"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.

Thursday, October 1, 2009

A Little Salt with Your Moly?


Morning Miners!

It is 5:45 AM and Thursday dropped by the break room for a cup before she awoke the sun. She's a good ole gal, a lot more friendly than her moody sister Monday. How about starting your day with a little Latin, cum grano salis? Lots of good stuff has come from the Greeks and Romans and it turns out they were often just as skeptical as us modern folks. Our expression of doubt, "take it with a grain of salt" was literally cum grano salis in the days of Pompey. That brings us to the point of today's discussion: you can take yesterday's article, Massive Moly Deposit Found in Utah, cum grano salis.

As a general rule announcements that are both startling and lacking in detail are candidates for scrutiny. When Rio Tinto announced they discovered "what may be the world's biggest deposit of molybdenum" below their open pit Bingham Canyon mine, the Colonel promised to check the facts. As I mentioned yesterday, "...the Reuters' report gives no information on the moly concentration, time frame or economic viability of this find."

I contacted Tim Arnold of our Eureka Moly and he shared some interesting observations. His first impression was, "Sounds like it is a long way off at first glance." He checked with the Denver office later in the day and relayed, "Our guys tell me that it is really not a 'new' discovery, as they have known about the moly below Bingham for some time. You notice that they do not talk numbers, so until they do we don’t really know if it is an increase to the old one, or if it has expanded. The deposit will have to be mined by underground block caving methods, like the Henderson mine. That means my original thoughts are probably correct. They will need to finish the Bingham pit before they can start caving it in. I also believe that the open pit is getting into some higher moly grades too."


I thought it would be useful to remind ourselves just how big the Mt. Hope project promises to be. Presently, the Henderson mine is the largest primary producer of molybdenum in the world. Operated by Climax Molybdenum (a subsidiary of Freeport McMoran), Henderson has produced more than 770 million pounds of molybdenum during the past 27 years.

The Mt. Hope deposit contains 1.3 billion pounds of Proven and Probable reserves with an estimated life of 44 years. Let's compare the annual averages:

Henderson: 770 million pounds/27 years = 28.5 million pounds per year
Mt. Hope: 1.3 billion pounds/44 years = 29.5 million pounds per year

Of course, these are averages and actual production varies year-to-year as a function of moly concentration, mine life etc. Mt. Hope is expected to produce 40 million pounds per year in just the first five years! That's B-I-G buckaroos.

Time will tell what the Bingham "new" discovery will bring but it appears to be a long long time away. Nothing to lose sleep over pardner.

Molybdenum and nickel slipped a little more yesterday. Here's the one-month chart the report updates for you periodically. If you missed it, General Moly provided a very good explanation of current molybdenum price action in our recent article, Good Golly Miss Moly.


Enough talk, let's walk the walk:

CAUTION: 4-WD is ON - the VIX or "fear index" is back above 25, I'm going keep the warning set until we get past Friday's employment report. So for now, off-road conditions for markets possible (what's this?)

Yellow light is ON for possible adverse regulation/legislation (mercury emissions)

Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)

Oil is up $0.06 in early trading to $70.67 (November contract); Gold is down $5.6 to $1003.7 (December contract, most active); Silver is down $0.038 to $16.620(December contract); Copper is down $.0445 to $2.7745 (December contract); Molybdenum is steady dropped to 13.6.

The DOW is down 102.56 points to 9609.72; the S&P 500, down 13.50 points to 1043.57. The miners are down:

Barrick (ABX) $37.29 down 1.61%
Newmont (NEM) $43.24 down 1.71%
General Moly (Eureka Moly, LLC) (GMO) $3.14 down 0.32%
Freeport McMoran (FCX) $66.97 down 2.39% (a bellwether mining stock spanning gold, copper & molybdenum)

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

Nucor (NUE) $46.36 down 1.38% - domestic steel manufacturing
ArcelorMittal (MT) $36.08 down 1.72% - global steel producer
POSCO (PKX) $103.39 down 0.53% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 1.21% to $1,183,427.50 (what is this?).

Cheers,

Colonel Possum

Headline Photograph by Mariana Titus: "Lone Mountain"

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