08%
Quadra (QUA.T) C$5.87 up 5.58%
Freeport McMoran (FCX) $39.17 is up 2.36% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks rock today (good news for General Moly):

Nucor (NUE) 44.52 up 3.39% - domestic steel manufacturing
ArcelorMittal (MT) 27.30 up 3.41% - global steel producer

Cheers,

Colonel Possum

Tuesday, April 21, 2009

Caterpillar Slashes Forecast

Morning Miners!

It is 6:54am, the coffee is hot and today's news is not. I don't listen to bankers much anymore but when Caterpillar speaks, the ole Colonel listens. The Big Cat just reported earnings and the outlook is not encouraging:

"Caterpillar expects the global economy to contract 1.3% and remain in recession for most of the year, amid continued tight credit. Though the rate of decline appears to be moderating, the company expects further drops, despite government stimulus plans that are expected to boost construction spending later this year." (WSJ, 4/21/2009)

Recently there has been talk that the so-called reflation trade in commodities coupled with global infrastructure spending would keep companies like Caterpillar floating high on the recession tide. Maybe not.

As we discussed yesterday, copper futures appear to be approaching stall speed and they are an important indicator of global recovery. The sudden downturn in oil prices is another "tell" that we might be in for a longer grind then some expected.

Enough talk, let's walk the walk:

Oil dropped over $1.29 in early trading to $44.59 (May contract). I usually quote the more active June number ($47.39), but the experts seem to believe today's front-month contact is the more foreboding signal of things to come in the oil patch.

The dollar ("Dixie" or .DXY) is pulling back a bit, down 0.15% to 86.536. The commodity index (.CRB) is down 0.23% to 215.74.

Gold is continuing its rally now that "Fear" has returned to the markets, up $2 to $889.5 (June contract); Silver is still over $12 but barely at $12.10; Copper continues its slide, down $.0635 to $2.04; Molybdenum still bebops below $8.

The DOW is down 31 points to 7,811.06; the S&P 500, down 1.8 points to 830.59. Miners are sloppy except for General Moly which has slowed its descent:

Barrick (ABX) $28.58 down 1.69%
Newmont (NEM) $38.56 down 1.28%
General Moly (GMO) $1.47 up 1.38%
Quadra (QUA.T) C$5.50 down 0.36%
Freeport McMoran (FCX) $39.17 up 0.15% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel is doing better today after a downdraft yesterday (good news for General Moly):

Nucor (NUE) 41.9875 up 0.69% - domestic steel manufacturing
ArcelorMittal (MT) 25.31 up 0.64% - global steel producer

Cheers,

Colonel Possum

Monday, April 20, 2009

Mongolian Goat Herders and the Price of Copper

Morning Miners!

It is 6:41am, the coffee's hot and there is a lot coming at us this morning from Mongolia to taxpayer money growing cobwebs in our biggest banks. Let's kick off this morning with two bits of news to set the global stage:

"Falling demand for cashmere among recession-hit shoppers in the West is cutting into earnings among nomadic herders in Mongolia, whose goats produce the soft fiber used in high-end sweaters, scarves and coats. The result: herder loan defaults." (WSJ, 4/20/09)

"Lending at the biggest U.S. banks has fallen more sharply than realized, despite government efforts to pump billions of dollars into the financial sector." (WSJ, 4/20/09)

Nuts! The first item might have passed as an amusement a year ago; today, it is one more sign of how connected our future is to the fate of others on a global scale. There are more questions surfacing about China's economic recovery and I'll close on how the Mongolian goat herder's fate might affect the price of copper.

The second quote gets the ole Colonel's hackles up. Bank of America reported handsome profits today, people are getting jammed on credit card fees and the credit crisis rolls on. Eric informed me the Great Basin Bank in Elko belly flopped last week. Nuts!

For the past few weeks we have talked a lot about the meteoric rise of copper futures relative to other commodity prices (e.g. oil and gold, see the Colonel's charts below). Much of this has been attributed to a recovery in China's demand for raw materials given their recent stimulus and infrastructure plans. Now, there is concern that other weakness in their economy (goat herder sitting on a pile of unsold cashmere) could derail their grand plan:

"Is this recovery V-shaped, with China set to return quickly to the high-level growth of recent years? Or is it more W-shaped, as a government spending-led recovery this year peters out and China's longer term structural issues resurface?"
(WSJ, 4/20/09)

Our old friend copper may provide the answer in the next few months:

"Bill O'Neill, a principal with commodity-advisory firm Logic Advisors, said that copper may be 'overextended' based on global fundamentals and that prices may be no higher than now or even modestly lower in three months. 'Looking a year out, things could certainly improve in the U.S. and Europe and we could see higher levels,' he said. 'But we're in a period here between now and middle of the third quarter where prices might stall.'" (WSJ, 4/20/09)

Lots to think about buckaroos, the ole Colonel will try to sort it all out. In the meantime, keep your spirits up. There's still gold in them thar hills, Fear is back and gold prices are up today!

Enough talk, let's walk the walk:

Oil dropped over $3 in early trading to $49.15; the dollar ("Dixie" or .DXY) is kicking butt on nearly everyone again (the euro dipped below $1.30), up 0.82% to 85.905. The commodity index (.CRB) is down a healthy 2.22% to 220.84.

Gold jumped $11.6 to $879.5 (June contract); Silver is back over $12 at $12.060; Copper pulled back $.067 to $2.127; Molybdenum still lolly gags below $8.

The DOW is down 203 points to 7,928.54; the S&P 500, down 24.3 points to 846.11. Gold Miners are one of the bright spots except for General Moly which is falling off a small butte:

Barrick (ABX) $28.49 up 3.49%
Newmont (NEM) $39.33 up 3.13%
General Moly (GMO) $1.47 down 16.48%
Quadra (QUA.T) C$5.60 down 8.65%
Freeport McMoran (FCX) $40.34 down 7.05% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel is also getting killed by the goat herder (bad news for General Moly):

Nucor (NUE) 41.91 down 5.10%% - domestic steel manufacturing
ArcelorMittal (MT) 25.99 down 11.42% - global steel producer

Cheers,

Colonel Possum

Friday, April 17, 2009

Who's got the Gold?

Morning Miners!

It is 6:42 am and there's some nicer weather coming at us! Grab a cup and let's watch a short video. If you scroll down close to the bottom of this page you'll find a link to CNBC, double click the play arrow and report back to the coffee room when you're done.

Hmm, pretty interesting. For those of you that were in the shop, here's a quick summary. We've talked a lot about gold this week and the CNBC video shows just how important the investor demand has been in the last several months. The gold Exchange Traded Fund (ETF), GLD, presently holds more gold than Switzerland or China! Here's the top six breakdown of who's got the gold in metric tonnes:

U.S. 8,133
Germany 3,412
IMF 3,217
France 2,508
Italy 2,451
GLD ETF 1,127

The ole Colonel buys gold using the GLD, their bullion is squirreled away in a London Bank. Apparently, a lot of other folks are doing the same thing. That makes me a little nervous, I don't like crowded theaters.

Today we're seeing at least two things that could influence the near term future of gold prices. This morning the S&P 500 is up more than 30% in six-weeks (666.79 intraday bottom, 3/6/09). That seems like a whole lot of optimism for an ailing economy that can barely walk to the bathroom! The second item is a further fall in gold futures this morning. Here's my take: if the broader markets nose dive, gold will probably recover as investors head back to safe havens. If the markets are wishy-washy or continue their upward trend, the Colonel is starting to worry that gold could head down hard.

To hedge my beer bet (gold will see $929 before $844 on or before 5/15), I sold all my silver yesterday. Silver is a hot air balloon when gold is on the rise and drops like a lead one when gold goes bad. Hey, I like to put my money where my mouth is buckaroos. Where do you think gold is headed?

Enough talk, let's walk the walk:

Oil moved up a little in early trading to $52.58; the dollar ("Dixie" or .DXY) is kicking butt on nearly everyone (another bad sign for gold), up 0.82% to 85.905. The commodity index (.CRB) is steady at 225.13.

Gold dropped $10.4 to $869.4 (June contract); Silver broke below $11 at $11.990; Copper pulled back $.15 to $2.1680; Molybdenum still lolly gags below $8.

The DOW is down 25 points to 8099.87; the S&P 500, down 2.75 points to 862.55. Miners are lousy except for General Moly stopping for air:

Barrick (ABX) $27.55 down 2.44%
Newmont (NEM) $38.49 down 3.29%
General Moly (GMO) $1.78 unchanged
Quadra (QUA.T) C$6.14 up 0.16%
Freeport McMoran (FCX) $42.63 down 2.54% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel remains strong (8:21am update, good news for General Moly):

Nucor (NUE) 43.98 up 0.50% - domestic steel manufacturing
ArcelorMittal (MT) 28.7025 up 1.93% - global steel producer

Cheers,

Colonel Possum

Thursday, April 16, 2009

Eureka at the Crossroads?

Morning Miners!

It is 6:59 am, the ole Colonel's head is buzzing and I don't think it's the caffeine. I just digested a pile of news and market data that could stumble a surefooted horse. If I had to boil it down to a few words it might be, "Eureka is at the crossroads of global recovery."

As I've said before, while you folks are working hard on the ground (or below it), the Colonel's job is to take his chopper and observe what might be coming over the hill. Let's look at three important chunks of today's global terrain:

"The Fed's Beige Book survey was slightly more optimistic than last month, showing that the pace of economic decline may be starting to moderate in some parts of the country." (WSJ 4/16/09)

"Industrial production in the 16 countries that use the euro dropped by 18.4% and inflation dived to a record low, with a quarter of the currency area members registering a drop in consumer prices..." (WSJ 4/16/09)

"China reported its worst quarterly economic growth in nearly two decades on Thursday, but also published other data indicating that the deepest part of the downturn may have already passed amid a huge wave of government spending." (WSJ 4/16/09)

One possible interpretation is the U.S. slowly turning the corner, Europe driving off a cliff and China's dragon starting to puff a little smoke after a shot of ether in her intake.

So how does all of this affect Eureka in the coming months? Deflationary trends in the U.S. and Europe could put a lot of pressure on gold in the near term, investors may try to short the demand weakness and drive prices south. Besides losing my recent beer bet this could cause some rough sledding for gold miners. This scenario is less than clear as evidenced by the mixed ratings for Barrick (ABX) in the last 24 hours. Today, Genuity cut the ABX price target from C$57 to C$50; yesterday, Scotia raised the target from C$44 to C$48. Confused?

The China story, as I have been reporting, is a bit more clear. A surge in infrastructure spending is great for the industrial metals. Copper has been on fire for weeks and Credit Suisse just upgraded the steel sector to overweight (Wall Street jargon for "back up the truck!"). Even though moly prices are still at their 5-month lows, General Moly (GMO) has been on a phenomenal tear this week.

So there, Eureka sits at the crossroads of gold and molybdenum. Hell, I'm still bullish on both. Let's rock the clock!

Here's the markets buckaroos:

Oil wobbled below $50 in early trading at $49.24; the dollar ("Dixie" or .DXY) is strong, up 0.21% to 85.111. The commodity index (.CRB) is steady at 225.43.

Gold dropped $11.2 to $882.3 (June contract); Silver is down a healthy 0.445 to $12.355; Copper pulled back $.0270 to $2.1720; Molybdenum lolly gags at $7.95.

The DOW is down 54 points to 7975.38; the S&P 500, down 4.24 points to 848.62. Miners are woozy except for General Moly which continues to be a rock star:

Barrick (ABX) $28.86 down 3.36%
Newmont (NEM) $40.70 down 3.78%
General Moly (GMO) $1.75 up 4.79%
Quadra (QUA.T) C$
Freeport McMoran (FCX) $43.01 down 4.00% (a bellwether mining stock spanning gold, copper & molybdenum)

Cheers,

Colonel Possum

Wednesday, April 15, 2009

A Fool's Errand

Morning Miners!

It is 6:43am and the coffee's hot. Predicting the price of gold is a fool's errand but the ole Colonel is at least a happy fool. The conventional market wisdom maintains a pretty bleak picture for near term gold prices and this morning's inflation data lends some additional support to their argument:

"The consumer price index slid 0.1% in March from February, the Labor Department said Wednesday...Year over year, consumer prices fell 0.4%, the first annual decline since August 1955."(WSJ, 4/15/09)

If gold is an inflation hedge, fear of deflation is usually a gold slayer. The naysayers predict gold will find resistance at $900 and fall back, maybe way back. A lot of this pessimism involves who is in the market. As I said in my 4/13 article, "What's up (or down) with Gold?", investors have overshadowed fundamentals of supply and demand lately.

Dennis Gartman, the "Commodity King" and my hero, said yesterday that a rise in gold today is a sell. Furthermore, Gartman may very well "short" gold for the time being. Shorting is a way to bet a price will go down, and so-called shorts can create havoc if they sense price weakness (remember what happened to bank stocks last Fall? Things got so bad that shorting was temporarily halted by the SEC for that sector).

So what does the Colonel think? Hell, like a happy fool I'm sticking with my beer bet:

Gold sees $929 before $844 on or before 5/15/09


I must admit that Gartman's statement yesterday did catch some sweat on my hat band. Not too many folks have got rich betting against this guy. Any takers out there?

Enough talk, let's walk the walk:

Oil is a bit over $50 in early trading at $50.24; the dollar ("Dixie" or .DXY) is pounding the euro and yen but weaker against the Canadian Loonie, up 0.3% to 85.06. The commodity index (.CRB) is up a scotch at 226.13.

Gold is up $3.5 to $895.5 (June contract); Silver is up 0.015 to $12.780; Copper is kicking butt again up $.0470 to $2.1620; Molybdenum remains not so fat but dumb and happy at $7.95.

The DOW is up 31 points to 7951.24; the S&P 500, up 2.36 points to 843.86. Miners are so-so, General Moly is holding steady after yesterday's monster rally:

Barrick (ABX) $29.35 up 0.22%
Newmont (NEM) $42.38 down 0.07%
General Moly (GMO) $1.67 down 0.01%
Quadra (QUA.T) C$6.09 down 0.98%
Freeport McMoran (FCX) $44.27 up 0.01% (a bellwether mining stock spanning gold, copper & molybdenum)

Cheers,

Colonel Possum

Tuesday, April 14, 2009

General Moly Pegs 5-Month High

Morning Miners!

Grab a cup, we've got some good news to chew on. General Moly (GMO) closed on a 5-month high yesterday at $1.47. It was a high volume day with nearly one million shares traded, twice their 90-day average! In early morning trading GMO opened at $1.60 and is presently $1.82 (7:44am). If you're in town, poke your head in the office and give the Eureka Moly guys a loud "Yee-ha!" from the ole Colonel.

What's going on? Moly prices are at a 5-month low dropping down to $7.95 from $8.20 last week. Maybe the answer is in the steel stocks. I compared GMO price action to Nucor (NUE) and ArcelorMittal (MT). The former represents domestic steel manufacturing and the latter, global steel production. Here are some interesting 1-month results:

GMO up >100%
NUE up 20%
MT up 45%

Don't you wish you'd put a little money on the bar when GMO stock was 64 cents? Similar to the rise in copper prices, I think we're seeing a little blue sky in the demand picture buckaroos!

Enough talk, let's walk the walk:

Oil is back over $50 in early trading to $52.51; the dollar ("Dixie" or .DXY) is up 0.26% to 84.832 and the commodity index (.CRB) is flat at 227.13.

Gold is down $6.0 to $889.8 (June contract); Silver is down 0.168 to $12.600; Copper has pulled back a wire gauge down $.0240 to $2.1015; Molybdenum sits not so fat but dumb and happy at $7.95.

The DOW is down 48 points to 8009.78; the S&P 500, down 3.97 points to 854.76. Gold miners are happy, General Moly is a party animal:

Barrick (ABX) $29.25 up 1.88%
Newmont (NEM) $42.38 up 0.71%
General Moly (GMO) $1.82 up 23.81%!!
Quadra (QUA.T) C$6.40 down 1.23%
Freeport McMoran (FCX) $45.89 up 0.66% (a bellwether mining stock spanning gold, copper & molybdenum)

Cheers,

Colonel Possum

Monday, April 13, 2009

What’s up (or down) with Gold?

Morning Miners!

The Colonel and an old miner were having a brew at the Keyhole the other day. I showed him my charts at the bottom of this page and declared with some frustration, “Gold is sometimes harder to figure than a woman’s scorn!”

“Gold’s not hard, it’s simple!” the ole miner laughed, “You throw a few bars of the stuff under your bunk and sleep sweet dreams at night with a chambered round in your 1911. In bad times, women and luck might leave you but your gold is there to stay.”

I appreciate his sentiment. Unlike mercurial stocks and bonds, the value of gold will not drop to zero. It is also a lot more satisfying to catch a lowdown high-grader running out your back door than receiving an e-mail from the SEC that informs you your life savings just evaporated like spit on a hot ponzi-scheme sidewalk.

The safe haven aspect of gold is an important part for understanding price fluctuations and I’d like to close on that thought. First, let’s look at some of the other pieces. Mining companies make money on the difference between the cost of producing an ounce of gold and the price of bullion. They can’t control the price so managing costs becomes their focus. As you know, that has been getting tougher and tougher. You have to move more tons of rock for an ounce of gold; energy costs are volatile, new geopolitical risks loom on the horizon and miners still think they’re entitled to an honest day’s pay!

On the supply-side, gold production in the traditional “Big Four”, South Africa, the U.S., Australia and Canada, has been on the decline for much of the decade. Global gold mining output fell 4% in 2008; South Africa’s percentage decline was the steepest since 1901, dropping 14%. New supply sources are popping up in Russia, Ecuador, Peru and a smattering of other global nooks and crannies. China has become the new No. 1 producer but overall there are few new rich deposits and that puts a serious crimp on future supply.

For the demand piece there are three legs to the stool; industrial uses, jewelry and investment. Products fabricated from gold, such as electronics and medical devices, have seen a decline due to higher prices and a slumping global economy. In 2008, fabrication demand dropped to 77.4 million ounces from 82.9 million in 2007. Demand from India, the biggest consumer of gold for jewelry has dropped off sharply in the last year.

In recent times, investment demand has taken up the slack between fabrication and jewelry demand. It has been going up for eight years and accelerated in the last two. In 2008, investors bought 43.3 million ounces, more than half used for fabrication in the same year. One of the most popular ways to buy gold is through the ETF or Exchange Traded Fund. It trades like a stock but the investor doesn’t take possession of the gold, it resides safely in a London bank. The ole Colonel likes this approach and occasionally buys the SPDR Gold Shares (GLD). This beats chucking bars under the bunk and saves ammunition for target plinking.

Putting all the pieces together, which tail is wagging the dog lately? It seems the safe haven play has trumped the fundamental issues of supply and demand over the last several months. Gold broke the magical $1000/oz in February and then see-sawed downward to $800 territory after a 5-week rally in the broader markets. The appetite for risk has improved and money is slowly leaving defensive plays like gold and returning to equities. The ole Colonel believes this may reverse again as more earnings reports roll out this month. I’ll put my money where my mouth is:

Gold sees $929 before $844 on or before 5/15/09


Now if some country or the IMF starts dumping gold, the Colonel will replace money with foot!

One more for the Beer Derby (see right column above the Moly chart)!

Enough talk, let's walk the walk:

Oil fell below $50 in early trading to $49.31; the dollar ("Dixie" or .DXY) is down 0.60% to 85.025 and the commodity index (.CRB) follows, down 0.70%.

Gold is up $13.9 to $896.6 (June contract); Silver is up $0.435 to $12.765; Copper continues its run, up $.0485 to $2.125; Molybdenum breaks below $8 to $7.95.

The DOW is down 67 points to 8016.55; the S&P 500, down 4.19 points to 852.37. Miners are mostly happy:

Barrick (ABX) $29.21 up 2.28%
Newmont (NEM) $41.66 down 0.29%
General Moly (GMO) $1.30 up 2.36%
Quadra (QUA.T) C$6.59 up 4.60%
Freeport McMoran (FCX) $44.91 up 1.84% (a bellwether mining stock spanning gold, copper & molybdenum)

Cheers,

Colonel Possum

Data Source for gold discussion: Investor’s Business Daily, 4/6/09

Friday, April 10, 2009

Buy the Ole Colonel a Beer (or two)!

Good Friday Miners!

The domestic markets are closed today so I thought I'd just clean the coffee pot. Say Eric, do you have any Break-Free?

In this business, don't ever believe someone that claims that they can predict the markets with 100% accuracy. Bernie Madoff was the only person who was always right and then we found out he wasn't even in the game! The trick is to be more right than wrong.

I made a bet in Monday's blog that copper would break 2-bucks this week and gold would close the week higher than it started. My second prediction doesn't sound too hard but there was a pretty loud Cassandra chorus earlier this week that gold was broken and headed for $700 country...phooey! Here's the numbers:

Copper, Monday morning $1.958, 4/9 close $2.071
Gold Monday morning $877.9, 4/9 close $883.3

We've been watching copper because it is a "tell" signal for improving global demand and to some extent, our economy:

"Copper futures extended five-month highs above $2 a pound on demand optimism as inventories of the metal fell substantially and equities rallied...Since copper is widely used in construction, electronics and automobiles, it often responds positively to bullish economic news or proxies for the economy, such as equities." (WSJ, 4/10/2009)

Yee-ha! Hey, since I'm sure I'll call some bloopers, I thought it might be fun to start "The Colonel's Beer Derby" (scoreboard is above the Moly Chart to the right). I'm retired and will do practically anything for a free brewski; if I'm wrong, y'all can drink on me! Send me some challenges.

The ole Colonel will be back in town May so belly-up to the bar buckaroos!

Cheers,

Colonel Possum

Thursday, April 9, 2009

Is There a Loonie Aussie in Your Future?

Morning Miners!

It is 7:05 am and no, the ole Colonel didn't oversleep! I've just been climbing a mountain of morning data to track a few more positive signs for mining. Grab a cup and put on your thinking caps!

You're on the ground (or below) and know your business better than anyone. The Report gives you a view of the world at 30,000 feet so you can see what global trends might put a little light in a recently dark mineshaft. Well, pardner, there are a few rays of sunshine this morning.

We've talked a lot about copper and yup, it got another nice pop this morning. Another encouraging sign is the recent rally of commodity-sensitive currencies. The Canadian dollar (Loonie) is higher this morning despite some weak Canadian jobs data for March and benefits from a small shovel of renewed risk taking in global financial markets. The Australian dollar (Aussie) is also having a very good week. The ole Colonel will keep his eye on this Loonie Aussie! Oil has also jumped nearly $3 on the open and I know this sounds bad for your wallet but checkout my 4/1 blog to understand why this might be a good sign for mining (as long as it ain't too high).

Another chunk of good news: "Wells Fargo projected first-quarter net income well above analysts' expectations, becoming the latest banking giant to express positive sentiments (WSJ, 4/9/09)" Bank stocks were on fire in early trading with the XLF (an ETF basket of bank stocks) up over 8%. I know you hate these guys but markets won't get better without the buggers.

Enough talk, let's walk the walk:

Oil cranked up $2.20 to $54.27; the dollar ("Dixie" or .DXY) is flat at 85.248 and the commodity index (.CRB) is up a healthy 3.99%...Yee-ha!!

Gold is down $5.1 to $880.8 (June contract); Silver is down $0.120 to $12.220; Copper smashes the 2-buck again at $2.06; Molybdenum remains steady at $8.20.

The DOW is up 200 points to 8037.18; the S&P 500, up 23.39 points to 848.55. Miners are fair to middling:

Barrick (ABX) $28.75 down 0.11%
Newmont (NEM) $42.16 up 0.26%
General Moly (GMO) $1.2601 up 0.07%
Quadra (QUA.T) C$5.93 up 6.85%
Freeport McMoran (FCX) $43.22 up 2.60% (a bellwether mining stock spanning gold, copper & molybdenum)

Cheers,

Colonel Possum

Wednesday, April 8, 2009

China Loves Buicks...Good News for Mining?

Morning Miners!

It is 6:44 am, the coffee is hot and life is good in the Great Basin! Before I do a market roundup, the ole Colonel wants to remind you that Patrick Ball is coming to the Opera House May 15th. This is a great show, I've seen it before and plan to be at the door with my sweetheart at 6:30 pm sharp to buy tickets. Checkout the "Eureka Opera House" link on the right of this page for more details.

I try to find nuggets in world news that help us understand the big picture for mining in the months ahead. There are two good ones this morning. Surprisingly, General Motors reported record sales in China for March, up 24.6%. Too bad they can't do that in the good ole U.S.A.! This is interpreted as a resurgence of confidence in China's economic outlook by the Chinese.

Item two is the long awaited Alcoa earnings report for the first quarter of this year. As expected, everything is lousy with low aluminum prices and collapsing global demand hitting their bottom line. On a positive note:

"Alcoa's president and chief executive officer, Klaus Kleinfeld, said his industry could be on the verge of improving, noting that there are "both near-term and long-term catalysts" that should help improve the aluminum business. For one thing, "current stimulus programs that target infrastructure and energy efficiency will create a demand" for aluminum, he said." (WSJ, 4/8/09)

Kleinfeld went on to say that improvements in China were key to this outlook. The markets liked that, Alcoa (AA) is up more than a percent to $7.869 (Hey, they could have easily been down 10% in this environment!).

These news items and the recent price action in copper say something positive for improving global demand and that's good for mining. I rest my case.

Enough talk, let's walk the walk:

Oil is still below $50 and headed lower at $48.37; the dollar ("Dixie" or .DXY) is flat at 85.347 and the commodity index (.CRB) is down slightly, 0.61%.

Gold is up $1.6 to $884.9 (June contract); Silver is up $0.045 to $12.225; Copper is just under 2-bucks at $1.9960; Molybdenum remains steady at $8.20.

The DOW is up 40 points to 7,829.38; the S&P 500, up 5.42 points to 820.97. Miners have their visors down:

Barrick (ABX) $28.65 down 1.62%
Newmont (NEM) $41.40 down 2.86%
General Moly (GMO) $1.16 down 0.85%
Quadra (QUA.T) C$5.37 down 2.89%
Freeport McMoran (FCX) $40.18 down 2.85% (a bellwether mining stock spanning gold, copper & molybdenum)

Sunshine for Sunday buckaroos,

Cheers,

Colonel Possum

Tuesday, April 7, 2009

Copper breaks $2.00

Lunch Break News Miners!

The May contract for high grade copper broke $2.00 around 10:30 (ET) today. Although it has fallen back slightly ($1.9795), this is a yee-ha for improving global demand (especially on a day when the DOW is down 200 points to 7775.86).

Gold is also up $11.2 to $884.0.

Cheers,

Colonel Possum

Just One Sentence to Kill The Party

Morning Miners!

It is 6:36 am. The coffee's hot and there is a lot to chew through this morning. There's a big Pacific storm headed our way and there should be lots of white stuff from tomorrow on. Click the Report's new "Local Weather" and checkout what the NWS has to say. I like the infrared satellite imagery of the Western States with the 4 km resolution to get the big picture. Zoom out to 16 km and you can see the lower tail of the circulation extends from Hawaii to California. Ooooh-weee!

Let's start with markets by looking at yesterday's action. It took just one sentence from Calyon Securities analyst Mike Mayo to end the largest four-week run up on the DOW since 1933:

"...recent government efforts to stabilize the financial system won't prevent Wall Street's loan losses from exceeding those of the Great Depression by late 2010."

I don't know about you but the ole Colonel is sick and tired of living in the 1930s. I believe folks that have skin in the game and analysts usually don't. I'll stick with Dennis Gartman who has a lot of skin in the commodity markets; if you want to know what is really coming at you, track the metals!

So where are we at today? In currency markets the dollar fell against the Japanese yen but rose against the euro, which usually means investors are starting to feel a tightening of the sphincter muscle. Gold futures rose and yields on 10-year Treasury bonds fell. Crude-oil futures slipped below $50 a barrel.

So do we jump down the mine shaft? Hell no buckaroos, copper futures are still going up! Gold is up, silver is up and the commodity index is steady. Metals are your friend; no jumping, more digging!

Enough talk, let's walk the walk:

The dollar ("Dixie" or .DXY) is up 0.64 percent and the commodity index (.CRB) is down a thin flat washer, 0.12%.

Gold is up $9.5 to $882.3 (June contract); Silver is up $0.080 to $12.190; Copper is up $ 0.022 at $1.9810; Molybdenum remains steady at $8.20.

The DOW is down 155 points to 7,820.54; the S&P 500, down 16.15 points to 819.33. Miners are mostly good:

Barrick (ABX) $29.42 up 2.33%
Newmont (NEM) $42.97 up 0.40%
General Moly (GMO) $1.21 down 0.82%
Quadra (QUA.T) C$5.70 down 3.39%
Freeport McMoran (FCX) $42.6705 up 2.20% (a bellwether mining stock spanning gold, copper & molybdenum)

Bring your all-weathers tomorrow,

Cheers,

Colonel Possum

Monday, April 6, 2009

Gold Takes Another Leg Down

Morning Miners!

It is 6:42 am. Grab a cup and let's kick-start the week. The ole Colonel added a new link to the right for local weather. This is the National Weather Service feed from Henderson Summit and has all sorts of satellite imagery too. I'd like this report to be a one stop shop, pardner!

Gold stumbled another $20 in early trading to bring us to solid 8-handle country at $877.9 (June contract). Am I discouraged? Hell no. The Colonel bought a little chunk Friday and I'll buy a little more if we fall further. Does anyone really believe there won't be any inflation down the road? Earnings season will start tomorrow with Alcoa (AA)reporting at 5:00 pm (ET). This should sour the lemonade a bit. I'll stick my neck out; gold will head back up and copper will bust two-bucks before the end of this week. See you at the Owl Club Friday, I'm buying if I'm wrong.

The dollar ("Dixie" or .DXY) is up a quarter percent and the commodity index (.CRB) is down a splinter under 1 percent.

Let's walk the walk:

Silver is following gold down at $12.285; Molybdenum steady at $8.20.

The DOW is down 51 points to 7,966.45; the S&P 500, down 8.07 points to 833.30. Here's the miners (ouch!):

Barrick (ABX) $28.92 down 4.96%
Newmont (NEM) $42.63 down 2.26%
General Moly (GMO) $1.21 down 6.20%
Quadra (QUA.T) C$5.98 down 3.55%
Freeport McMoran (FCX) $41.46 down 2.84% (a bellwether mining stock spanning gold, copper & molybdenum)

I know most of you need to get back to work, have a good'un. If you got equipment in the shop and can stick around a bit, I'll talk charts.

At the bottom of this blog page are the Colonel's five charts. I track gold, silver, copper, oil and natural gas futures on a daily basis and update my models every month based on the last 3-months of data. There is a brief explanation below on what these charts can tell you. The ole Colonel will explain more in future blogs. Today's charts include a new model for April and I'm seeing some encouraging news. Checkout "Copper vs Gold" and "Copper vs Oil" buckaroos! Who said global demand is not picking up?

Cheers,

Colonel Possum

Friday, April 3, 2009

Spring Mud in Bean Flat

Morning Miners!

It is 6:29 am. Grab a cup and remind me to buy another can of Joe at Raine's for Monday morning.

The ole Colonel started the report a minute before the markets open because I need a little suspense in my life. The action lately reminds me of spring mud in Bean Flat. As long as the ground is frozen, you can tool around out there in the F-250 without a care in the world. When things warm up, it is a high-center nightmare with Handyman jacks front and rear. Eric got me laughing one day when he told me Bean Flat was North Central Nevada's "Bermuda Triangle." More than one tourist has disappeared out there in their Honda Civic looking for Jackalopes!

I've been wrong about market direction several times this week. Bad news has not stopped rallies in both stocks and commodities (DOW above 8,000 at least for a bit, copper heading for $2.00, oil back above $50). The ground is solid and I can hear the sage slapping on my bumper. This morning might bring a quick thaw. The Friday job report shows a loss of more than 5 million jobs in the last 16 months, non-farm payrolls dropped another 663,000 in March with unemployment now pegging 8.5%.

OK, enough suspense. Let's take a peek. Hmm...DOW hanging in there...S&P steady. Both down a tad but so far so good. Let's walk the walk:

The commodity index (.CRB) is down a bit 0.17%; gold is down 0.8 at 908.1 (June contract) with silver following at $12.885. Molybdenum has dropped to $8.20 from a pretty steady $8.75.

The DOW is down 33 points to 7,945; the S&P 500, down 2.82 points to 831.56. Here's the miners:

Barrick (ABX) $31.90 down 1.24%
Newmont (NEM) $45.72 down 1.12%
General Moly (GMO) $1.14 down 4.20%
Quadra (QUA.T) C$6.00 (at open)
Freeport McMoran (FCX) $42.11 up 1.30% (a bellwether mining stock spanning gold, copper & molybdenum)

So far, so good. Earnings season starts with Alcoa reporting Tuesday, get your Handyman ready buckaroos. In the meantime, have a good weekend. Oh, yeah...don't forget the coffee for Monday...

Cheers,

Colonel Possum

Thursday, April 2, 2009

General Moly Announces Water Rights

Morning Miners!

It is 6:35 am and it is always a good day when there is positive news from General Moly! Checkout their news release on water right approval in Kobeh Valley for the Mt. Hope Project. It is on their homepage (click on their link to the right of this report). That's a yee-ha for GMO.

Markets have opened up in early trading with all sorts of screwy things going on. The European Central Bank lowered interest rates a stingy 0.25% (less than expected) to 1.25%. This strengthened the euro but cratered the dollar (down more than 1%) and oddly gold is down $15.5 to $912.2. This has had an adverse effect on the gold miners but other miners are in rally mode. General Moly started with a nice pop to $1.16. Given yesterday's broad rally, oil has jumped over $3 to land back in fifty dollar land at $52.05. Somehow we have gone from the world is doomed to the world is saved in a day...hmm?

The commodity index (.CRB) is up a healthy 1.82% and silver is following gold down entering 12-handle territory at $12.870. Molybdenum has been holding steady at $8.75 for the last week (you can check on Moly prices by clicking on the Infomine link to the right).

The DOW is up nearly 190 points (7,951)and S&P 500, up 22 points to 832.90. Hey, those aren't small moves given yesterday's uptick. Here's the action for the miners:

Barrick (ABX) $32,63 down 3.72%
Newmont (NEM) $45.40 down 4.22%
General Moly (GMO) $1.16 up 1.75%
Freeport McMoran (FCX) $42.27 up 6.45% (a bellwether mining stock spanning gold, copper & molybdenum)

Let's cross our fingers.

Cheers,

Colonel Possum

Wednesday, April 1, 2009

Strong South Wind from a Tonopah Low

Morning Miners!

April fools! It is 6:57 am and this ain't no weather report (but I will make a few storm analogies in a minute). Grab a cup and let's talk metals.

For starters, why aren't we talking about the markets? It is the first of the month and private-sector jobs in the U.S. fell a steeper-than-expected 742,000 in March, according to a national employment report published by payroll giant ADP (storm #1). Let's not even go there, so much for all the end-of-March lemonade. I'll close with the markets so just sit tight.

Jobs are a lagging indicator, metals futures are a leading indicator of things to come. My hero, Dennis Gartman, says it best, "Metals have a Phd in economics." Now if you've just got laid off from General Moly you might be thinking, "Lag my ass, Colonel..." Hold that thought and let's look down the road a piece.

Tom Albanese, CEO of Rio Tinto, told CNBC some interesting stuff. There is a lot of buzz about BHP coming back with a second offer and Rio has lined up a big chunk of change with China's CHINALCO. I was less interested in that than his thoughts on the future. According to Albanese, things might be looking up for metals as soon as the second half of this year. We know the collapse of global demand is how miners spell R-E-C-E-S-S-I-O-N. There may be some improvement ahead with all the new infrastructure spending governments are planning, especially in the US and China. Albanese stated the well known axiom that there will be a day when China will need more metals than world can produce. Months, years, decades...who knows?

There have been some encouraging signs. My charts below have been showing a dramatic rise in copper futures prices lately with respect to gold and oil. The world's greatest growth demand for copper is China...hmm. I learned from Gartman that it is good to look at commodity prices in terms of other commodities (e.g. gold, oil) since it removes currency fluctuation. That brings us to storm #2: with everybody printing money, inflation will some day return like a strong south wind from a Tonopah low. Guess what happens to commodity prices? Mining might get better sooner than folks think if we can KEEP oil below $150 - ha!

Now for today in early morning trading:

The commodity index (.CRB) is down more than one percent and gold is up $6.10 to $931.1 (June contract). The Dollar is flat.

The DOW and S&P 500 have recovered to positive territory (7,615.69 & 789.39) with mostly good action for the miners:

Barrick (ABX) $33.10 up 2.10%
Newmont (NEM) $45.18 up 0.94%
General Moly (GMO) $1.04 down 0.94%
Freeport McMoran (FCX) $38.64 up 1.39%

See aren't you glad we had that cup before we peeked at the numbers?

Cheers,

Colonel Possum