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


The author/editor of the Eureka Miner owns common shares of local mining stocks, General Moly (GMO) 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.

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?


Colonel Possum

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