"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.

Monday, August 31, 2009

The Duke Returns, General Moly Leads Grubstake



Morning Miners!

It is 5:42 AM. Help me wash some cups and we'll be good to go. The film crew came in the break room early this morning and they're ready to shoot. We're in for a Monday "twofer" because it is the end of August. We always bring the Duke back the last day of the month to check consumer savings and credit rates, but now he's here for a longer stretch to film his new movie on global recovery (Is the Cavalry in the Long Dusty Valley?).

Last week we left left John Wayne and the Cavalry in Indian country and things were getting a bit too quiet for comfort. It doesn't seem like it's going to get much better today; copper missed $3 by a penny early this morning and is headed south with a lot of other commodities. What's up? That doggone Chinese stock market took another 7% dipsy-doodle down and it's spooking the horses. As we've chatted before, the Shanghai Index shouldn't be taken too seriously compared to broadly traded stock markets but it hit a May low today and its little tail is sure wagging a big dog.

Let's checkout some good news before the arrows start flying. At the market close Friday, the readers (yup, that's you) made $118,377.91 in the Eureka Miner's Million Dollar Grubstake. That's a 11.8% return on your money since we started May 10th buckaroos! General Moly is leading the pack, here's the top four out of twelve stocks:

General Moly (GMO) up 52.7%
ArcelorMittal (MT) up 28.0%
Freeport-McMoran (FCX) up 26.4%
Caterpillar (CAT) up 17.8%

Here's the bottom four (worst first):

Newmont Mining (NEM) down 5.4%
EOG Resources (EOG) down 4.7%
ConocoPhillips (COP) down 2.6%
Barrick Gold (ABX) up 4.1%

It's important to note that the top four are driven by strong steel and copper performance and a positive international outlook for Caterpillar. Oil and gold have been range bound for sometime now and it has hurt our favorite gold miners and the two energy companies in the Grubstake.

Look who just came in the break room, it's the Duke! Yes folks, it's time to walk the walk in the savings and credit markets. The Report started this check in the blog, Where's The Duke When We Need Him?. The Report plans to continue this monthly review so you can track where we're going as time marches on. Here are today's national averages compared to last month's numbers (WSJ Market Data, 8/31/09):

10-yr Treasury Note 3.449% vs 3.56%, down
Money Market 1.17% vs 1.21%, down (52-wk low, 1.17%)
5-year Bank CD 2.66% vs 2.65%, up (52-wk low, 2.59%)
30-yr mortgage, fixed 5.32% vs 5.55%, down (52-wk low, 5.06%)
15-yr mortgage, fixed 4.80% vs 4.86%, down (52-wk low, 4.69%)
New-car loan, 48-month 7.43% vs 7.28%, down (52-wk low, 6.48%)
Home-equity LOC, $30K 5.82% vs 5.78%, up (52-wk low, 5.03%)


It is a little discouraging that money market rates are at their 52-week low but CD rates may have bottomed out last month and are slowly inching up. The good news for home buyers are lower fixed mortgage rates than last month. The 10-yr Treasury hovering around 3.5% tells us that Uncle Ben is doing a pretty good job in keeping interest rates low and the credit markets stable. Ben has savers on the Slim-Fast plan.

Enough talk, let's walk the walk:

All lights are green on the Eureka Outlook Dashboard (upper right, what is this?)

Oil is down $2.13 in early trading to $70.61 (October contract); Gold is down $9.6 to $949.2 (December contract, most active); Silver is down $0.135 to $14.680 (December contract); Copper is down $0.0825 to $2.8680 (December contract); Molybdenum holds at $17.15.

The DOW is down 90.54 points to 9453.66; the S&P 500, down 12.12 points to 1016.81. The miners are down:

Barrick (ABX) $34.04 up 1.78%
Newmont (NEM) $40.33 up 2.63%
General Moly (Eureka Moly, LLC) (GMO) $2.72 down 3.21%
Freeport McMoran (FCX) $63.67 down 2.76% (a bellwether mining stock spanning gold, copper & molybdenum)

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

Nucor (NUE) $44.95 down 1.98% - domestic steel manufacturing
ArcelorMittal (MT) $35.89 down 2.31% - global steel producer
POSCO (PKX) $92.25 down 2.45% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is down 2.00% to $1,095,962.54 (what is this?).

Cheers,

Colonel Possum

Friday, August 28, 2009

Should You Care What Harmesh Arora Says?



Morning Miners!

It is 6:06 AM and that Raine's TGIF coffee is extra strong today. It looks like we may be able leave this week on a happy note. John Wayne and the Cavalry are taking a set break from the long dusty valley of global recovery. A few privates dropped in for a cup earlier this morning and said no more filming until Monday. Copper is just several pennies away from $3; the ole Colonel set that as a threshold several days ago for better times ahead. Gold and silver are also up nicely today, maybe the movie will be canceled. Oh-oh molybdenum dropped to $17.15...maybe there's a few more scenes to go (Is the Cavalry in the Long Dusty Valley?).

That's the funny thing about living in a town with a commodity-sensitive economy; your future relies on a fickle market with all sorts of world-wide actors and directors, few heros and lots of ne're-do-wells. Boom or bust on a global scale and that's the key. What's happening in Brazil, Russia, India or China can affect you in Eureka much more now than it did just a few years ago. Here's today's example: Harmesh Arora, vice president of the Bombay Bullion Association Ltd., said India gold purchases may drop to 250 metric tons from 396 tons in 2008. The reason given is India's extreme drought and the present high price of gold. Should I care or is this just a small wiggle in the supply/demand picture of a metal with a zillion other price pressures?

I did a rough back-of-the-envelope calculation to figure out what makes gold news and what doesn't. In Arora's case his reduction equates to about 0.4 tons of negative demand per day for 2009. Of course it doesn't spread out that evenly but just humor me for a moment. The massive gold ETF, GLD, made news this week because investors bought 1.0 ton in a single day, that's positive demand. Early this month, the European Central Banks(ECB) decided to limit sales of gold to 2,000 tons over five years starting this September. Their top ten signatories hold about 11,000 tons of the yeller stuff and don't want to cause price swings in the markets by overselling. The new limit equates to about 1.1 tons per day on the supply-side.


OK, enough. What's my point? I think for ballpark numbers any supply or demand input around 1 ton/day gets a news story. Even though India is the largest consumer of gold for jewelry, Harmesh Aurora's estimate just makes press and isn't going to crash the gold market. If the European bankers can shed an average exceeding one ton-a-day and sleep at night, Arora's 0.4 tons isn't even a good haul back load buckaroos. Now if global investors dump a few tons overnight, I'll be knocking on your bunk door!

All that glitters is not cause for worry, let's walk the walk:

All lights are green on the Eureka Outlook Dashboard (upper right, what is this?)

Oil is up$0.51 in early trading to $73.00 (October contract); Gold is up $12.9 to $960.2 (December contract, most active); Silver is up $0.549 to $14.800 (September contract); Copper is up $0.1055 to $2.9775 (September contract); Molybdenum drops to $17.15.

The DOW is down 28.12 points to 9552.51; the S&P 500, down 0.12 points to 1030.86. The miners are happy:

Barrick (ABX) $35.13 up 1.59%
Newmont (NEM) $41.06 up 1.21%
General Moly (Eureka Moly, LLC) (GMO) $2.85 up 2.52%
Freeport McMoran (FCX) $65.72 up 2.27% (a bellwether mining stock spanning gold, copper & molybdenum)

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

Nucor (NUE) $45.65 up 1.76% - domestic steel manufacturing
ArcelorMittal (MT) $36.76 down 0.32% - global steel producer
POSCO (PKX) $94.61 down 1.22% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is up 1.02% to $1,119,677.73 (what is this?).

Cheers,

Colonel Possum

Thursday, August 27, 2009

Dondog's Find in Oyo Tolgoi



Morning Miners!

It is 6:09 AM and the Colonel just saw a shooting star in the north sky. If we were ancient warriors that event might cause us to change our battle tactics for the day. More on that in a moment. Speaking of warriors how would you like to walk in the Gobi Desert with a geologist named Garamjav Dondog to a site important to Ghenghis Khan? Today it is called Turquoise Hill but in the Bronze Age it was a place to mine copper for for all manner of bronze implements.

As reported by Reuters yesterday, Ivanhove Mines has received the go-ahead for full scale operations to proceed at their massive Turquoise Hill copper and gold project in Oyu Tolgoi, Mongolia. This is important on several levels. Ivanhoe Mines in partnership with Rio Tinto has waited for years for this landmark agreement with Mongolia and it may open the gates for other foreign companies to explore and develop this mineral rich land, a modern day rush! Secondly, it illustrates the extent a resource hungry world will go to find new mineral reserves.

This is great reading for your break today. I found two stories; a new York Times Article published in 2004 that will introduce you to Garmajav Dondog, and yesterday's Reuter's article on the historical agreement:

Finding a Mother Lode in Mongolia - (New York Times, 10/14/2004)

A giant leap for Mongolia, but where to? - (Reuters, 8/26/2009)


Now back to our battle plan. Yesterday we left the Duke and the Cavalry in dangerous country wondering what might happen in the markets for the next several months (Is the Cavalry in the Long Dusty Valley?). Caution is the word buckaroos. Investor Doug Kass predicted yesterday that we have hit a market top and it would be downhill for the rest of the year. Why should we listen to him? Like Nouriel Roubini and Meredith Whitney, Doug Kass shares the distinction for calling last year's market collapse (Look for Change in Familiar Places). In fact, Kass called the bottom last March when the S&P 500 hit the Devil's Triple Six (S&P intraday low of 666.79). They may all be wrong this time around but the ole Colonel is listening and the Duke has his scouts galloping up a butte to get a better view. Stay tuned.

Enough gloom-doom talk, let's walk the walk:

All lights are green on the Eureka Outlook Dashboard (upper right, what is this?)

Oil is down $1.32 in early trading to $70.11 (October contract); Gold is down $0.4 to $945.4 (December contract, most active); Silver is down $0.090 to $14.165 (September contract); Copper is down $0.0130 to $2.8440 (September contract); Molybdenum holds steady at $18.00

The DOW is down 57.29 points to 9486.23; the S&P 500, down 9.59 points to 1018.53. The miners are getting clobbered:

Barrick (ABX) $33.44 down 2.22%
Newmont (NEM) $39.17 down 1.78%
General Moly (Eureka Moly, LLC) (GMO) $2.70 down 2.88%
Freeport McMoran (FCX) $61.86 down 2.01% (a bellwether mining stock spanning gold, copper & molybdenum)

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

Nucor (NUE) $43.94 down 2.96% - domestic steel manufacturing
ArcelorMittal (MT) $35.60 down 1.06% - global steel producer
POSCO (PKX) $94.40 up 0.01% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is down 1.78% to $1,082,483.81 (what is this?).

Cheers,

Colonel Possum

Image of Garamjav Dondog adapted from a photograph by Jae Hyun Seok for The New York Times

Wednesday, August 26, 2009

Is the Cavalry in the Long Dusty Valley?



Morning Miners!

It is 5:44 AM, grab a cup and Yee-ha for hump day! I don't know why but the ole Colonel feels like we've come to the part in the movie where the cavalry is descending into a long dusty valley. All is quiet and the scouts are looking for Indian silhouettes on the bluffs. The Duke is riding point; he just looked back at us, you know the look.

We've had a great ride so far. The broader markets have been up, up and away; by my count there have been eight new 52-week highs in the S&P 500 in just a little over a month. The talking heads are bubbly on the tube and they've resumed taking potshots at Nouriel Roubini and Meredith Whitney. As we've reported before, these two predicted last year's financial disaster with nearly 100% accuracy several years before it occurred (Look for Change in Familiar Places). Now they are receiving scorn for their less than rosy recovery outlooks. Roubini (aka Dr. Doom) predicts a dip in commodity prices before the end of the year (Moly Hits Magic Number, Dr. Doom Speaks to Miners) and banking analyst Dick Bove has replaced Whitney as the new "Banking Savant". I remember Bove famously urged folks to buy Citigroup stock around $20 after the collapse of Bear Sterns calling it a "generational opportunity". A year later Citigroup was a penny stock. So much for listening to that joker.


Where am I going with all this? The Colonel is a born optimist but a cautious one. I do believe we've turned the corner and better days lie ahead. It just seems the party has started a little too early. Dennis Gartman, the "Commodity King", offers some sage advice; base metals collectively have a PhD in economics. He believes they are good leading indicators of things to come and our favorite base metal in the Report has been copper. If we break $3 soon we may be galloping out of the valley with no arrows in our hats. If we stall and start heading towards $2.50, there may be an overdue pause in the party.

Here's a three month chart of molybdenum, gold and copper. Hmm, a little flat lately buckaroos.


To complete the picture, here is a chart of silver and gold over the same time period. Not much to write home about.


On the positive side, the lack of wild swings in this data bodes well for price stability. The big question is whether we are near a top with volatility returning in the Fall or ready for a breakout to higher prices. I'd at least cinch your saddle, pardner. Don't touch that dial.

The Duke just looked back, let's walk the walk:

All lights are green on the Eureka Outlook Dashboard (upper right, what is this?)

Oil is down $0.67 in early trading to $71.38 (October contract); Gold is up $3.7 to $949.7 (December contract, most active); Silver is up $0.045 to $14.355 (September contract); Copper is down $0.0195 to $2.8735 (September contract); Molybdenum holds steady at $18.00

The DOW is up 26.52 points to 9565.81; the S&P 500, up 3.43 points to 1031.43. The miners are mixed:

Barrick (ABX) $34.04 down 0.33%
Newmont (NEM) $40.04 down 0.65%
General Moly (Eureka Moly, LLC) (GMO) $2.80 up 4.09%
Freeport McMoran (FCX) $63.64 down 0.73% (a bellwether mining stock spanning gold, copper & molybdenum)

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

Nucor (NUE) $46.44 up 0.15% - domestic steel manufacturing
ArcelorMittal (MT) $36.12 down 1.58% - global steel producer
POSCO (PKX) $93.91 down 0.98% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is up 0.08% to $1,105,236.21 (what is this?).

Cheers,

Colonel Possum

Photograph of Dennis Gartman, Financial Post (Canada)

Tuesday, August 25, 2009

El Niño and Uncle Ben Again


Morning Miners!

It is 5:46 AM and the weather has me puzzled. Not today's but maybe January or so. A moderate to heavy El Niño is possible and that could mean a lot of moisture after New Years as warmer Pacific waters push their way up the West Coast. Since weather is so important to farming and ranching in our area and can affect mining too, I've included a link to the NOAA El Niño site in our Local Weather & Climate Section in the right column of this blog:

NOAA El Niño Updates


Anytime you have record droughts in India, August hurricanes in Nova Scotia and none in the Gulf (at least yet) you know something is going to be different than the last several years. Patch that roof now, buckaroos. Snow blowers are cheap in August.


As reported in the Wall Street Journal today, President Barack Obama announced that he is nominating Ben Bernanke for another term at the helm of the Federal Reserve, hailing Mr. Bernanke's "calm and wisdom" in the face of the economic crisis.

This has been a cliff hanger for some and most economists agree this was the proper thing to do. The Colonel is also a believer in the ole "don't change horses in midstream" saw. Uncle Ben will either be praised or condemned by history and a lot depends on the timely withdrawal of all the liquidity that has been hose piped into the economy lately. One thing for sure is that we will all be experts on the wisdom of this renomination in about twelve months. Ironically, the Federal Reserve's actions have probably contributed to the stability of near term gold prices. Investor's fear of hyperinflation down the road at odds with their desire to sell gold and jump back into the stock market has kept gold in a tight range which is not all bad.

Enough talk, let's walk the walk:

All lights are green on the Eureka Outlook Dashboard (upper right, what is this?)

Oil is down $0.87 in early trading to $73.50 (October contract); Gold is up $6.70 to $950.4 (December contract, most active); Silver is up $0.145 to $14.340 (September contract); Copper is down $0.0290 to $2.8860 (September contract); Molybdenum holds steady-eddy at $18.00

The DOW is up 52.38 points to 9561.66; the S&P 500, up 5.21 points to 1030.78. The miners are mixed:

Barrick (ABX) $34.50 up 0.35%
Newmont (NEM) $40.49 up 1.38%
General Moly (Eureka Moly, LLC) (GMO) $2.73 up 2.25%
Freeport McMoran (FCX) $64.35 down 1.67% (a bellwether mining stock spanning gold, copper & molybdenum)

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

Nucor (NUE) $46.89 up 0.26% - domestic steel manufacturing
ArcelorMittal (MT) $36.92 up 0.35% - global steel producer
POSCO (PKX) $93.64 up 0.66%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is up 0.43% to $1,111,592.03 (what is this?).

Cheers,

Colonel Possum

Photograph: Ben Bernake, AP (WSJ 08/25/2009)

Monday, August 24, 2009

Klondike Miners Opened Window of Time


Morning Miners!

It is 6:01 AM and Summer is heading for the backdoor, let's catch her before she's gone! OK, that's better. You sit right here with the miners hon' and the ole Colonel will pour you cup. No use running off, you've been good to us and there is plenty of time left before Fall takes your place.


We'll get to the markets in a minute. No need to rush there either. Summer has brought us some nice rallies in metals and miners and we know Fall often brings a bag of surprises. Let's start the week with a story instead. Canwest News Service out of Toronto has a great piece on old timer miners in Alaska and the fossils they discovered along with their gold. Here's the link:

Klondike rush produced two treasures — gold, fossils

The story is sourced from this month's GSA Today, one of the world's top geological journals. A seven-member team of Canadian and British researchers detail the priceless scientific treasure that has emerged from the Klondike goldfields:

"The Klondike mines are like 'windows of time' for scientists, says Yukon government paleontologist and study co-author Grant Zazula, describing the 'amazing relationship' between gold-diggers and researchers." (Canwest, 8/24/09)

The part I found intriguing was the fossil evidence discovered by miners that date back to when there was a land bridge between Siberia and Alaska. That is the bridge that brought the first buckaroos to our neck of the woods, pardner! Have a good read on your break.

It looks like we're starting the week on a good foot with the markets. Everything is still up, up and away which gives the Colonel cause to start looking for some early signs of Fall. Now, I'm not trying to be a party-pooper but an ounce of caution is worth a pound of moly. Speaking of which, molybdenum dropped 25 cents Friday to $18.00. That in itself is not much but moly has been on a steady uphill climb since the sub-$8 lows of April. We'll keep an eye on this one since the price of moly is a good gauge of how well the global steel industry is really doing. I'm not too worried unless moly falls below $16.50.

Besides moly, the Report looks at gold, oil and copper to monitor global well being. The ole Colonel likes the 20-day moving averages (MVA) of these three since it takes out a lot of the day-to-day pops and drops. Since mid-June the averages have kept in a tight range except for copper which seems to float ever closer to $3. Here are the 20-day MVAs compared to this morning's price:

Gold $931 to $952 (2.2% range); today $955 (+0.3% outside range)
Oil $65 to $70 (7.7% range); today $74.6 (+6.6% outside range)
Copper $2.21 to $2.72 (23.1% range); today $2.88 (+5.9% outside range)

What does all this blasted number crunching signal? Let's take them one at a time. As investors have grown in confidence they have been cashing in gold to put money back in the stock market. This and a lower consumer demand from India (blamed partly on a poor monsoon season) has caused gold price to wallow in its range. Since June the SPDR gold holding ETF (GLD) had seen a fall of 6%. This is significant because the GLD holds more than a thousand tons of old yeller in London. That is a larger holding than most central banks. The turning leaf of Autumn for gold is a recent reversal of this trend. The GLD reported its first rise in its gold holdings in five weeks on August 21st, up by nearly a ton to 1,066.41 tons. Could this signal a change in investor sentiment?

Oil has just gone nuts lately rising in price far beyond the fundamentals of present supply and demand. Investors are betting that a crisp rise in global demand will justify prices rapidly approaching $80. This could be detrimental to domestic and global recovery. Increasing beyond the present price level is the autumn leaf of worry for oil.

Finally, copper our little canary in the global mineshaft since March, continues to soar like an eagle. If it breaks $3 this Fall that is a positive sign; if our bird dives below $2.50, duck for cover buckaroos! Stay tuned, the Colonel is eagle-eyeing all three.

Enough talk, let's walk the walk:

All lights are green on the Eureka Outlook Dashboard (upper right, what is this?)

Oil is up $0.74 in early trading to $74.63 (October contract); Gold is up $0.60 to $955.3 (December contract, most active); Silver is up $0.256 to $14.420; Copper is up $0.1500 to $2.8820 (September contract); Molybdenum dropped $0.25 to $18.00

The DOW is up 78.14 points to 9584.10; the S&P 500, up 9.17 points to 1035.30. The miners are happy-pappy:

Barrick (ABX) $35.03 up 1.04%
Newmont (NEM) $41.23 up 0.95%
General Moly (Eureka Moly, LLC) (GMO) $2.60 up 1.17%
Freeport McMoran (FCX) $67.08 up 3.10% (a bellwether mining stock spanning gold, copper & molybdenum)

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

Nucor (NUE) $47.59 up 0.93% - domestic steel manufacturing
ArcelorMittal (MT) $37.57 up 2.82% - global steel producer
POSCO (PKX) $96.08 up 0.47%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is up a healthy 1.50% to $1,120,952.12 (what is this?).

Cheers,

Colonel Possum

Photograph by: Handout, GSA Today

Klondike-era miners pose beside the remains of an extinct mastadon dug up in the hunt for gold a century ago. The picture appears on the cover of the latest edition of the geological journal GSA Today.

Friday, August 21, 2009

Slow And Easy or Texas Hold'em?


Morning Miners!

It is 5:44 AM, clean cups are on the hook and there's some Raine's TGIF coffee brewing in the pot. The dog days of summer just got a little more exciting buckaroos. Early today gold popped to $955 and Brent crude oil to $74.25 on London's spot and futures exchanges. We'll check in a minute to see how that ripples over to our own markets this morning. The story of gold and oil in the next several months will tell us a lot about what's ahead for Eureka as we wipe away recession mud from our windshield. A gold rally makes us smile but oil on a tear could rip a whole in our wallets and push production costs for miners. I heard an economist say yesterday that the best single indicator for recovery is the future price of gasoline.



There are few fundamentals that support higher oil but there is a lot of easy money chasing barrels hoping for a sharp rise in global demand. That's the River Card pardner in a giant game of Texas Hold'em. In our new Eureka Outlook Dashboard, the Colonel is turning on the "Check Engine" if oil gets above $80 (to your upper right, what is this?).

The Turn Card has been on the table for most of the year and its the Ace of China. There is little debate that the quickness and efficiency of China's stimulus plan has lit a fire under commodity prices and helped buoy Asian countries as well as our own. The big question is whether this boom will last for the world's third largest economy or will it just become a paper tiger? Why should we care in Eureka?

Here's an example of a tiger that can walk right down Main St. Reuters reports from Mumbai, India, that after a months long rally to a 10-month high last week, the price of benchmark hot-rolled coil in China plunged nearly 8 percent. Hot-rolled coil is used in the early stages of steel production then cut to customer defined form factors such as steel sheets. China makes half the world's steel and its neighbors, such as South Korea, are integral to the process. A blip in Chinese steel demand is directly felt by suppliers such as South Korea's POSCO and POSCO is a 20% investor in Eureka Moly's Mt. Hope Project. Get the picture pardner?

In isolation, a price fluctuation in an obscure foreign metal market isn't anything to lose sleep over (and please don't). What is catching some attention is a coincident collapse in China's stock market of 20 percent in just two weeks sparking worries that it may signal underlying economic weakness in China. The domestic Shanghai Exchange crumbled before our own stock market crash last year so some claim it to be a leading indicator for things to come.


The ole Colonel is far from convinced but I will watch the stripes on this kitty cat. There is an equally convincing argument that the Shanghai stock market is highly speculative, barred from foreign investment, comprised mostly individual Chinese investors and subject to all manner of government shenanigans. I'm not ready to hang my predictive hat on anything that flaky-shaky. The good news has been a slow and easy uptrend in our own markets as our stimulus plan is finally gathering steam. I'll watch them all for you buckaroos, it might be a game of Texas Hold'em but Eureka has some great hole cards. If the price of molybdenum keeps rising, I'm purring like a kitten.

Here kitty-kitty, let's walk the walk:

All lights are green on the Eureka Outlook Dashboard (upper right, what is this?)

Oil is up $0.95 in early trading to $73.86 (October contract); Gold is up $12.2 to $953.8 (December contract, most active); Silver is up $0.275 to $14.155; Copper is up $0.0985 to $2.8400 (September contract); Molybdenum is cruising at $18.25

The DOW is up 135.65 points to 9485.70; the S&P 500, up 16.00 points to 1023.37. The miners are doing cartwheels:

Barrick (ABX) $34.87 up 2.14%
Newmont (NEM) $40.96 up 2.30%
General Moly (Eureka Moly, LLC) (GMO) $2.60 up 2.36%
Freeport McMoran (FCX) $64.08 up 2.97% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are a-steeling, (a "tell" for General Moly):

Nucor (NUE) $47.05 up 0.94% - domestic steel manufacturing
ArcelorMittal (MT) $36.65 up 4.14% - global steel producer
POSCO (PKX) $95.33 up 0.54%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is up a whopping 2.19% to $1,103,086.03 (what is this?).

Cheers,

Colonel Possum

Thursday, August 20, 2009

Elko Makes Fortune!


Morning Miners!

It is 6:07 AM, the coffee is hot and Loquita is sawing logs. The ole Colonel has a great article for you to read on your break today. Elko is featured in Fortune magazine as the American city that the recession missed:


Elko, Nevada: Where the recession never hit


There are a lot of levels for you to enjoy in this piece. First, much of what Fortune says about Elko could just as well apply to Eureka (except for the brothel part). In a recession, gold mining is not a bad business to be in and we've got lots of that in both counties. The article also covers tourism, casinos, ranching, housing, low unemployment and (of course) Sue's Fantasy Club. City manager Curtis Calder is quoted as saying:

"Elko is the best place in Nevada to be...and maybe in the whole country."

The ole Colonel will take exception to that boast, obviously there is no better town than Eureka. It is, however, nice for northeastern Nevada to get all this media attention lately. Earlier this month the Report covered a similarly supportive Gold Report interview with world renown geologist and investor, Brent Cook (What Makes Nevada the Premier Place to Be?).

A second enjoyable aspect of the Fortune article are the images by San Fransisco photographer, Christopher LaMarca (Redux Pictures). There is a photo gallery of 14 terrific pictures of Elko's folks and environs including today's headline image of White King. In addition to Curtis Calder some of those photographed you may know: Mayor Mike Franzoia, Elaine Spencer (Economic Diversification Authority), rancher Jimmy Elison with his sons Josh and Jared, local bikers "Biggin" and "ZZ", and Madame "Victoria".

Finally, I always gets a kick when an "East Coast" magazine features the wild West. Even though they picked the wrong best town, this Fortune article gets a Colonel Yee-ha!

Enough East Coast talk, let's walk the walk:

All lights are green on the Eureka Outlook Dashboard (upper right, what is this?)

Oil is down $0.42 in early trading to $72.52 (October contract); Gold is down $3.72 to $941.1 (December contract, most active); Silver is down $0.005 to $13.870; Copper is down $0.0135 to $2.7470 (September contract); Molybdenum is steady-eddy at $18.25

The DOW is up 49.05 points to 9328.21; the S&P 500, up 9.08 points to 1005.54. The miners are mixed:

Barrick (ABX) $34.00 up 0.53%
Newmont (NEM) $39.81 down 0.33%
General Moly (Eureka Moly, LLC) (GMO) $2.57 down 0.85%
Freeport McMoran (FCX) $63.65 up 2.51% (a bellwether mining stock spanning gold, copper & molybdenum)

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

Nucor (NUE) $46.80 up 1.56% - domestic steel manufacturing
ArcelorMittal (MT) $35.32 up 0.26% - global steel producer
POSCO (PKX) $93.66 up 1.84%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is up 0.70% to $1,081,845.56

Cheers,

Colonel Possum

Wednesday, August 19, 2009

Dashboard Lights for Eureka



Morning Miners!

It is 5:51 AM, grab a cup and let me introduce you to a new feature for the Report. If you'll look directly to your right there is a Eureka Outlook Dashboard with five indicator lights. Today we're all green. The five lights represent aspects of Eureka's near term future that we've talked about before (Back to Basics for Eureka's Outlook). Admittedly there is a mining emphasis here but some of these lights directly impact other important aspects of our local economy, namely ranching and farming. Let's list them again and then come up with some trip levels that would turn a green light to a warning color (yellow or red):

Commodity reflation intact
Stable credit and equity markets
Low inflation for the next 6-12 months
Positive trend for gold and molybdenum prices
Continued investor confidence in Barrick and General Moly

Our old friend copper is probably one of the best metals to gauge whether commodity reflation is alive and well. For example, domestic demand for copper will grow as our housing industry recovers. It's still a little early to call that but China's demand for copper and other raw materials has caused a surprising rise in prices in the global markets. If copper drops below $2.50 we've got a "yellow" light and any movement below $2.00 is a definite "red". There is also danger on the upside for certain commodities such as oil since they can put a hole in your wallet and drive production costs for our miners. We're near a tipping point with oil at $70. If we start heading for $80 this summer (i.e. reflation turning to inflation), the ole Colonel will turn on a check engine light. There is some room for debate here but you can be sure that if I turn on a light other than green, we'll talk about it that morning. You can be the judge of whether we pull the car to the side of the road or keep on cruising.


Credit and equity markets appear to be stabilizing after a bruising start this year. At the end of each month, the Report looks at national averages for consumer credit (home mortgage, car loans etc.) as well as savings rates (money markets, CDs). We always bring John Wayne along for these articles to keep the financial scalawags on their toes (The Duke Returns, Recession Heads for the Backdoor). If anything goes south in the between time, you can bet I'll throw up a color other than sage brush green.

The stock markets are beginning to be a little dicey after a healthy run up from March. I'm keeping the green light on as long as we stay in a range (i.e. S&P 500 trading above 970). If things start to drop out (S&P below 970), Katy bar the door! The Colonel prefers the S&P 500 to the Dow Jones simply because 500 of America's best companies is a more reliable gauge of economic health than 30.

Inflation is nothing to worry about for the near term (6-12 months). Whether all our money printing leads to hyper-inflation someday is another story and you can bet I've got my eye on both. The unadjusted Consumer Price Index (CPI) was just reported to be down 2.1% from last July so for now, we're solid green buckaroos.

Molybdenum has been a champ lately coming up steadily from a sub-$8 low in March to $18.25 presently. General Moly has a calculation on their Website that shows that once Mt. Hope is in production their operational cost estimate is $5.32 per pound assuming $80 oil. For good measure, I'd like to see moly stay above $16.50 for a green light (Moly Hits Magic Number, Dr. Doom Speaks to Miners). For gold I'm still a bull although there are some downward pressures arising which will be discussed in a future blog. For now let's say a green light stays on for any price above $920 (roughly the year-to-date average).

Investors have been kind to both Barrick (ABX) and General Moly (GMO) this spring and early summer although there have been some downturns in share price lately. For green lights, I think we need to keep ABX above $30 and GMO above $2. The Eureka Grubstake Portfolio is a good barometer for overall investor confidence in the commodity space since it represents 12 companies that directly or indirectly contribute to Eureka's future (The Eureka Miner's Million Dollar Grubstake). Let's keep the Portfolio in the black for a green light (i.e. greater than the original $1,000,000 investment).

All green pardner, any color changers? Let's walk the walk:

Oil is up $1.31 in early trading to $72.40 (October contract); Gold is up $5.2 to $944.4 (December contract, most active); Silver is down $0.220 to $13.740; Copper is down $0.0760 to $2.6855 (September contract); Molybdenum holds at $18.25

The DOW is down 9.90 points to 9208.04; the S&P 500, down 1.47 points to 988.20. The miners are mixed:

Barrick (ABX) $33.56 down 0.30%
Newmont (NEM) $39.12 down 0.28%
General Moly (Eureka Moly, LLC) (GMO) $2.52 down 0.40%
Freeport McMoran (FCX) $60.55 up 0.13% (a bellwether mining stock spanning gold, copper & molybdenum)

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

Nucor (NUE) $45.30 down 1.26% - domestic steel manufacturing
ArcelorMittal (MT) $34.83 down 0.09% - global steel producer
POSCO (PKX) $91.42 down 0.274%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is down 0.05% to $1,062,797.37

Cheers,

Colonel Possum

Tuesday, August 18, 2009

Not So Hotsi in Potsi, Cap-And-Trade Stumbles



Morning Miners!

It is 5:48AM, grab a cup and give the ole Colonel a hand. I've got just one more group of bullet holes to patch up after yesterday's market shoot-out and things look to be a lot calmer today. There is one mining story on the wire that is just too good to pass up. An ex-coca farmer might be a speed bump on America's road to affordable electric cars.

The world’s largest reserves of lithium, a metal needed to manufacture batteries for electric vehicles, exist in the Uyni Salt Flats in Bolivia's Andean province of Potsi. Bolvia's president and ex-coca farmer, Evo Morales, is good friends with Hugo Chávez and supporter of his so-called "Bolivarian Revolution". One feature of this movement is a propensity to nationalize everything that makes money. In 2006, Evo Morales issued a decree nationalizing the country’s oil and gas reserves. He ordered the military to occupy Bolivia's gas fields and gave foreign investors a six-month deadline to comply with demands or leave. This is a real incentive for a mining company to throw $800 million into a Lithium project wouldn't you say? I have no evidence of this but it's a good bet the Chinese will fill this vacuum given their latest shopping spree in Latin America for natural resources. We'd better keep our eyes open or we'll be importing batteries and electric vehicle technology from China to offset our dependence on Venezuelan and other bad guy's oil! You can checkout the whole article from the South America Policy Examiner:

Bolivia Needs 4 Percent of its GDP in Investments to Explore Lithium Deposits


Cap-and-trade stumbled down under as the Australian Senate defeated that country's version by a vote of 42-30. Interestingly there is some debate about the chief cause of the defeat. The BBC reported that "opposition senators...feared the legislation would harm the country's mining sector." There are other reports that claim the bill died because there is now serious disagreement in Australia on the very existence of human-caused global warming. So it goes, the ole Colonel will keep his eye on our own version of cap-n-trade as it bobbles along through Congress (last report, Moly Down Under, Cap-and-Trade Update).


Here's a last little tidbit to follow up from yesterday's discussion on where money seeks reward (Shoot-Out at the O.K. Corral). The Colonel failed to mention the re-emergence of the "carry-trade", a neat hat trick which involves borrowing money in countries such as Japan where interest rates are low, then investing it where rates are higher and pocketing the difference. After thriving during the bubble years, the trade all but disappeared as big currency swings led to heavy losses amid the financial crisis. As the carry-trade gathers steam, it is likely to have an effect on currencies, weighing on the ones in which traders borrow and pushing up those in which they choose to invest. Guess what? This time around the U.S. has interest rates near zero and commodity-sensitive countries like Brazil and Australia (where interest rates are higher) are in line to benefit. The Australian "Aussie", which we periodically track in the Report, has risen 29% against the U.S. currency since February. Just one more monkey on our dear ole greenback!

Pretty quiet in the O.K. corral today buckaroos, let's walk the walk:

Oil is up $0.71 to $67.46 (September contract); Gold is up $4.2 to $940.0 (December contract, most active); Silver is up $0.020 to $13.995; Copper is down $0.0200 to $2.75.05 (September contract); Molybdenum still holds at $18.25

The DOW is up 52.07 points to 9187.41; the S&P 500, up 5.26 points to 984.99. The miners are on their feet:

Barrick (ABX) $33.47 up 1.61%
Newmont (NEM) $39.03 up 0.67%
General Moly (Eureka Moly, LLC) (GMO) $2.46 up 2.92%
Freeport McMoran (FCX) $59.57 up 0.35% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks have some steel, (a "tell" for General Moly):

Nucor (NUE) $45.30 up 1.62% - domestic steel manufacturing
ArcelorMittal (MT) $34.29 up 2.14% - global steel producer
POSCO (PKX) $91.50 up 0.83%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is up 1.06% to $1,053,457.11

Cheers,

Colonel Possum

Monday, August 17, 2009

Shoot-Out at the O.K. Corral



Morning Miners!

It is 6:45 AM, my coffee is on the floor and bullets are whizzing through the windows. It took a while to reach the keyboard but the "incoming" has kept the Colonel down. We've got a broad global sell off buckaroos and that keeps life interesting. Commodities including gold and oil are taking a thumping and markets from China to Europe are down 2 to 3% (checkout the bottom of this blog for real time global market updates). The Eureka Miner's Grubstake Portfolio fell more than 5% losing the readers over $50,000 in early morning trading.

Am I worried? Hell no, pardner! We've been looking for a correction for sometime. Coming up some 50% from our March lows, it is time for a little reality to return to the markets. Here's how I see it. There are few places for money to go to find a decent return nowadays. As you may have noticed money markets and 1-year certificates of deposit (CDs) offer sub-1% returns. Corporate bond rates have fallen from their highs and Treasurys are pretty dismal (10-year, 3.5%). This has caused investors to pour money back into commodities and stocks. A good example is the recent rise in oil prices; there are no fundamentals that support $70 oil with inventories sloshing around in anchored in ships and brimming in storage tanks around the world. Stock prices have got a little heady too as folks ignore bad news and pile in on any positive indications that the recovery is underway.

So is there any good news? Of course, the broad consensus from economists is that the recession is nearly ended or behind us already. We won't know for sometime and few of us will feel like things are better until job growth turns positive which is months away. The markets may overreact in the down direction but central banks, by keeping interest rates low, have set a floor for how low things can go. The truth is that money will return to the riskier asset classes (commodities and equities, see note below) as long as they are the only place for significant reward.

The ole Colonel nibbled at a few stocks this morning on the dip in energy and waste management (ECA & WM). If gold gets down near $920 it might be a good time buy a chunk and watch for Barrick (ABX) in the low $30 range and Caterpillar (CAT) below $40. If General Moly sags below $2, I'm backing up the truck!

Don't worry, be happy. Don't expect things to drop too low or soar too high for some time to come.

I hear some more shooting over by the corral, let's walk the walk:

Oil is down $2.03 to $65.48 (September contract); Gold is down $14.3 to $934.4 (December contract, most active); Silver is down $0.667 to $14.055; Copper is down $0.0735 to $2.7625 (September contract); Molybdenum bravely holds at $18.25

The DOW is down 187.80 points to 9128.46; the S&P 500, down 23.28 points to 980.81. The miners looking for cover:

Barrick (ABX) $32.61 down 3.86%
Newmont (NEM) $39.27 down 3.35%
General Moly (Eureka Moly, LLC) (GMO) $2.36 down 12.27%
Freeport McMoran (FCX) $59.67 down 6.25% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are getting hammered, (a "tell" for General Moly):

Nucor (NUE) $44.27 down 5.32% - domestic steel manufacturing
ArcelorMittal (MT) $33.51 down 5.58% - global steel producer
POSCO (PKX) $90.85 down 5.24%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is down 5.41% to $1,039,249.66 losing $59,437.44 so far today!

Cheers,

Colonel Possum

Note: Commodities are traditionally not considered an "asset class" like stocks and bonds. In the last several years, however, institutions and individuals have poured money into commodities as if they were an investment asset. Even China has stockpiled raw materials like copper this year to hedge against their vast dollar reserves. If the dollar declines, commodity prices rise and the stocks they hold grow in value. From the Colonel's point of view; if it walks like a duck, squawks like a duck it probably is a duck (possibly a hanging duck in China).

Friday, August 14, 2009

Moly Down Under, Cap-and-Trade Update



Morning Miners!

It is 5:56 AM, let me pour you a hot cup of TGIF coffee! Australian Marengo Mining Ltd. is undertaking a massive copper/molybdenum project in Papau New Guinea. It is expected to be in production by 2013 if all goes well. Reading about this effort made me fell even better about our Mt. Hope project. The Yandera porphyry copper-molybdenum venture is the typical way that moly is mined in the world, as a byproduct of copper mining. Mt. Hope is unique in offering a pure play for the valuable steel strengthening metal.

When the term "massive" is applied to Yandera it refers more to the copper potential than the moly byproduct. Let's look at the numbers:

Mt. Hope - In the first five years of production, General Moly estimates 40 million pounds of molybdenum will be mined annually at approximately 0.103 % moly. The present plan is for the open pit mineralization to be mined in the first 20 years with lower grade mineralization being mined and processed in the succeeding 30 years.

Yandera - Marengo estimates a total potential for 82 million pounds of molybdenum over a ten year life at 0.0135% moly.

So what we have in our backyard is a nearly 8 times higher grade of moly than the Yandera find down under. In two years Eureka Moly can pack out ten years of Yandera production with another 18 to 28 years left for Mt. Hope. Yee-ha!

Tim Arnold should check the ole Colonel's calculations in case I made an early morning slip of the decimal. If I pass his test, the "massive" Yandera undertaking adds a new perspective to the terrific potential of the Mt. Hope project. Also, I bet a cold beer and WalMart are easier to find here than in the steamy jungles of Papau.


Switching gears, there is an interesting article on cap-and-trade versus carbon tax in the Wall Street Journal. This is an issue that our own Natural Resource Advisory Commission has looked at because of its potential impact on miners, ranchers and farmers. Presently legislation using cap-and-trade to limit greenhouse gases is working its way through Congress and could become the law of the land. This is an approach that caps emissions of pollutants and then lets folks trade permits that allow them to pollute within those limits. The alternative concept is a direct tax on carbon emissions. Both attempt to curtail global greenhouse-gas emissions; the downside is the near term impact this may have on struggling domestic and world economies.

Thomas Crocker who came up with the cap-and-trade idea in the 1960s as a University of Wisconsin graduate student, is now having second thoughts about his idea applied on a global scale:

"I'm skeptical that cap-and-trade is the most effective way to go about regulating carbon," says Mr. Crocker, 73 years old, a retired economist in Centennial, Wyo. He says he prefers an outright tax on emissions because it would be easier to enforce and provide needed flexibility to deal with the problem. (WSJ, 08/13/09)

I encourage you to read further about the thoughts of John Crocker:

Cap-and-Trade's Unlikely Critics: Its Creators

Looks like a tough day for markets and miners, let's walk the walk:

Oil is down $2.05 to $68.47 (September contract); Gold is down $2.3 to $954.2(December contract, most active); Silver is down $0.252 to $14.735; Copper is up $0.0675 to $2.8465 (September contract); Molybdenum continues to hold at at $18.25

The DOW is down 160.75 points to 9237.44; the S&P 500, down 17.83 points to 995.10. The miners are down:

Barrick (ABX) $33.85 down 0.99%
Newmont (NEM) $40.75 down 1.74%
General Moly (Eureka Moly, LLC) (GMO) $2.69 down 3.58%
Freeport McMoran (FCX) $63.04 down 4.58% (a bellwether mining stock spanning gold, copper & molybdenum)

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

Nucor (NUE) $46.46 down 2.62% - domestic steel manufacturing
ArcelorMittal (MT) $35.14 down 2.66% - global steel producer
POSCO (PKX) $94.89 down 2.50%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is down 2.37% to $1,094,749.90

Cheers,

Colonel Possum

Thursday, August 13, 2009

Fed Lifts Maidenform, Silver Breaks $15



Morning Miners!

It is 5:50 AM and the ole Colonel noticed it is getting a little darker every morning. Someone hit the jake brake on summer buckaroos! The Fed boosted markets yesterday by not saying anything much different from their last official statement. Maidenform was a star performer jumping nearly 7%, go figure. I'll cheer anything that gives this recovery added support! Global markets reacted favorably too and I just watched silver break $15 on the London exchange.

As reported by the Wall Street Journal:

"U.S. Federal Reserve officials on Wednesday left official interest rates near zero but suggested the economy is on more stable ground. Information 'suggests that economic activity is leveling out,' the Fed statement said.

Still, officials said they would slow up their plans to buy up to $300 billion of Treasury securities in order to provide a smooth transition in those markets. The unconventional rescue program was widely expected to expire in September. Now, the Fed plans to continue purchases through October." (WSJ, 8/13/09)

Remember that a government buying Treasurys is a government printing money. It is good to see an end to this but troubling that we have to do it at all. Inflation down the road is the fear and you could see it in currency and precious metals. After the statement the dollar went up, gold went down then gold went up and the dollar tumbled. Inflation fears generally support gold and trash the dollar. It is too early to tell what the long term trend will be; if the Fed pulls excess liquidity out of the system in a timely fashion we may have a soft landing. If not? Keep some gold under your bunk pardner.


Ken Heebner, one of the savviest investors around, made an interesting point on CNBC yesterday. Keeping the U.S. credit rating intact is another key element for successful recovery. As we auction Treasurys to raise money there must be buyers or we're in trouble. So far so good, the auctions have exceeded expectations and foreigners are snapping up our debt left and right. Ken observed that the Middle East countries that supply the world oil are some of our biggest customers. Together they apparently exceed Treasury purchases by the Chinese. Ken speculates that countries like Saudia Arabia still depend on us for protection at the end of the day and thereby are willing to lend when we're on the ropes.

While this is good from a recovery standpoint, the logic is frightening. We export national wealth to buy oil, oil-rich nations lend us our dollars back so we can send them back again at a later day, but this time with interest! I'd rather ponder how Maidenform supports our economy than unravel this international can of worms.

Enough global talk, let's walk the walk:

Oil is up $0.43 to $70.59 (September contract); Gold is up $3.8 to $956.3 (December contract, most active); Silver is up $0.240 to $14.825; Copper is up $0.0555 to $2.8790 (September contract); Molybdenum continues to hold at at $18.25

The DOW is down 11.64 points to 9349.97; the S&P 500, up 0.49 points to 1006.30. The miners are still happy:

Barrick (ABX) $34.28 up 2.02%
Newmont (NEM) $41.07 up 1.48%
General Moly (Eureka Moly, LLC) (GMO) $2.78 up 0.72%
Freeport McMoran (FCX) $64.81 up 2.91% (a bellwether mining stock spanning gold, copper & molybdenum)

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

Nucor (NUE) $46.87 up 0.54% - domestic steel manufacturing
ArcelorMittal (MT) $35.54 down 0.14% - global steel producer
POSCO (PKX) $96.62 down 0.01%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is up 0.83% to $1,111,898.92

Cheers,

Colonel Possum

Wednesday, August 12, 2009

A Chinese Dragon Hungry for Miners?



Morning Miners!

It is 5:53 AM, the ole Colonel is on his second cup and there is a dragon at my door. Oh, it's just Loquita coming in from her morning pee. There was a dragon at the door of Canadian Royalties Inc. yesterday as China launched a hostile bid to takeover the distressed nickel miner. This chilling report comes from the Toronto's Globe and Mail:

China Makes Unexpected Grab for Canadian Miner

This might be a game changer in China's insatiable appetite for natural resources marking the first time they have attempted a hostile acquisition. Typically, China has sought a friendly agreement with management before taking the seat at a foreign mining company. Nickel is a key ingredient in steel production and China apparently went after the weakened miner to capture its Nunavik project which contains approximately 20 million tons of ore, grading about 1 per cent nickel and 1 per cent copper. Because of its small size, the bid would not require Ottawa's approval under the Investment Canada Act.

Ironically the takeover bid came as Canadian Finance Minister Jim Flaherty is in Beijing on a trade mission to encourage Chinese investment in Canadian companies. The other disturbing report on China and miners comes from the Wall Street Journal this morning:

BEIJING -- China formally arrested four executives of Rio Tinto Ltd. on suspicion of stealing commercial secrets, but backed away from more serious espionage accusations in a move that the Australian miner said demonstrated that its employees had done nothing wrong. Previously, the four faced accusations of stealing state secrets, a grave criminal offense that can result in a possible life sentence. (WSJ, 8/12/09).

Phew, a little dragon repellent at the doors of Eureka Moly might be a prudent precaution (just kidding...).

The other story that has my interest is the official statement from Uncle Ben's Federal Open Market Committee at roughly 11:15 AM (PDT)today. The key thing to watch is the dollar index or "Dixie" (DXY) which tracks the greenback against a trade-weighted basket of six major currencies.


Mantras are OK for religions but not for investing. When you hear everyone talking about inevitability of the dollar's decline it may be time to swim upstream. Two weeks ago, the Colonel bought some UUP ("Oooper"), an exchange traded fund (ETF) that is bullish on the dollar. If the dollar goes up you make money; if it continues to go down, you get out of Dodge. The UUP ETF is a nice way to hedge a gold position because the dollar and gold typically move in opposite directions. Lately gold has lost some luster and the "Oooper" has enjoyed a bounce. If the "Dixie" breaks 80 today after the Fed announcement, "Oooper" is a good bet bukaroos:

"Many economists expect the Fed to allow its program of buying as much as $300 billion in Treasurys to expire when that amount is reached, likely sometime in September. While not equivalent to lifting interest rates, confirmation of the end of the program could be seen as a step toward a less accommodative monetary policy, and would likely be viewed as supportive for the dollar..." (WSJ, 8/10/09)

Enough fortune cookies, let's walk the walk:

Oil is up $1.26 to $70.71 (September contract); Gold is up $2.9 to $950.5 (December contract, most active); Silver (London spot) is $14.50 (see note); Copper is up $0.0365 to $2.7740 (September contract); Molybdenum is holding at $18.25 (The Colonel's commodity source is on the blink, no silver futures data this morning)

The DOW is up 123.33 points to 9364.78; the S&P 500, up 12.16 points to 1006.51. The miners are happy again:

Barrick (ABX) $33.83 up 0.59%
Newmont (NEM) $40.37 up 0.42%
General Moly (Eureka Moly, LLC) (GMO) $2.65 up 1.15%
Freeport McMoran (FCX) $62.22 up 0.55% (a bellwether mining stock spanning gold, copper & molybdenum)

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

Nucor (NUE) $46.20 up 0.57% - domestic steel manufacturing
ArcelorMittal (MT) $35.27 up 0.63% - global steel producer
POSCO (PKX) $95.72 down 1.32%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is up 0.68% to $1,093,743.75

Cheers,

Colonel Possum

Tuesday, August 11, 2009

Miners Tired or Just Resting?



Morning Miners!

It is 5:49AM, the coffee is hot and it is the dog days of summer. Not for everyone, well-heeled traders are romping with their millions in the Hamptons and much of Europe takes one month leaves in August. The markets thin out and second tier folks noodle equity and commodity prices up and down. That's probably an exaggeration but August is typically a lazy time for markets often ended by sheer moments of terror in September when the A-team returns.

We've come a long way since the terror of March with the S&P 500 rebounding an amazing 51%. Lately, however, things seem to be cooling off a bit with concerns about the pace of recovery and many waiting to see what Uncle Ben will do and say at the Fed meeting this week. Our favorite miners and metals are pretty much snoozing with the dogs except for the energetic molybdenum. Here's a comparison at yesterday's close of where we've come over the last 2-months:

S&P up 6.4%

Barrick up 1.0%
Newmont down 5.0%
General Moly up 1.0%
Freeport McMoran (a bellwether stock) up 6.0%

Gold up 0.4%
Silver down 0.4%
Copper down 1.6%
Molybdenum up 74%

I don't know about you but it seems kind of nice that things are a little boring, boring is stability and we need that before the next shot at the moon. Hang in there buckaroos, take that lazy dog for a walk. The Miners aren't tired, they're just resting.

Enough snoozing, let's walk the walk:

Oil is down $0.24 to $70.36 (September contract); Gold is up $2.3 to $949.2 (December contract, most active); Silver is down $0.030 to $14.325 (September contract); Copper is up $0.0140 to $2.7845 (September contract); Molybdenum is camping out at $18.25.

The DOW is down 97.11 points to 9240.84; the S&P 500, down 11.80 points to 995.30. The miners are playing hooky today:

Barrick (ABX) $33.87 down 1.14%
Newmont (NEM) $40.20 down 1.33%
General Moly (Eureka Moly, LLC) (GMO) $2.69 down 5.28%
Freeport McMoran (FCX) $61.43 down 1.52% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are on holiday too, (a "tell" for General Moly):

Nucor (NUE) $46.36 down 1.57% - domestic steel manufacturing
ArcelorMittal (MT) $34.86 down 3.37% - global steel producer
POSCO (PKX) $97.19 down 1.83%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is down 2.08% to $1,089,394.90

Cheers,

Colonel Possum

Monday, August 10, 2009

"What Makes Nevada the Premier Place To Be?"


Morning Miners!

It is 5:44 AM, grab a cup and we've got some work to do on this Monday morning. Let's start with a positive. Yesterday InfoMine highlighted a Gold Report interview with world renown geologist and investor, Brent Cook:

Of Peak Gold and Navigating the Rocky Road to Riches


When you're on break it is a good read on the global recovery, small mining operations and the future direction of gold and base metals. Of particular note is his answer to the interviewer's question, "What makes Nevada the premier place to be?" In a world of declining gold production and more challenging exploration opportunities, Mr. Cook believes that Nevada is the place to be with its Carlin style systems. I won't steal this interesting article's thunder but here is a sample of his answer:

"...The Carlin Trend alone has over 70 million ounces and individual deposits host tens of millions of ounces. If you can find one of those, it's very profitable. If you can do it in a tiny $15 million dollar market cap company, well, I'm buying the next round. When you look at Barrick Gold Corporation (NYSE:ABX) and Newmont Mining Corp. (NYSE:NEM), that's where they started. Barrick is still finding deposits in Nevada. In this decade, they've discovered of about 15 million ounces on ground they've had for 25 years. The deposits are there. They just take a lot of work. That's why I think Nevada is one of the better places to be, plus you know the politics, the infrastructure is good, and you can always get a cold beer." (Infomine/Gold Report, 8/9/2009)

I know this is singing to the Choir buckaroos but the ole Colonel still likes to hear the music! Buy Brent a cold beer.

Now for some familiar dark clouds. Mining Law reform is back in the headlines with two bills pushing through Congress to extract higher royalty payments from mining companies operating in the U.S. Senator Jeff Bingaman (D., N.M.) has proposed a 2%-5% royalty in his bill to change the 1872 Law. Even more troubling is the bill introduced by Rep. Nick Rahall (D., W.Va.) that imposes an 8% royalty on production value. He said earlier this year:

"Given our current economic crisis and the empty state of our national treasury, it is ludicrous to be allowing this outmoded law to continue..."

Great, and then there is the EPA part of this logic. As reported by the Wall Street Journal today:

"Under the bills, royalties and other fees would be used to clean up thousands of abandoned mining sites. The Environmental Protection Agency last month reported that mining has polluted 3,400 miles of streams and 440,000 acres of land and continues to release enormous quantities of toxic chemicals."

This debate has been going on for a long time but I thought Laura Skaer, executive director of the Northwest Mining Association, mounted a clever defense by pointing out that if too many costs are imposed on domestic miners, the U.S. will be importing even more of the raw materials used to make such items as wind turbines, hybrid vehicles and solar panels:

"Then we've traded our dependence on Mideast oil for a dependence on foreign minerals," Ms. Skaer said, "The zinc, molybdenum and rare-earth minerals needed for wind turbines, copper for hybrid cars and titanium and cobalt for solar panels are imported from China, Peru and elsewhere." (WSJ, 08/10/09)

Go Laura and thank you for mentioning molybdenum. On and on it goes, stay tuned.

To end on a little brighter note, the central banks of Europe have agreed to lower their yearly quota for gold sales from 500 to 400 metric tons over the next five-year period beginning in September. This reflects their concern about the declining dollar and looming inflation. The agreement reinforces the long held notion that gold is a monetary asset and should be supportive of future gold prices. The lower ceiling helps to diminish fears that the 10 largest signatories would dump gold to take advantage of its higher price. They presently hold total more than 11,000 tons, valued at $350 billion.

Enough Euro-talk, someone is selling gold today! Let's walk the walk:

Oil is down $12.8 to $71.12 (September contract); Gold is down $12.8 to $946.7 (December contract, most active); Silver is down $0.348 to $14.320 (September contract); Copper is up $0.0185 to $2.804 (September contract); Molybdenum is hanging in at $18.25.

The DOW is down 11.33 points to 9358.74; the S&P 500, down 1.88 points to 1008.60. The miners are grumpy today:

Barrick (ABX) $34.19 down 1.67%
Newmont (NEM) $41.00 down 1.30%
General Moly (Eureka Moly, LLC) (GMO) $2.83 down 0.35%
Freeport McMoran (FCX) $62.33 down 1.70% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are unhappy today too, (a "tell" for General Moly):

Nucor (NUE) $48.02 down 2.26% - domestic steel manufacturing
ArcelorMittal (MT) $36.37 down 2.70% - global steel producer
POSCO (PKX) $100.79 down 1.88%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is down 0.94% to $1,118,763.28

Cheers,

Colonel Possum

Friday, August 7, 2009

Ending the Week on Good (Less Bad ) News!


Morning Miners!

It is 5:20 AM., I just poured a strong cup and the jobs report will announce in just a few minutes. Be right back.

10-4 good buddies, we have a better than expected report! Although we have 19-months of jobs loss, it is the smallest loss since last August. The Labor Department says nonfarm payrolls declined by 247,000 in July versus an expected 350,000. They also revised their numbers with a net 43,000 fewer jobs lost earlier this year. Unemployment surprisingly dropped from 9.5% in June to 9.4% in July. Payroll cuts slowed in a variety of industries including manufacturing and many services while the automobile sector posted a rare increase, as anticipated seasonal layoffs failed to materialize (Go cash for clunkers).


Reactions from some of the CNBC business news guests are noteworthy. Mesirow Financial's Chief Economist, Diane Swonk exuded, "...wonderfully pleased!" Other eco-luminaries exclaimed in the wee morning hours, "the economy has clearly turned", "...back from Armageddon", "...a turning of the animal spirits."

OK, enough already. What does this really mean? Folks (except economists) are still losing their jobs. The true recovery test will be the gap between when companies stop laying off and start hiring. The Colonel is not one to ignore a ray of light in the mineshaft, so I'll agree that this morning's news is at least pointing in a good direction. The dollar strengthened, T-Bill yields jumped, silver popped to nearly $15 in London and the markets have opened on an upbeat note. Below is a 15-day chart of our four favorite metals, we've a come a long way in a short time. That's worth at least one Big Friday Yee-ha!


Enough talk, let's walk the walk:

Oil is down $0.50 to $71.44 in early trading (September contract); Gold is up $0.8 to $963.7 (December contract, most active); Silver is up $0.190 to $14.835 (September contract); Copper is up 0.0365 to $2.7885 (September contract); Molybdenum is chilling at $18.25.

The DOW is up 62.27 points to 9318.53; the S&P 500, up 7.98 points to 1005.06. The miners are mixed today:

Barrick (ABX) $35.31 down 1.23%
Newmont (NEM) $41.95 down 0.87%
General Moly (Eureka Moly, LLC) (GMO) $2.79 up 1.60%
Freeport McMoran (FCX) $63.70 down 0.45% (a bellwether mining stock spanning gold, copper & molybdenum)

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

Nucor (NUE) $49.03 up 0.41% - domestic steel manufacturing
ArcelorMittal (MT) $37.68 up 1.40% - global steel producer
POSCO (PKX) $103.00 up 1.43%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is up 0.28% to $1,133,863.13

Cheers,

Colonel Possum

Thursday, August 6, 2009

Jobs, Gold, Moly and Mnogovershinnoye


Morning Miners!

It is 5:44 AM and Becky Quick of CNBC just left the break room. She grabbed a cup and left off the initial job claims report. Gold bounced in London and the ole Colonel just found Ruby Hill's sister in Mnogovershinnoye, Russia. If I can digest all this news and put it in a few words before your first cup, The Report has accomplished its mission. Let's start with jobs. Once a month the private-sector and government release employment reports. The playbill is the ADP report yesterday, new claims for state jobless benefits today and the unemployment report tomorrow. Like a rock concert; the first two are warm up bands, the unemployment report is the BIG headliner. All three are important in understanding where we are in the recession.

The private-sector ADP report based on payrolls showed private employers cut 371,000 jobs during the month of July. This is not great but better than the 473,000 jobs lost in the previous month. It's also the best number by ADP since the Lehman bankruptcy disrupted the economy in the second half of 2008.

CNBC reported that the number of workers filing new claims for state jobless benefits fell 38,000 to 550,000 last week, providing another glimmer of hope that the economy may be on the road to recovery. If tomorrow's numbers are "less worse" too, some talking heads are declaring the recession may already be behind us. How is this possible? The government Einsteins that figured out that the recession began in December 2007 will be the ones to have the final say. Their estimate is months away even if turns out that June 2009 marked the end. I'm sure glad none of these people work for the fire department. The truth is that lots of folks are still getting the axe and most of us won't feel a lot better until there are signs of job growth.

In the meantime gold and silver continue to rally and that is great news! I checked my numbers last night to find that oil, copper and gold have the highest positive correlation for the entire year. Correlation gives us a sense for how the price of different things move in relation to each other. For example the dollar often has a negative correlation relative to gold. If one goes up the other goes down. A tight positive correlation implies that prices are all moving together up, up and away. Dr. Doom predicts a reversal in this trend this year and then a second move up in 2010 (Moly Hits Magic Number, Dr. Doom Speaks to Miners). Stay tuned...oops, spot gold just slipped a bit.


Molybdenum seems to be riding the same train with oil, copper and gold. It sits at a new summer high of $18.25. Good Golly Miss Moly!



To close, I'd like to propose a "sister" mine in Russia for our own Ruby Hill. Although Highland Gold is a Russian operation, Barrick Gold is a not an insignificant shareholder (as the Canadians might say in a double-negative way). Highland's Mnogovershinnoye mine located in the aevsk area of the Khabarovsk Territory in the far-east of the Russian Federation has produced about 900,000 ounces of gold so far. This puts it behind Ruby's recent million mark but in the same league. The ole Colonel just loves the name; if you can say "Mnogovershinnoye", I'll buy you a beer. Here's another Russian word that's a bit easier to say. If you asked me today how things were going, I'd say:

Отлично! - (pronounced "Otlichno" for EXCELLENT!)

Oh, who's the woman in the funny hat? Mine security, of course!

Enough sisterhood, let's walk the walk:

Oil is down $1.73 to $70.24 in early trading (September contract); Gold is up $1.3 to $967.6 (December contract, most active); Silver is up $0.085 to $14.845 (September contract); Copper is up 0.0715 to $2.7405 (September contract); Molybdenum rests on a perch at $18.25.

The DOW is down 35.52 points to 9245.45; the S&P 500, down 5.94 points to 996.78. The miners are down today:

Barrick (ABX) $35.83 down 0.56%
Newmont (NEM) $41.34 down 1.36%
General Moly (Eureka Moly, LLC) (GMO) $2.78 down 1.77%
Freeport McMoran (FCX) $63.82 up 0.99% (a bellwether mining stock spanning gold, copper & molybdenum)

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

Nucor (NUE) $48.24 up 0.56% - domestic steel manufacturing
ArcelorMittal (MT) $37.34 down 2.37% - global steel producer
POSCO (PKX) $102.59 up 1.69%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is down 0.54% to $1,130,681.68

Cheers,

Colonel Possum