Tuesday, August 18, 2009
Not So Hotsi in Potsi, Cap-And-Trade Stumbles
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