"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, November 30, 2009

Dubai World, A World Away?



Morning Miners!

It is 6:02 AM and the break room frig is filled with turkey sandwiches. I hope you and the family had a good'un.

The ole Colonel decides daily what news out there might interest Eurekans and what is just a lot of noise in the global fun house. I figure if an event moves gold through a $44 price swing in a single day, it is probably newsworthy. On Wednesday when most Americans were packing it off to grandma's, Dubai World announced that it sought a delay in a $59 billion dollar debt repayment. It was on the eve of the four-day Eid Al Adha holiday in the Arab world and apparently caught everyone by surprise. Asian stock markets swooned, the U.S. dollar nose-dived and investors flocked for safe haven in the Japanese yen. On Friday, after the Japanese government threatened to intervene to strengthen the U.S. dollar, the tide reversed with a dollar rally. Gold did a dipsy-doodle down to $1140 and oil plunged to the low $70 range. Later in the day gold and oil stabilized, the dollar rally fizzled and the entire world was glad it was the weekend.

Who are these global party poopers? Dubai is a city-state in the Gulf region and one of seven emirates that make up the United Arab Emirates or U.A.E. Abu Dhabi is another member and the only oil-wealthy emirate of the federation, they'll be important to our story in a minute. Dubai has illusions of grandeur on the world stage building the world's tallest building in a massive metropolitan complex of man-made islands which even includes an indoor mountain for snow skiing. The Burj rises 2,684 feet to be more than twice as high as our Empire State building. When oil was topping $140/barrel, I remember Dubai boasting that they would soon replace New York as the financial capital of the world. I guess Americans were to fall in the shadow of the mighty Burj. Of course that was then and this is now.

Dubai World is a state sponsored holding company that is skilled at borrowing money if not finding oil. All was hunky-dory until the credit crisis hit and this Arab never neverland now faces paying the piper. The chilling fact is that much of this debt is held by European banks and to a lesser extent some in the United States. Whether Dubai will default or be rescued by their wealthy cousins is the worry at hand. This weekend, Abu Dhabi's central bank stood behind financial institutions in the region to avoid a run on U.A.E. banks. They have yet to say they will bailout Dubai World. Stay tuned.

What is the moral of this story? The credit crisis has been described as a slow train wreck...real slow. Don't be surprised to hear from some big banks in the next weeks or months that they have a little Dubai never nevermoney on their balance sheets. The $59 billion is not the issue in our new debt world of trillions as much as a loss of investor confidence in the global financial system recovery. We're not out of the woods yet bucakroos but I bet that the U.S. is in a whole lot better shape than Europe. Don't give up on the greenback yet!

Enough skiing in the desert, let's walk the walk:

4-WD is ON - After Dubai the VIX or "fear index" is wobbling around 25, rougher road market conditions expected (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 down $0.07 in early trading to $75.98 (January contract, most active); Gold is down $3.6 to $1171.9 (February contract, most active); Silver is down $0.095 to $18.240(March contract); Copper is up $0.0075 to $3.1330(March contract); Molybdenum is steady at $12.00

The DOW is up 47.99 points to 10357.91; the S&P 500 is up 4.71 points to 1096.20. The miners are mixed:

Barrick (ABX) $43.13 up 1.39%
Newmont (NEM) $53.83 up 0.90%
General Moly (Eureka Moly, LLC) (GMO) $2.25 up 2.64%
Freeport McMoran (FCX) $83.98 down 0.19% (a bellwether mining stock spanning gold, copper & molybdenum)

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

Nucor (NUE) $42.46 up 1.55% - domestic steel manufacturing
ArcelorMittal (MT) $39.70 up 2.85% - global steel producer
POSCO (PKX) $119.92 up 0.08% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.97% to $1,283,522.56 (what is this?).

Cheers,

Colonel Possum

Wednesday, November 25, 2009

The Report Wishes You a Happy Thanksgiving!



Morning Miners!

It is 5:56 AM, have a cup with the ole Colonel before Turkey Day. Remind me to unplug the pot, the Report will be back bright and early Monday morning, 11/30. There is a lot to be thankful for in the marketplace and I thought we'd close the week with some good news in addition to gold setting a new record this morning breaking $1180 on the London spot exchange. Here are six things to be happy about:

1. The liquidity-driven momentum of gold price (i.e. weak U.S. dollar and low interest rates) shows no sign of slowing soon. It appears a $1200 level is nearly sure thing before year's end. Down swings are moderated by central banks stepping in to buy the dips along with big players like Barrick Gold.

2. Copper, our canary in the global recovery mineshaft, is soaring like an eagle again. It is near levels not seen since September of last year hitting an intraday high of $3.179 on 11/23 (December contract). This morning's price of $3.138 is 139% above a record low set the day after last Christmas of $1.315.

3. Molybdenum price has pulled back from its summer highs but appears to have stable support as the steel industry recovers. Kevin Louhrey, President and CEO of Thompson Creek Metals, expects that 2010 will be a better year than 2009 and 2011 "even better than 2010" (Molybdenum on CNBC Business News, 11/24/09)

4. The Eureka Miner's Million Dollar Grubstake Portfolio has courted new highs lately earning the readers north of $300,000 since its inception in May (30% return). The Grubstake has twelve stocks that directly or indirectly affect the future of Eureka County so its value is a good barometer for how well we're doing as the nation recovers from the "Great Recession". The broader DOW and S&P 500 markets continue to enjoy a terrific rally from the lows this spring (e.g., S&P at 1100 is up 64.5% from a March intraday low of 666).

5. Although some years away, strategic metals such as lithium and vandium together with silver promise to play an important role in the emerging alternative energy sector. Humboldt County has massive lithium carbonate deposits, Eureka County has a promising vanadium play and silver is a natural by-product of present day gold mining (note 1). This is potentially great news for the kids and grand kids of resource-rich Northern Nevada even though us old timers may witness only the beginning of this industry (What's in a Battery for Eureka County?).

6. On the broader economic front, good news is on the wires this morning. As reported by the Wall Street Journal:

"Consumer spending increased in October by 0.7% as incomes rose and inflation remained low, boding well for economic growth. Personal income rose by 0.2% for the second straight month. In a separate report, initial claims for jobless benefits declined by 35,000 to 466,000 in the most recent week...Wednesday's report was an encouraging sign for growth in the fourth quarter, since both consumer spending and incomes rose by more than expected in October." (WSJ, 11/25/2009)

There, that's all good stuff buckaroos. The Report wishes you and your family a happy Thanksgiving!

Before the checking the turkey, let's walk the walk:

4-WD is OFF - the VIX or "fear index" is below 25, smoother road market conditions are expected to continue (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 down $0.03 in early trading to $75.99 (January contract, most active); Gold is up $14.4 to $1180.2 (December contract, most active); Silver is up $0.165 to $18.620(December contract); Copper is up $0.0240 to $3.1375(December contract); Molybdenum is steady at $12.00

The DOW is up 6.28 points to 10439.99; the S&P 500 is up 0.71 points to 1106.36. The miners are happy:

Barrick (ABX) $43.49 up 1.09%
Newmont (NEM) $54.10 up 1.41%
General Moly (Eureka Moly, LLC) (GMO) $2.37 up 1.72%
Freeport McMoran (FCX) $86.53 up 1.10% (a bellwether mining stock spanning gold, copper & molybdenum)

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

Nucor (NUE) $42.46 up 1.17% - domestic steel manufacturing
ArcelorMittal (MT) $39.65 up 0.92% - global steel producer
POSCO (PKX) $124.28 up 2.99% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.93% to $1,301,523.75 (what is this?).

Cheers,

Colonel Possum

Note 1 - For example, much of Nevada's silver production in 2007, which totaled 262 metric tons, was a co-product or by-product of gold mining. The Robinsin mine near Ely is a good example of silver by-product in a primarily cooper mine. Nevada silver production peaked in 2007 at 770 metric tons tons (source: Nevada Bureau of Mines)

Tuesday, November 24, 2009

Molybdenum on CNBC Business News



Morning Miners!

It is 5:29 AM, let me pour you a cup and let's watch a video. Kevin Loughrey, President and CEO for Thompson Creek Metals (TC), was on CNBC Business News yesterday with Maria Bartiromo to talk about the prospects for molybdenum mining. You will find the entire five minute interview near the bottom of this blog page. Thompson Creek and Freeport McMoran are two major producers of moly today.

The interview is an excellent overview on the future for molybdenum mining and Thompson Creek Metals. Many of the points made by Louhrey are the same as those made by General Moly in their moly price analysis featured in the Report's article Good Golly Miss Moly last September. The Colonel urges you to watch the interview but if you're a bit rushed here is a brief summary:

1. Moly demand is returning for a recovering steel industry as well as other industrial uses.
2. China is very important to moly demand growth.
3. China became a net importer of molybdenum in 2009.
4. Thompson Creek expects 2-3% demand growth from the rest of the world.
5. Restocking has caused moly prices to decline some but world inventories are moderate. Louhrey expects that 2010 will be a better year than 2009 and 2011 "even better than 2010".
6. Thompson Creek is very optimistic about their future specifically and moly mining in general.

That deserves a Colonel Yee-ha! You can visit the Thompson Creek homepage with this link:

Thompson Creek Metals Company


The Colonel can testify that there was a day when some of the folks at CNBC had difficulty saying M-o-l-y-b-d-e-n-u-m. In April of 2007, I appeared with my sidekick Loquita on the CNBC show "Fasy Money". They had a segment for loyal followers to ask the top notch traders questions about stocks. They sent the Colonel a webcam and my dog and I were soon asking Eric Bolling questions about General Moly (GMO) and the molybdenum market. Although Bolling had recently received the Maybach "Man of the Year" award from Trader Monthly he had a devil of a time pronouncing molybdenum (he's forgiven, most people do). Bolling, however, said very positive things about General Moly - he sure got that part right! Here is a photo of Loquita watching the previously taped show. I'm the feller with hat.



Loquita stole the show and was asked to return for a second taping in May with my lovely wife Mariana. For a brief while, Loquita was the "CNBC Fast Money Mascot".

Enough T.V. talk, let's walk the walk:

4-WD is OFF - the VIX or "fear index" is below 25, smoother road market conditions expected (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 down $0.73 in early trading to $76.83 (January contract, most active); Gold is up $2.9 to $1167.6 (December contract, most active); Silver is down $0.100 to $18.510(December contract); Copper is down $0.0150 to $3.1205(December contract); Molybdenum is steady at $12.00

The DOW is down 70.82 points to 10380.13; the S&P 500 is down 7.05 points to 1099.19. The miners are sleepy:

Barrick (ABX) $43.84 down 0.09%
Newmont (NEM) $53.18 down 0.30%
General Moly (Eureka Moly, LLC) (GMO) $2.40 down 0.41%
Freeport McMoran (FCX) $84.88 down 0.53% (a bellwether mining stock spanning gold, copper & molybdenum)

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

Nucor (NUE) $41.70 down 0.10% - domestic steel manufacturing
ArcelorMittal (MT) $39.27 up 1.11% - global steel producer
POSCO (PKX) $119.57 down 1.37% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0,25% to $1,289,411.31 (what is this?).

Cheers,

Colonel Possum

Monday, November 23, 2009

What's in a Battery for Eureka County?


Morning Miners!

It is 5:58 AM, grab a cup and it looks like we're starting the week with another record. Gold popped above $1170 this morning in London, last Monday it broke the $1130 level - I could get used to starting the week this way!

The Colonel promised last week that we'd take a closer look at other metals that may play an important part in our future. The Report to date has identified lithium, vanadium and silver as key players in the emerging alternative energy world. There are massive lithium carbonate deposits in nearby Humboldt County, promising vanadium deposits in the southeast corner of our county and silver remains an important by-product of current gold production (silver is Nevada's fourth highest produced metal).

If you're just catching up with this exciting story here are some background articles:

The Next Big Thing in Northern Nevada (The Eureka Miner's Market Report, 9/28/2009)

A Big Step into the Future for Eureka County (The Eureka Miner's Market Report, 10/23/2009)

A Silver Lining for the Silver State? (The Eureka Miner's Market Report, 11/16/2009)


Today let's dig a little deeper in the mineshaft and understand what new roles each of these metals may play. A common challenge to alternative energy schemes is energy storage. Electric energy is what you pay Mt. Wheeler for and it flows reliably out of your wall plug whenever you need it. If we relied on a wind machine or solar panel to do the same we'd need someway to store energy when "the wind don't blow and the sun don't shine". High-tech batteries offer one solution to ensure continuous power from intermittent electric generation.

You may someday own an electric or electric-hybrid car to save gas on those Elko trips to WalMart while the F-250 rests at home for the tough work (say when gasoline is $10/gallon, heaven forbid). In either case, your new-fangled auto will carry a lot of high-tech batteries to get you there and back.


For applications like an electric car, "energy density" is very important. Now don't run out of the break room pardner, we don't have to return to that hated high school physics class to figure this one out. It just takes a little common sense. If you're going to pack around a passel of batteries, you'd probably like them to be light and not take up too much space. There's got to be somewhere to put your week's WalMart supplies or this whole electric concept isn't worth a bucket of horse you-know-what.

That's all energy density means and it has two flavors: energy-per-weight and energy-per-space. We're all familiar with that clunky lead-acid battery under our hood, let's use it to compare energy density with hi-tech batteries. Let's start with energy-per-weight and give that old Diehard a value of 1.0.

Energy per weight

Lead-acid - 1.0
Nickel-metal hydride (NiMH) - 2.0
Lithium-ion (Li-ion) - 2.9 to 5.7
Silver-zinc - 3.7
Vanadium redox - 0.3 to 0.5

OK, that's pretty cool. The lithium-ion or silver-zinc batteries can store three to nearly six times as much energy as Mr. Diehard. The Vanadium redox battery is actually worse than our old friend but it will have a saving grace in a moment. What about space? Here's a similar comparison:

Energy per space

Lead-acid - 1.0
Nickel-metal hydride (NiMH) - 1.7
Lithium-ion (Li-ion) - 1.4 to 2.0
Silver-zinc - 2.8
Vanadium redox - 0.08 to 0.14

Again the lithium and silver batteries are star performers offering significant space savings for the same energy stored. The vanadium battery looks like a real loser in this comparison but it has a terrific feature.


The Colonel likes to think of the vanadium redox battery as the old work horse; not worth a damn in a race but the only pony that can plow all day. For some applications, size and weight aren't as critical as they are for an electric-powered car. This is where vanadium shines. It is the only battery chemistry ideally suited for handling mega-watt power applications. For wind and solar farms, the energy storage device can sit in one place fat, dumb and happy. The vanadium redox battery offers almost unlimited capacity simply by using larger and larger storage tanks, it can be left completely discharged for long periods with no ill effects and it can be recharged simply by replacing the electrolyte if no power source is available to charge it.

Furthermore, some scientists believe the vanadium redox energy densities can be improved someday for electric car applications. In this scenario, you'd fill your car up with a fresh electrolyte just like you fill with gasoline today. Another pump for Marge's Chevron buckaroos and vanadium is in our backyard at the Gibellini mine site!

Before we get too excited, remember that alternative energy demand for lithium, vanadium and silver are some years away and other battery chemistries may be discovered that are superior in the meantime. Whatever the case, the Colonel believes energy storage is a technology coming our way in one form or another and will prove economically beneficial to resource-rich Northern Nevada and Eureka County.

Enough future talk, let's walk the walk:

4-WD is OFF - the VIX or "fear index" is below 25, smoother road market conditions expected (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 $1.89 in early trading to $79.36 (January contract, most active); Gold is up $23.2 to $1170.0 (December contract, most active); Silver is up $0.380 to $18.820(December contract); Copper is up $0.0585 to $3.1665 (December contract); Molybdenum is steady at $12.00

The DOW is up 154.63 points to 10472.79; the S&P 500 is up 18.56 points to 1109.94. The miners are doing cartwheels:

Barrick (ABX) $45.33 up 3.07%
Newmont (NEM) $54.39 up 4.08%
General Moly (Eureka Moly, LLC) (GMO) $2.44 up 4.72%
Freeport McMoran (FCX) $83.73 up 2.55% (a bellwether mining stock spanning gold, copper & molybdenum)

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

Nucor (NUE) $42.10 up 2.36% - domestic steel manufacturing
ArcelorMittal (MT) $39.14 up 3.33% - global steel producer
POSCO (PKX) $122.69 up 3.14% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 2.79% to $1,311,181.93 (what is this?).

Cheers,

Colonel Possum

Friday, November 20, 2009

The Dollar, The Devil & The Deep Blue Sea


Morning Miners!

It is 5:55 AM and we've got the break room re-stocked with that famous Raine's TGIF coffee. The pot is brewing Scott's Red Label brand. If your nerves can't take it, the Colonel will gladly heat you up some Blue Label. I imagine most governments around the world are on the Blue brand caught somewhere between the Devil and the Deep Blue Sea. Most face a difficult decision: if they cut off their fiscal stimulus too soon, we could fall back into recession; if they lolly gag, inflation and high interest rates could be at our front door in 2011. That's at least the opinion of French banking giant, Societe Generale.

These are favorable conditions for gold price which has been riding high on the Deep Blue Sea while the dollar searches for Davy Jone's locker. Gold is bought as a hedge against paper currency weakness and it has also been a beneficiary of the recent carry trade that has sent the dollar lower and other assets higher. A "carry trade" is borrowing money at a low rate to invest in other asset classes that promise a higher return. Carry trade typically puts additional pressure on the currency borrowed. In the past, carry traders focused on Japan with their low interest rates but lately the United States has become the target of choice given the Fed's zero interest rate policy. There are no indications that this policy will change until there is improvement in employment and sustainable growth returns. In the meantime, the dollar will continue to dive deeper and gold will float higher.


Precious metals are historically famous for violent downward corrections of 10-20% or more but in this environment large players will step in to buy gold on the dips and that helps moderate down swings. These players are central banks trying to diversify their U.S. dollar reserves and mining companies like Barrick that are buying gold to reduce their hedge positions to take advantage of rising prices for future production. As the Report has said before, be glad you live in a community that has a gold mine or two in its backyard.

If this isn't enough to satisfy you in tough times, there is a hiring opportunity for miners in the Northwest Territories. Checkout this link:

N.W.T. diamond mine to hire 150 new workers


The Diavik diamond mine above the Arctic Circle is on the verge of hiring 150 new employees as it starts moving its operations underground in the new year. The Report has covered this operation in the past and it has been a featured destination on the History Channel's "Ice Road Truckers":

From Kenworth's to Diamonds to Kartika Trehan (10/20/2009, The Eureka Miner's Market Report)

Diamonds are a (Canadian) Miner's Best Friend (9/14/2009, The Eureka Miner's Market Report)

If the expected warmer than usual winter in Eureka has you blue, head north buckaroo!

Enough ice talk, let's walk the walk:

4-WD is OFF - the VIX or "fear index" is below 25, smoother road market conditions expected (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 down $0.81 in early trading to $77.24 (January contract, most active); Gold is up $1.3 to $1143.2 (December contract, most active); Silver is down $0.100 to $18.355(December contract); Copper is up $0.0095 to $3.0905 (December contract); Molybdenum is steady at $12.00

The DOW is down 40.13 points to 10292.31; the S&P 500 is down 6.16 points to 1088.74. The miners are still grumpy:

Barrick (ABX) $43.64 down 1.58%
Newmont (NEM) $52.07 down 1.12%
General Moly (Eureka Moly, LLC) (GMO) $2.31 down 2.94%
Freeport McMoran (FCX) $83.67 down 1.24% (a bellwether mining stock spanning gold, copper & molybdenum)

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

Nucor (NUE) $40.76 down 1.12% - domestic steel manufacturing
ArcelorMittal (MT) $37.82 up 0.02% - global steel producer
POSCO (PKX) $119.11 down 0.20% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 1.14% to $1,267,935.64 (what is this?).

Cheers,

Colonel Possum

Photographs of Raine's Market by Mariana Titus

Thursday, November 19, 2009

If God Had Money


Morning Miners!

It is 6:07 AM, allow the ole Colonel to pour you a little Thor's java and spin another tale. Yesterday, we recalled Willie Nelson advising country legend Bill Anderson to sing louder than than Texans drink beer (They Drink Beer Louder Than You Can Sing). Today's story is about that do-wacka-do feller, Roger Miller. I saw Roger play in the 1960s and we'll close on that memory in a moment. I heard Willie Nelson on satellite radio the other day tell a story about when he and Roger watched a sunset somewhere in Texas while traveling. Willie commented about its beauty and Roger Miller said, "Just think what God could have done if he’d had money!"

Now I think Our Maker has better things to do than worry about the monetary woes of mortals but if He did give a hoot about the U.S. greenback He wouldn't have much budget to create things. Given the present state of the dollar we'd probably have to be content with a Big Canyon in Arizona instead of a grand one and Mt. Whitney may have been named Mt. Wimpy.

Fortunately the U.S. dollar is picking up a little steam this morning as gold takes a pause from its meteoric rise. Still the dollar index (USDX or .DXY or "Dixie") dropped below the 75 level yesterday. When we last reported on the dollar in October (Whistling Dixie...What is a Weak Dollar?), the Dixie had just hit a 14-month low at 75.63. When the Dixie was first established in 1973 it gave a value of 100 to the U.S. dollar against a basket of currencies.

The dollar was backed by gold until FDR dropped the gold standard in 1933. I found a short video history of that event on YouTube:

FDR takes United States off gold standard


It is interesting to watch because many of the same conditions are similar to today's situation; the economic turmoil of the Great Depression and severe global trade imbalances. As reported by The Economist recently, Dylan Grice of Societe Generale calculated a present day value for gold if the U.S. had remained on a gold standard. By his calculations the Federal Reserve has a monetary base of $1.7 trillion while it owns 263 million troy ounces of gold; that converts into a gold price of $6,300 an ounce!

Maybe I'm just stubborn but the Colonel believes the dollar will again have its day especially when we remember that 70% of the Dixie is the euro. Until we pick up some momentum economically in this country we'll probably have to contend with a weaker dollar and higher gold prices. Say, that's not all bad in a gold mining town.

Oh, what about Roger Miller? Bless his departed soul, I say him play at the Troubadour in Santa Monica in the mid-1960s and he was as crazy on stage as his do-wacka-do lyrics. Here is a video of him singing "King of the Road" from those days. "Rooms to let for 50 cents" was a pretty strong dollar then even if it was a flop house buckaroos!

King of the Road – Roger Miller

Enough tall tales, let's walk the walk:

4-WD is OFF - the VIX or "fear index" is below 25, smoother road market conditions expected (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 down $2.25 in early trading to $77.85 (January contract, most active); Gold is down $9.8 to $1131.4 (December contract, most active); Silver is down $0.195 to $18.220 (December contract); Copper is down $0.0340 to $3.0765 (December contract); Molybdenum is steady at $12.00

The DOW is down 160.14 points to 10266.17; the S&P 500 is down 20.20 points to 1089.60. The miners are grumpy:

Barrick (ABX) $42.96 down 1.78%
Newmont (NEM) $51.18 down 2.88%
General Moly (Eureka Moly, LLC) (GMO) $2.35 down 4.86%
Freeport McMoran (FCX) $82.83 down 4.86% (a bellwether mining stock spanning gold, copper & molybdenum)

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

Nucor (NUE) $40.50 down 3.39% - domestic steel manufacturing
ArcelorMittal (MT) $37.60 down 2.69% - global steel producer
POSCO (PKX) $119.56 down 1.81% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 2.46% to $1,264,518.95 (what is this?).

Cheers,

Colonel Possum

Wednesday, November 18, 2009

They Drink Beer Louder Than You Sing




Morning Miners!

It is 6:28 AM, grab a cup and let's start the day with a good story. I enjoy listening to country legend Bill Anderson do interviews with other country greats on satellite radio. The other day he told an amusing story about advice he once received from Willie Nelson that has as much wisdom as the Outlaw's famous wit. I found Willie's exact quote on a PBS sponsored website called American Roots Music. Here's a link if you want to pass a good time on your break:

American Roots History - Oral Histories

As Willie Nelson tells the story:

One time I was flying on an airplane, and I just happened to sit next to Bill Anderson. He says, "You do pretty good in those clubs in Texas. I just can't seem to catch on down there. Can you give me any pointers?" I said, "Well, I think they drink beer louder than you sing." And he laughed a little and said, "You're probably right."

The ole Colonel would like to extend Willie's thought to metals this morning. Clearly gold has been the loudest singer in the bar, louder than central banks and investors can swill easy money. It is hitting new record highs this morning on the London spot exchange breaking $1150/oz. There is much debate whether this is all about our weak dollar or fears of inflation or large players like Barrick providing price support on the pullbacks. Lawrence Williams gives an excellent account on gold on MineWeb this morning:

Gold - "raging bull" or should it be "caveat emptor"? (MineWeb, 11/18/2009)

While you check out gold, the Colonel would like to draw your attention to another loud voice coming from the back of the metals saloon. Copper is hitting some high notes that cannot be ignored. To take out U.S. dollar effects, I plotted copper performance versus oil for the past several months (there is a larger and more readable version at the bottom of this blog page).


I call this the "China Chart" because both oil and copper price are sensitive to Asian recovery, especially in China. If you look at the 20-day (1-month) trajectory (blue line), you'll notice that copper has recently gone ballistic with respect to oil. The white vertical arrow shows an upward "stovepipe" momentum. A few months ago both copper and oil were range bound indicated by the counterclockwise white arrow. As a consequence, major copper miners like Freeport-McMoran (FCX) are enjoying 52-week highs. My copper/oil model shows that this morning's COMEX copper price of $3.1315 is near the upper bound of its expected range. That deserves a Colonel Yee-ha! for another loud singer in the bar.

for $80 oil the fair value of copper is $3.01784 in a range of $2.89330 to $3.14237

Enough singing, let's walk the walk:

4-WD is OFF - the VIX or "fear index" is below 25, smoother road market conditions expected (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 0.61 in early trading to $79.75 (December contract); Gold is up $8.4 to $1147.8 (December contract, most active); Silver is up $0.303 to $18.690 (December contract); Copper is up $.0230 to $3.1350 (December contract); Molybdenum is steady at $12.00

The DOW is down 51.92 points to 10385.50; the S&P 500 is down 4.57 points to 1105.75. The miners are mixed:

Barrick (ABX) $44.65 down 1.00%
Newmont (NEM) $53.20 up 0.72%
General Moly (Eureka Moly, LLC) (GMO) $2.41 up 1.26%
Freeport McMoran (FCX) $84.94 down 0.49% (a bellwether mining stock spanning gold, copper & molybdenum)

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

Nucor (NUE) $42.36 up 0.31% - domestic steel manufacturing
ArcelorMittal (MT) $38.72 down 0.49% - global steel producer
POSCO (PKX) $121.80 down 0.57% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.17% to $1,298,426.47 (what is this?).

Cheers,

Colonel Possum

Tuesday, November 17, 2009

More Silver but Diamonds Aren't Forever



Morning Miners!

It is 5:57 AM, grab a cup and let's look at what's shinning and what's lost some glitter. Yesterday we watched a much awaited jump in silver prices as gold set another record breaking day. The precious metals are consolidating a bit today but gold is still north of $1130 and silver above $18. Reuters reported an investor surge into the silver Exchange Traded Fund(SLV:NYSE) for a new record holding of over 8,950 metric tons. The Colonel will keeps his eyes on gold's wacky cousin.

Things are not faring as well for diamonds. I get worried when I see two articles in different publications sending up warning flares on the same day. MineWeb carries a Reuters article this morning warning of a speculative bubble in rough diamond prices that is likely to pop by mid-2010 and may threaten a rerun of last year's industry crisis:

Diamond industry wary of rough stone price bubble (Reuters via MineWeb, 11/17/2009)

The Wall Street Journal carried a similar story observing that major diamond miners are circling the wagons to avoid a bubble by slowly increasing output to tamp down prices of rough gemstones. Prices for uncut rocks have risen more than 40% since February in a backdrop of declining retail sales. The Report has followed diamonds and things were looking up as diamonds displaced gold as the jewelry du jour in India. Unfortunately, this has not been able to compensate for a dramatic drop in demand in western countries.

From Kenworth's to Diamonds to Kartika Trehan (10/20/2009, The Eureka Miner's Market Report)

Diamonds are a (Canadian) Miner's Best Friend (9/14/2009, The Eureka Miner's Market Report)

The Colonel bailed out on poor ole Harry Winston Diamond Corp (HWD) this morning. It was a nice ride but I don't like the "bubble" word pardners.

Enough talk, let's walk the walk:

4-WD is OFF - the VIX or "fear index" is below 25, smoother road market conditions expected (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 0.02 in early trading to $78.92 (December contract); Gold is down $3.4 to $1135.8 (December contract, most active); Silver is down $0.100 to $18.300 (December contract); Copper is up $.0085 to $3.1120 (December contract); Molybdenum is steady at $12.00

The DOW is down 27.51 points to 10379.45; the S&P 500 is down 4.26 points to 1105.04. The miners are mixed:

Barrick (ABX) $44.25 up 0.59%
Newmont (NEM) $52.13 down 0.50%
General Moly (Eureka Moly, LLC) (GMO) $2.38 up 0.42%
Freeport McMoran (FCX) $83.86 DOWN 0.73% (a bellwether mining stock spanning gold, copper & molybdenum)

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

Nucor (NUE) $41.67 DOWN 0.81% - domestic steel manufacturing
ArcelorMittal (MT) $38.42 down 0.60% - global steel producer
POSCO (PKX) $122.20 down 0.11% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.34% to $1,290,382.99(what is this?).

Cheers,

Colonel Possum

Headline Photograph by Mariana Titus, Ackerman Ranch

Monday, November 16, 2009

A Silver Lining for the Silver State?



Morning Miners!

It is 5:53 AM, nothing like starting a new week with new records for precious metals! Continued dollar weakness sent gold past $1130 on the London spot market this morning and lifted platinum and palladium to new 12-month highs. Last week, the Report noted that silver appeared fairly cheap compared to its precious metal cousins but that may change soon. It has participated in the rally but still lags gold by a margin inconsistent with historical behavior. There had been some buzz that the supply/demand picture for silver was not rosy and contributed to its recent lack luster performance. There is a good counterpoint to this argument in an article posted on MineWeb this morning:

Silver Prices to Hit New Highs in 2010 (MineWeb, 11/15/2009)

For reasons we'll explore in a moment, the author reports silver could see $25/oz next year. This morning silver spot popped to $18.25 which is terrific but still lags gold. The ole Colonel ran his most recent gold/silver model this morning and this is where silver price should trade based on the last 3-months of COMEX futures data:

For $1130/oz gold the fair value of silver is $20.081 in a range of $19.311 to $20.850


Hmm...that's something to think about buckaroos. The MineWeb article sees a positive outlook for industrial silver demand next year with improving economic conditions. One of the most intriguing areas is a rising popularity of silver as a "high-tech" metal. Chintan Parikh, a commodity analyst at the CPM Group, says:

"Another key driver for 2010 will be the advent of new market places for silver, including pent-up demand for silver-zinc batteries in ‘smart' automobiles and an array of portable electronic devices..." (MineWeb, 11/15/2009)

The Report readers may remember articles we did on lithium and vanadium as potentially key metals in the next generation for electric cars; let's add silver to our list. The great news is that all three metals are abundant in our own State (e.g, lithium carbonate from Kings Valley, Humboldt County and vanadium from Gibellini, Eureka County)

The Next Big Thing in Northern Nevada (The Eureka Miner's Market Report, 10/23/2009)

A Big Step into the Future for Eureka County (The Eureka Miner's Market Report, 9/28/2009)

It is important to remember these are long plays and the demand ramp up for lithium, vanadium and silver for electric car applications is some years away. It is always good to keep your eye on the future, pardner:

"...silver-zinc batteries are destined to generate major market share as they are said to be much safer, more environmentally-friendly and far more energy-efficient than lithium-ion batteries (which currently dominate the markets for smart cars and portable electronics)." (MineWeb, 11/15/2009)

The Report will look at advanced battery technologies in a followup piece, stay tuned.

By the by, POSCO, a major investor in our Mt. Hope project, hit new 52-week highs this morning. Looks like a good week for everyone.

Enough talk, let's walk the walk:

4-WD is OFF - the VIX or "fear index" is below 25, smoother road market conditions expected (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 1.98 in early trading to $78.33 (December contract); Gold is up $15.4 to $1132.1 (December contract, most active); Silver is up $0.820 to $18.200 (December contract); Copper is up $.1035 to $3.0760 (December contract); Molybdenum is steady at $12.00

The DOW is up 134.07 points to 10404.54; the S&P 500 is up 16.80 points to 1110.28. The miners are rockin':

Barrick (ABX) $43.85 up 2.24%
Newmont (NEM) $52.19 up 2.35%
General Moly (Eureka Moly, LLC) (GMO) $2.39 unchanged
Freeport McMoran (FCX) $83.96 up 2.93% (a bellwether mining stock spanning gold, copper & molybdenum)

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

Nucor (NUE) $41.79 up 2.35% - domestic steel manufacturing
ArcelorMittal (MT) $38.92 up 4.71% - global steel producer
POSCO (PKX) $122.24 up 3.80% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 2.85% to $1,293,043.16 (what is this?).

Cheers,

Colonel Possum

Headline Photograph by Mariana Titus

Wednesday, November 11, 2009

The Report Wishes You a Thoughtful Veterans Day


Morning Miners!

The Report wishes you a thoughtful Veterans Day. The ole Colonel is expecting his sweetheart to return from Louisiana today. It is time for a little R&R, see you bright and early Monday, November 16th.

Cheers,

Colonel Possum

Headline Photograph:

Sgt. Elmer Titus and his first wife Sylvia
Father of my wife, Mariana Titus

Tuesday, November 10, 2009

Why Is Silver So Cheap?


Morning Miners!

It is 5:48 AM and the Colonel had a pleasant surprise waiting for him in the break room. The coffee pot was brewing and there wasn't a soul around. I reached for my favorite "Caterpillar" coffee mug to find a note inside. It read, "Why is silver so cheap? - Dog".

Do you remember that we met "Dog" or Diogenes the Greek Miner this October (Dog in Search of an Honest Metal) ? At that time he was in search of an honest metal; one that was relatively free of speculation, a metal that responded to supply and demand fundamentals. That's getting harder every day in this world of easy money but our friend Dog claimed it was molybdenum. He pointed out that as a minor metal it wasn't traded on the big exchanges and thereby its price less influenced by market speculators. Tim Arnold of Eureka Moly LLC has informed the Report that molybdenum is expected to be introduced on the London Metal Exchange (LME) in February of next year. This will be an interesting turn of events, stay tuned.

In the meantime, I set out to answer Dog's latest question: why is silver so cheap? In a world of $1100/oz gold what should the price of silver be? I checked my models and here's the answer:

For $1100/oz gold the fair value of silver is $19.163 in a range of $18.394 to $19.933

My Gold/Silver model looks at the last 3-months of gold and silver COMEX futures data and applies a bit of old fashioned statistics to come up with these numbers. I just checked the COMEX and silver is presently trading at $17.410. That's not only below the estimated fair value of $19.163 it is well below the lower range of $18.394. Hmmm...I see what's catching the light of Dog's miners lamp!

"Hey, Colonel. How good are these high falootin' models of yours anyway?" You ask.

Of course, I think pretty good but am reminded of billionaire investor Warren Buffet's warning, "Beware of geeks bearing models!" To answer your question let's see how my oil/gold model is doing:

For $1100/oz gold the fair value of oil is $78.08 in a range of $71.56 to $84.60

This morning oil is trading at $79.91 above fair value but well within the estimated range. Here is a chart of oil versus gold (a larger and more readable chart is given at the bottom of the blog page):


The magenta line represents the "fair value" of oil with respect to the price of gold and the two aqua lines show the expected range. The squirrely yellow line connecting the dots shows the daily price data and the blue line is a 1-month moving average. The 1-month line is a good one to follow because it smooths out a lot of daily price fluctuation. The big white arrow shows there is currently momentum for both higher gold and oil prices.

OK, if you believe all that malarkey, here is a similar chart of silver versus gold. Holy cow, the yellow squirrely line is out-of-bounds and the white arrow shows a downward trend for the 1-month average! Now we see why Dog is barking.


The answer to "Why is Silver So Cheap?" is not clear to me. It is either a good opportunity to buy silver if you think gold is pressing ever higher or a sign we're reaching the top for precious metals. I claimed the latter a few weeks ago when gold was $1050 and got steam rolled by the glittering juggernaut. Maybe Dog will return soon with a clue.

How about one more chart? This one has some good news for the metal space. I look at copper price movements with respect to gold and copper is getting back some of its mojo. My charts take out "weak dollar" affects and show the relative performance of the commodity (copper) with respect to the reference commodity (gold). It looks as if copper price has a good future if gold trends higher. Yee-ha!

For $1100/oz gold the fair value of copper is $2.9435 in a range of $2.7713 to $3.1158

This morning copper is slightly above fair value at $2.9650.


Enough charts, let's walk the walk:

4-WD is OFF - the VIX or "fear index" is below 25, smoother road market conditions expected (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 0.48 in early trading to $79.91 (December contract); Gold is up $0.3 to $1101.7 (December contract, most active); Silver is down $0.070 to $17.410 (December contract); Copper is down $.0250 to $2.9650 (December contract); Molybdenum is steady at $12.00

The DOW is down 8.08 points to 10218.86; the S&P 500 is down 1.95 points to 1091.13. The miners are unhappy:

Barrick (ABX) $42.80 down 0.47%
Newmont (NEM) $50.47 down 0.18%
General Moly (Eureka Moly, LLC) (GMO) $2.62 down 0.38%
Freeport McMoran (FCX) $82.07 down 1.36% (a bellwether mining stock spanning gold, copper & molybdenum)

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

Nucor (NUE) $40.65 down 1.76% - domestic steel manufacturing
ArcelorMittal (MT) $36.16 down 1.79% - global steel producer
POSCO (PKX) $116.07 down 1.42% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.77% to $1,269,792.20 (what is this?).

Cheers,

Colonel Possum

Monday, November 9, 2009

Genral Moly Reports, Mt. Hope Update


Morning Miners!

It is 6:45 AM and the Colonel has been reading General Moly's (GMO) third quarter report released this morning. Let me pour you a cup of coffee and we'll checkout the highlights. Before we begin, it is worth noting that fear has left the marketplace again; stock markets are roaring and and gold is reaching new highs (presently around $1106 on both the London spot and COMEX futures market). I guess this proves when the dollar is weak and the FED keeps interest rates near zero it will be giddy-up-go for some time to come. Simply amazing!

Here is the link to the complete General Moly Report; investors think it is good stuff, GMO share price is up 5%:

GENERAL MOLY ANNOUNCES THIRD QUARTER RESULTS


GMO expects the Record of Decision (ROD) for the Mt. Hope Project sometime in the third quarter of 2010 and The BLM should complete their administrative Draft Environmental Impact Statement (EIS) by the end of this year. As reported by Bruce D. Hansen, Chief Executive Officer:

"Finalizing our hydrologic reports after gathering extensive additional data and completing robust models represents a significant milestone in the Mt. Hope permitting effort as it paves the way to see the draft EIS ready for public comment in the first quarter of next year."

GMO looks good through 2010 without accessing new sources of financing. They also present a thorough operating cost and economic analysis of the Mt. Hope Project which remains positive with current molybdenum prices and oil at $80/bbl. Factors are given for higher oil prices and changes in moly pricing so you can do your own the "what if" scenarios.

Finally, there is the following rationale for current moly prices which the Report tracks closely:

"Over the third quarter of 2009, spot molybdenum prices traded between $10.15 and $17.45 per pound, ending the quarter at $14.13 and trading as low as $11.00 per pound more recently. Price fluctuations during the period were primarily attributable to changing Chinese demand patterns. Although Chinese crude steel production continues at record levels, Chinese imports of molybdenum have diminished recently, causing price weakness. Prices well above the lows seen earlier this year continue to be supported by Chinese molybdenum imports, increasing steel capacity utilization rates in developing nations, modestly improving steel capacity utilization in the United States and Europe, an end to global inventory de-stocking, and molybdenum supply reductions."

All that deserves a Colonel Yee-ha for the crew at Eureka Moly and the folks at General Moly HQ!

Enough talk, let's walk the walk:

4-WD is OFF - the VIX or "fear index" is below 25, smoother road market conditions expected (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 1.81 in early trading to $79.24 (December contract); Gold is up $11.3 to $1106.8 (December contract, most active); Silver is down $0.295 to $17.670 (December contract); Copper is down $.0325 to $2.9850 (December contract); Molybdenum steady at $12.00

The DOW is down 11.64 points to 9994.32; the S&P 500 is down 1.94 points to 1064.69. The miners are ballistic:

Barrick (ABX) $43.19 up 3.75%
Newmont (NEM) $50.452 up 2.88%
General Moly (Eureka Moly, LLC) (GMO) $2.59 down 4.86%
Freeport McMoran (FCX) $83.21 up 4.59% (a bellwether mining stock spanning gold, copper & molybdenum)

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

Nucor (NUE) $40.93 up 4.04% - domestic steel manufacturing
ArcelorMittal (MT) $36.79 up 4.86% - global steel producer
POSCO (PKX) $116.89 up 3.95% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up a whopping 2.95% to $1,272,469.08 (what is this?).

Cheers,

Colonel Possum

Headline Photograph by Mariana Titus, Ackerman Ranch

Friday, November 6, 2009

One-O-Point-Two...Ouch! Gold Breaks $1100


Morning Miners!

It is 6:08 AM, grab a strong cup of that good ole Raine's TGIF coffee, you may need it. The Colonel has been digesting the Commerce Department's monthly jobs report which just announced at 5:30 AM our time. Ouch. The new unemployment number is 10.2%, above expectations and a so-called "10% psychological level". Spot gold responded with a run up to $1098 and then broke $1100 a bit after the news.


The job loss for October was 190,000, also slightly higher than expected but the previous months were revised upward with 90,000 fewer jobs loss. What does all this gibberish mean? On the optimistic side it appears the trend line to positive growth in jobs has actually improved. You need a positive number to eventually reverse the unemployment number. The bubbly economists now think positive growth is no sooner than the spring of next year; gloom & doomers believe it may not occur until 2011. In either case it will take years to move from 10% plus to the 5-6% enjoyed during more prosperous times.


The Colonel watches the labor report announcement on CNBC Business News. Today's guest was David Malpass of Encima Global LLC, formerly chief economist at Bear Stearns. I like Malpass because he is a straight shooter and believes a strong dollar is central to maintaining our standard of living. This morning he called 10.2% an "ouch number" although acknowledged the gradual improvement in the job loss trend. He sees a widening gap between large companies that are now doing well (Caterpillar is a good example with strong overseas sales) and struggling small businesses facing tight credit. Healthy small companies are a major source of new jobs so we see the paradox of a rising stock market and dismal unemployment. Malpass pointed out that today's numbers will no doubt keep interest rates low, one of the few positives noted.

As the Report has stated in the past (Eureka is not Saginaw Michigan), Eureka is uniquely positioned in this economic turmoil. Lower interest rates will keep commodity prices up. Gold gets an added boost given its role both as an investor safe haven and a means to lower national dollar reserves (e.g., India, China, Middle East). Oil has backed off from $80 with this news so gold miners get a double-break; lower operating cost and higher gold price. For a Canadian company like Barrick there is a third positive; as the U.S. dollar falls against the loonie, labor costs in Nevada are reduced. Unless some adverse environmental regulations emerge, gold mining should remain one of the strong stabilizing influences for our County. Things are a lot rougher in places where manufacturing and services play a central role in their economies.

Here's some molybdenum lining to today's dark cloud: Moly price is up $0.25 to $12. This is the first increase in many weeks of falling price.

Enough talk, let's walk the walk:

4-WD is ON - the VIX or "fear index" is bobbing around 25, the Colonel still expects off-road market conditions ahead (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 down $2.11 in early trading to $77.51 (December contract); Gold is up $2.3 to $1091.6 (December contract, most active); Silver is down $0.055 to $17.355 (December contract); Copper is down $.0190 to $2.9380(December contract); Molybdenum popped up a little to $12.00 from $11.75.

The DOW is down 11.64 points to 9994.32; the S&P 500 is down 1.94 points to 1064.69. The miners are mixed:

Barrick (ABX) $41.69 up 2.41%
Newmont (NEM) $48.91 up 3.51%
General Moly (Eureka Moly, LLC) (GMO) $2.35 down 2.09%
Freeport McMoran (FCX) $78.81 down 0.87% (a bellwether mining stock spanning gold, copper & molybdenum)

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

Nucor (NUE) $39.38 down 1.01% - domestic steel manufacturing
ArcelorMittal (MT) $35.19 down 1.12% - global steel producer
POSCO (PKX) $111.89 up 2.19% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.24% to $1,227,375.75 (what is this?).

Cheers,

Colonel Possum

Headline Photograph by Mariana Titus, Ackerman Ranch

Thursday, November 5, 2009

Gan Canny, Miner's Lamps & Locomotives



Morning Miners!

It is 6:02 AM, grab a cup of Thor's java and let's connect the dots on something fun; it will led us to miner's lamps and locomotives in a moment. I heard the other day from James, one of my favorite Brits who has the English knack for writing with both wit and charm. We worked together some years ago in South Wales and he now lives in Singapore with a beautiful wife and child. Very international that James. Anyway, he signed off his note with the expression Gan canny bonny lad. The ole Colonel hadn't heard that one before so I set about to do some research. The words are Geordie, the name of the English dialect spoken by folks from the Tyneside region in the northeast corner of England. It means roughly, "Go with care good friend", I've included the more exact and nuanced meaning from the dictionary of Geordie speech below the sign off.

When do we get to the miner stuff, Colonel?

OK, hold your horses young'uns. Some believe the people of the Tyneside area are called "Geordies" because of the "Geordie lamp", one of the first safety lamps developed for miners. "Geordie" comes from "George" and George Stephenson, a Tynesider himself, invented the safety lamp to prevent firedamp (methane) explosions in the coal mines common to that area (note 1).


There was also a "Davy lamp" at that time and both operated on roughly the same principle. The flame is enveloped in wire gauze of a certain fineness that does not ignite firedamp. The Stephenson's Geordie lamp added a glass enclosure for both gauze and flame which worked best in the moist air of Tyneside bituminous coal mines. Both lamps were very fragile and miners were occasionally blown to Kingdom Come until electrical lighting reduced the occurrences in the early 1900s. It took until 1930 for the introduction of battery-powered helmet lamps to finally solve the problem. Think about George the next time you don your safety helmet, miners!


Now to connect the final dots. George Stephenson was a clever fellow and also built one of the first steam locomotives in 1829. Named "Rocket" it won a prize of £500 and pulled a heavy load at a steady speed of nearly thirty miles per hour. Its success, in spite of some local pooh-poohing, led to the adoption of railway transport for passengers and goods. George Stephenson is often referred to as "Father of Railways" and his rail gauge of 4 feet 8½ inches,sometimes called "Stephenson gauge", became the world's standard gauge. On your next trip to Walmart, think of George when you pass the main line along I-80.

The Colonel hopes you learned a few new tidbits this morning, I know I did last night. Gan canny bonny lad (or lass)!

Enough Geordie talk, let's walk the walk:

4-WD is ON - the VIX or "fear index" dropped just above 25 but I'm keeping this yeller until we get past tomorrow's labor report; off-road market conditions are expected to continue (what's this?)

Yellow light is ON our Fuel Gauge, oil is too close to $80 for my comfort.

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 down $0.56 in early trading to $79.84 (December contract); Gold is up $1.4 to $1088.7 (December contract, most active); Silver is flat at $17.460 (December contract); Copper is down $.0425 to $2.9505(December contract); Molybdenum is steady at $11.75.

The DOW is up 142.98 points to 9945.12; the S&P 500 is up 13.62 points to 1060.12. The miners are mixed:

Barrick (ABX) $40.19 down 0.22%
Newmont (NEM) $47.34 down 0.07%
General Moly (Eureka Moly, LLC) (GMO) $2.40 up 4.80%
Freeport McMoran (FCX) $78.66 up 1.24% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are still pouring metal, (a "tell" for General Moly):

Nucor (NUE) $39.35 up 1.76% - domestic steel manufacturing
ArcelorMittal (MT) $35.15 up 1.97% - global steel producer
POSCO (PKX) $108.30 up 0.19% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 1.12% to $1,214,772.23 (what is this?).

Cheers,

Colonel Possum

Headline Photograph: The Eureka & Palisades Locomotive on its way to Durango, Colorado (see Ruby Hill Pours One Million, E&P Railroad News)

Note 1: In fairness there is an alternate explanation for the genesis of Geordie. Tynesiders during the Jacobite risings declared their allegiance to the Hanoverian kings of Great Britain George I and George II; whereas the rest of the county of Northumberland, to the north, was loyal to James Francis Edward Stuart.

From the Geordie Dictionary:

GAN - To go. As seun as aa hord him, aa gans up tiv him.

CANNY - The most common and most beautiful word in our dialect. We cannot better Heslop's description:

"An embodiment of all that is kindly, good, and gentle. The highest compliment that can be paid to any person is to say that he or she is canny. As "home" expresses the English love of the fireside, so in Tyneside and Northumberland does canny express every home virtue. All that is good and loveable in man or woman is covered by the expression "Eh, what a canny body !" A child appealing for help or protection always addresses his elder as canny man "Please. canny man, gi's a lift i' yor cairt." "0, canny man 0 show me the way to Wallington." What Northumberland bairn but has appealed, when punishment impended, "Please canny man, it wasn't me !" The fishwife who wishes to compliment her customer says, "Noo, canny-hinny, see what vor buyin'."

BONNY - Good looking. But is usually used like "canny" to describe character as well as looks. A bonny bairn, a good looking child. A bonny singer, an accomplished singer. Sometimes it is used ironically to describe the opposite, abonny mess; thor's a bonny game gaan on. The old song says:"My bonny keel laddie. my canny keel laddie."

LAD - A sweetheart. She wis gan a waak wiv her lad - she was out walking with her sweetheart.

LASS - A sweetheart. Wor lass however means "my wife".

Finally…

AA'D - I had. Aa'd better gan canny - I had better be careful. AA'D. I would. Aa'd a been there mesel - I would have been there myself.

Wednesday, November 4, 2009

Gold Soars & a $34 Billion Dollar Bet on America


Morning Miners!

It is 5:29 AM, grab a strong cup of joe and let's marvel a bit at the events of the last 24 hours. Gold is on a tear hitting a new record high of $1088.5 on the COMEX yesterday and nearly hitting $1096 on the London Spot Market this morning. The ole Colonel recently said $1080 was probably tops for 2009, I don't mind being dead wrong. The other big news was billionaire investor Warren Buffett's announcement that he plans to buy the rest of Burlington Northern Santa Fe that he doesn't already own. The deal amounts to $34 Billion in cash and an additional $10 Billion in new debt. The "Sage of Omaha" calls it an "all-in wager on the future of the United States." That deserves a Colonel Yee-ha!



The third noteworthy event was a strong dollar on a gold rally day. It looks like the greenback is retreating some this morning pending the Federal Reserve announcement at 11:15 Am (PST) today after their policy meeting. Folks are looking for any monetary tightening in the winds; Australia raising interest rates a second time sent the U.S. buck flying yesterday.

Strong gold, strong dollar and a big railroad story makes my day any day pardner. It seems the BNSF deal is also a play on coal remaining a big player in our future energy needs. Here is a link to an article on that thought:

Buffett's Burlington Bid A Bet On Coal's Continued Role (Dow Jones, 3/3/2009)

So what's up with gold? The recent rally started when it was discovered that India quietly bought 200 tons of gold from the International Monetary Fund (IMF) last month. The IMF plans to sell a total of 403.3 tons of gold this year to increase its resources for lending to low-income countries. It is thought that the India buy is a move away from the U.S. dollar and an effort to shore up their gold reserves. Both China and India hold a lot of greenbacks and have much lower gold reserves than is typical for Western nations.

"China may be quietly building its own reserves anyway through purchasing domestically mined gold - it is now the world's top producer. It may also make sense for other countries - mainly in the Far East and Middle East, where gold has always been an important element in wealth preservation among monied individuals, to follow suit - not only by buying from the IMF, but also building holdings by small and steady purchases in the open market. This may already be happening given the considerable support being seen for gold every time it dips back a little from its recently much higher levels." (MineWeb, 11/3/2009)

Here are links to two articles on the India purchase:


India dumps dollars for IMF gold - is China next in line?
(MineWeb, 11/3/2009)

India buys 200 tonnes of IMF gold (London Telegraph, 11/3/2009)

Strange times indeed Buckaroos. Stay tuned. Looks like we have an up market today.

Enough talk, let's walk the walk:

4-WD is ON - the VIX or "fear index" is still above 25, off-road market conditions are expected to continue (what's this?)

Yellow light is ON our Fuel Gauge as oil bumps back up over $80 (although it just dropped a thin flat washer lower, it is still too close for my comfort!).

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 $0.28 in early trading to $79.88 (December contract); Gold is up $6.5 to $1091.4 (December contract, most active); Silver is up $0.280 to $17.460 (December contract); Copper is up $.0415 to $2.9975(December contract); Molybdenum is steady at $11.75.

The DOW is up 57.13 points to 9829.04; the S&P 500 is up 6.99 points to 1052.40. The miners are in La-La land:

Barrick (ABX) $39.68 up 1.30%
Newmont (NEM) $47.23 up 1.61%
General Moly (Eureka Moly, LLC) (GMO) $2.58 up 9.07%
Freeport McMoran (FCX) $78.78 up 2.60% (a bellwether mining stock spanning gold, copper & molybdenum)

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

Nucor (NUE) $39.34 up 0.77% - domestic steel manufacturing
ArcelorMittal (MT) $34.80 up 2.62% - global steel producer
POSCO (PKX) $107.56 up 2.81% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 2.28% to $1,217,750.74 (what is this?).

Cheers,

Colonel Possum

Headline Photograph by Mariana Titus

Tuesday, November 3, 2009

Barrick Reports Loss, Cortez Hills on Track


*** BREAKING NEWS *** Gold broke $1080 midday on the COMEX futures exchange (most active, December contract). The Dollar Index (.DXY) is also strong breaking its 50-day average which is now positive trending.

Morning Miners!

It is 5:24 AM, the coffee is on and we'd better catch up on some mining business. Both Barrick and Newmont reported their third quarter (Q3) results last week. Here are the links to their press releases and presentations:

Barrick Press Release
Barrick Presentation

Newmont Press Release
Newmont Presentation


Barrick Gold reported a net loss of $5.4 billion compared to net income of $254 million in Q3 2008. That sounds bad but the loss primarily reflects a $5.7 billion charge to earnings for a change in accounting treatment to allow them to eliminate their gold hedges. The Report covered Barrick's announced intention to do so this September (Barrick Makes Bold Move, Moly Drops, 9/9/09). Eventually removing hedges should be a positive for shareholders since it provides investors leverage to gold price for all future production. This makes sense if you think gold prices will continue to rise and Barrick certainly does; checkout their presentation slide 15, Outlook - Bullish on Gold.

By the by, if you need reminding that gold mining is a profitable business for big miners, checkout slide 7. Barrick's total cash cost in Q3 was $456/oz for an averaged realized gold price of $971/oz. Oooh-Weee, buckaroos. By comparison, their new "advanced low cost mines" are expected to do even better. Cortez Hills is agood example. Presently 85% complete, the Cortez Hills project is on track to commence production sometime early next year. They are expected to produce one million ounces per year at an estimated total cash cost of $350-$400/ounce (slide 4).

Newmont mining reported a net income of $388 million from a quarterly revenue of $2.0 billion. They are doing a good job of reducing costs too. Their average realized gold price was $964 per ounce at a cost of $404/ounce. This is down 13% from $467 per ounce in the year ago quarter. In Nevada they sold 505,000 equity ounces of gold at costs of $541/ounce (see note 1). They estimate to lighten the weight of Northern Nevada by about 1.9 and 2.0 million ounces of gold by the end of 2009. Not too bad, pardner.

The markets are a little rocky this morning with a nice pop in the old U.S. greenback. This reinforces the trend we discussed last week; strong dollar, weak markets (The Colonel's Outlook for Year's End). The curious thing today is a rising gold price which is contrary to its typical inverse relation to the dollar. Stay tuned, this could be interesting.

Enough talk, let's walk the walk:

4-WD is ON - the VIX or "fear index" is way above 25, off-road market conditions are expected to continue (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 down $0.89 in early trading to $77.24 (December contract); Gold is up $7.7 to $1061.7 (December contract, most active); Silver is down $0.015 to $16.425 (December contract); Copper is down $.0235 to $2.9240(December contract); Molybdenum is steady at $11.75.

The DOW is down 56.91 points to 9732.53; the S&P 500 is down 4.78 points to 1038.10. The miners are mixed:

Barrick (ABX) $37.49 up 2.68%
Newmont (NEM) $44.85 up 2.94%
General Moly (Eureka Moly, LLC) (GMO) $2.31 up 2.21%
Freeport McMoran (FCX) $74.11 down 0.67% (a bellwether mining stock spanning gold, copper & molybdenum)

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

Nucor (NUE) $38.69 down 0.85% - domestic steel manufacturing
ArcelorMittal (MT) $33.10 down 2.30% - global steel producer
POSCO (PKX) $103.86 down 1,18% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.52% to $1,164,404.41 (what is this?).

Cheers,

Colonel Possum

Headline Photograph by Mariana Titus, "Pete's Horses, Ackerman Ranch"

Note 1 - The reader is cautioned not to compare Barrick's and Newmont's cost figures too literally without first reading a zillion accounting footnotes; for ballpark comparisons I think you can skip this step!