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