"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.

Thursday, July 23, 2009

Moly Jumps to $14.50, Newmont Reports

Morning Miners!

It is 6:08 AM, the coffee is hot and we've got a lot of work this morning. Yesterday the ole Colonel said that if molybdenum prices got to $15 the folks at Eureka Moly, LLC would be smiling. Well buckeroos we're only 50 cents away with a jump yesterday from $13.25 to $14.50! Copper has also broke the key $2.50 level in early trading. To top things off, Newmont just reported their second quarter results for the year, you can click on their link in the Miner's corner or checkout their slide presentation:

Second Quarter Earnings Release

We'll close today with Newmont, let's start with General Moly. In yesterday's Back to Basics for Eureka's Outlook, the Report reviewed five pillars that support the near term future of Eureka County's economic recovery. The fifth pillar was investor confidence in Barrick and General Moly. Investment spans those of us that own a few shares in these companies to large investors like the steel producer POSCO which has a 20% interest in the Mt. Hope Project. You know how the Colonel feels about our proud homeboys with the Molybdenum T-shirts, let's take a few core samples on the steelmakers. Molybdenum is a key material in the production of high grade steels; if investors are happy with steel, it follows that some of this goodwill should flow to General Moly.

The Report covers three on a daily basis: ArcelorMittal (MT), POSCO (PKX)and Nucor (NUE). The first two have a global footprint; Nucor has a domestic focus as a manufacturer of steel and steel products in North America. For our quick look today, let's throw U.S. Steel (X) in the mix. Here's how they are ranked by market capitalization, a direct gauge of investor participation (market cap is the product of share price and outstanding shares of a company's stock):

ArcelorMittal $48.9B
POSCO $29.2B
Nucor $14.0B
US Steel $5.45B

The big dogs in this list are both investors in General Moly (MT & POSCO). My dear departed father would never believe that US Steel is the Chihuahua in this pack. Of course, he would also not believe that General Motors has been delisted from the DOW Jones. Times, they are a changing pardner. Let's see where these folks actually make steel:

ArcelorMittal - 36% in the Americas, 49% Europe, 15% other (e.g. Kazakhstan)
POSCO - South Korea
Nucor - North America
US Steel - 77% North America, 23% Europe

We might reasonably conclude that a look at these four should give us a pretty good sense of what is happening in the world of steel. ArcelorMittal alone covers 20 countries on four continents. Yesterday we tracked the stock performance of Barrick and General Moly against the S&P 500 for the past 3-months. That's a good interval for comparison because it takes us back to some pretty dark days. Let's do the same for the steel dogs:

S&P up 12%
ArcelorMittal up 36%
POSCO up 29%
Nucor up 10%
US Steel up 36%

It is interesting that the domestic Nucor roughly tracks the S&P in 3-month performance while the other three with international exposure have done noticeably better. This pretty much tells the larger story about global recovery. China, which was not only quick but efficient in applying their stimulus dollars, has benefited steelmakers with a global footprint. The United States is back on its feet but will take a bit longer for stimulus dollars to lift domestic industries. The bottom line is that all four are doing much better with the return of investor confidence and so should General Moly. I just peeked and GMO is up again today in early trading to $2.54 - that's a Colonel Yee-ha!

Here are the Second Quarter 2009 highlights from the Newmont Report:

* Equity gold sales of 1.2 million ounces at an average realized price of $915 per ounce
* Equity copper sales of 47 million pounds at an average realized price of $2.17 per pound
* Costs applicable to sales for gold of $423 per ounce, down 4% from $439 per ounce in the year ago quarter
* Costs applicable to sales for copper of $0.58 per pound
* Net cash provided from continuing operations of $503 million
* Adjusted net income of $213 million ($0.43 per share)

Checkout slide #4 of Newmont's presentation for an interesting comparison of Nevada to their other mining operations. The new Boddington Project in Western Australia should be a big plus for their future.

Enough globe trotting, let's walk the walk:

Oil is up $0.66 to $66.06 in early trading (September contract); Gold is up $1.5 to $954.8 (August contract); Silver is up $0.060 to $13.760(September contract); Copper is up $0.0495 to $2.505 (September contract); Molybdenum is soaring at $14.50.

The DOW is up 160.67 points to 9041.93; the S&P 500, up 18.66 points to 972.73. The miners are happy today:

Barrick (ABX) $35.63 up 1.95%
Newmont (NEM) $41.99 up 0.02%
General Moly (Eureka Moly, LLC) (GMO) $2.54 up 1.60%
Freeport McMoran (FCX) $59.73 up 1.62% (a bellwether mining stock spanning gold, copper & molybdenum)

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

Nucor (NUE) $44.24 down 0.09% - domestic steel manufacturing
ArcelorMittal (MT) $37.06 up 3.69% - global steel producer
POSCO (PKX) $97.60 up 2.25%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is up 1.83% to $1,075,774.28


Colonel Possum

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