"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, December 31, 2009

The Colonel Wishes You a Happy New Year!


Morning Miners!

It is 6:44 AM and time for the ole Colonel to wish you all a Happy New Year! You'll have to brew your own Raine's TGIF Red Label coffee tomorrow, the Report will be back on the air bright and early Monday, January 4. Unless a lightning bolt hits the markets latter today, I think we can safely say that 2009 has been a good'un: the S&P 500 is up 68% from its March low, gold is back over $1100/oz, the old greenback is feeling a bit more chipper, our local miner's have had a good run and the Eureka Miner's Grubstake Portfolio has earned more than a quarter million dollars.

In the metals, copper is king posting a new 16-month high of $3.3790 on the COMEX this morning (most active, March contract). This is a good omen for 2010 since copper has been a fairly reliable gauge of global economic recovery. Here is a MineWeb article on the prospects for base metals according to the Royal Bank of Scotland (RBS):

Copper still the favourite base metal - RBS
(Mineweb, 12/31/2009)

Certainly metals have been helped in 2009 by significant investor interest which in some cases has displaced supply/demand as a key price driver. Early in 2010 it is expected that molybdenum will launch along with cobalt on the London Metal Exchange (LME):

Cobalt and Molybdenum 2010

Here is a pretty good summary for why this is a good idea:

London Metal Exchange cobalt and molybdenum FAQ

The Brits are great hosts too and it should be fun with cocktails to boot:

"You are invited to join the LME and its members at a cocktail reception to celebrate the launch of the minor metals contracts. Held on the LME’s trading floor known as the ‘Ring’ you will have the opportunity to meet with key individuals from the broader metals community as well as key decision makers in the cobalt and molybdenum markets."

If the Colonel doesn't make this shindig, I do plan to build a molybdenum pricing model next year and share the results with our Eureka Moly LLC. This will be my sixth proprietary model; presently the Report models oil, gold, silver, copper and natural gas.

Loquita looks like she needs to go out, see you on Main Street tonight!


Enough talk, let's walk the walk:

4-WD is OFF - the VIX or "fear index" remains below 25; smoother road market conditions expected to continue (what's this?)

Yellow light is ON for possible adverse regulation/legislation: Cortez Hills & mercury emissions

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

Oil is up $0.54 in early trading to $79.82 (February contract, most active); Gold is up $2.5 to $1100.0 (February contract, most active); Silver is up $0.108 to $16.910 (March contract); Copper is up $0.0135 to $3.3585 (March contract); Molybdenum is steady at $12.50 yesterday.

The DOW is down 52.60 points to 10495.91; the S&P 500 is down 4.17 points to 1122.25. The miners are mixed:

Barrick (ABX) $39.80 up 0.61%
Newmont (NEM) $47.65 up 0.13%
General Moly (Eureka Moly, LLC) (GMO) $2.07 down 0.48%
Freeport McMoran (FCX) $80.92 up 0.05% (a bellwether mining stock spanning gold, copper & molybdenum)

The Steels are mixed, (a "tell" for General Moly):

Nucor (NUE) $47.00 down 0.12% - domestic steel manufacturing
ArcelorMittal (MT) $46.08 down 0.41% - global steel producer
POSCO (PKX) $131.61 up 0.11% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.11% to $1,280,489.96 (what is this?).

Cheers,

Colonel Possum

Headline Photograph by Mariana Titus

Wednesday, December 30, 2009

POSCO & Miss Moly Go Dancing


Morning Miners!

It is 6:04 AM, more snow and the coffee is hot. Make yourself comfortable and the Colonel will return after the market open.

OK, pardner, this is setting up to be an interesting day. The U.S. dollar is rising on increased concerns about European debt and gold is falling in turn. The broader markets are mixed as we race to the year's end but wait, not everything is heading south. It is often the case that strength can be found on weak market days. Today's outstanding stock in the Eureka Miner's Grubstake is steel maker POSCO (PKX), 20% investor in our Mt. Hope project. In fact, POSCO is flirting with a new 52-week high on a day when the world's largest steel producer, ArcelorMittal (MT) is down more than 2%.

What about molybdenum? The gains are small but steady with moly picking up another quarter yesterday to make $12.50. Here's a 1-month chart of molybdenum and nickel, another key ingredient in making steel.


I'd say that's a pretty encouraging trend up. So what's up with General Moly (GMO)? Recently GMO took a dip below $2, recovered nicely to a $2.25 level and today is headed back to 2-bucks. Let's look at a chart of GMO compared to its 200-day moving average:


The average line bottomed this August and has been on a modest uptrend (see Note 1). Today's price is below that line and possibly signaling a good time to buy given the positive action of POSCO and molybdenum together with an improving global demand story for steel. Let's see how Thompson Creek (TC) is doing. TC is another pure play moly mining company that is presently in production;


OK, there is a similar shape to the 200-day average except TC is sitting a little above line (see Note 2). The Colonel has a feeling (and I might be wrong) that both TC and GMO have a reasonable prospect of heading north with moly in the first quarter of the new year. As I mentioned the other day, I bought a little GMO at $2.05 and $2.17 both below the present 200-day average price of $2.40.

I'll close with one more positive indicator. The March (most active) COMEX contract for copper hit a new 52-wk intraday high of $3.362 in early morning trading on a strong dollar day. Last year at this time, copper traded as low as $1.4370. Copper has been our faithful canary in the global recovery mineshaft and she looks like she's going to the New Year dance with POSCO and Miss Moly!

Enough talk, let's walk the walk:

4-WD is OFF - the VIX or "fear index" remains below 25; smoother road market conditions expected to continue (what's this?)

Yellow light is ON for possible adverse regulation/legislation: Cortez Hills & mercury emissions

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

Oil is up $0.21 in early trading to $79.08 (February contract, most active); Gold is down $8.6 to $1089.5 (February contract, most active); Silver is down 0.195 to $16.915 (March contract); Copper is up $0.0275 to $3.3410 (March contract); Molybdenum closed up at $12.50 yesterday.

The DOW is down 7.93 points to 10537.78; the S&P 500 is down 1.89 points to 1124.31. The miners are down:

Barrick (ABX) $39.62 down 0.23%
Newmont (NEM) $47.43 down 0.69%
General Moly (Eureka Moly, LLC) (GMO) $2.07 down 2.36%
Freeport McMoran (FCX) $80.98 down 0.14% (a bellwether mining stock spanning gold, copper & molybdenum)

The Steels are mixed, (a "tell" for General Moly):

Nucor (NUE) $46.06 unchanged - domestic steel manufacturing
ArcelorMittal (MT) $45.79 down 2.10% - global steel producer
POSCO (PKX) $131.56 up 0.63% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.72% to $1,277,012.74 (what is this?).

Cheers,

Colonel Possum

Headline Photograph by Mariana Titus

Note 1: A 200-day moving average is a 200-market-day average that includes the most recent price in the average and tosses out the oldest. Two hundred market days is roughly 10 months in calendar time. This average smooths the data but lags actual price by 1/2 the averaging interval; in this case, 5-months. The low in July-August therefore reflects the bottoming of GMO share price earlier in February-March. To maintain the current upward trend, GMO actual price needs to stay above the 200-day line. If GMO doesn't move above the 200-day line soon, all bets are off.

Note 2: By comparison, TC is technically a much healthier chart than GMO since the actual share price has remained above the 200-day moving average. A move below this line would probably not bode well for TC or GMO. The positive moly price and POSCO trend should, however, lift both TC and GMO if the steel industry continues to recover in 2010.

Tuesday, December 29, 2009

Fearless in 2010?



Morning Miners!

It is 6:47 AM. There's a little new snow on the ground; grab a cup, warm up and let's see if we can solve a puzzle. Like Alice in Wonderland, the ole Colonel is becoming "curiouser and curiouser" about the markets lately. We had a terrorist attack on an airline recently that now appears tied to Al Qaeda and the markets hardly took notice. In fact, over a period of months fear seems to have disappeared from investor's thinking as the broader markets inch ever higher. On September 11 of this year the Report looked at a "fear index" often used to gauge investor sentiment:

Viva Las VIXas! Don't Worry Be Happy (The Eureka Miner's Market Report, 9/11/2009)

The choice of reporting date was coincidence but now eerily prescient given the close call of Flight 253. As we discussed then, the so-called "fear index" is actually the "Chicago Board Options Exchange Volatility Index" or simply VIX. Here's a quick overview from that article:

"The VIX is often referred to as the 'fear index' because it is a measure of market volatility. When there are wild swings in the markets, we say the volatility is high; when day-to-day price fluctuations are small, we say the volatility is low and markets are stable.

The VIX represents one measure of the market's expectation of volatility over the next 30 day period. It is derived from S&P 500 index options which investors buy and sell to defray risk. A high value corresponds to a more volatile market and therefore more costly options. Options are like insurance, when the rates go up you can bet someone is expecting a hurricane in the investment world."

OK, so if we look at the VIX today it should give us some idea of what's in store for the first month of 2010. Here is the "curiouser" part; this morning's value is below 20 sitting at levels not seen since the latter part of August 2008. On a daily basis, the Report looks at the VIX to determine how rough the road ahead will be on the Eureka Outlook Dashboard. We say if the level is less than 25, smooth market conditions are expected. For the last several days we've been below 20...Hmm.

To give this some perspective it's worth repeating the chilling VIX levels from recent history. As reported in September, here are some key events during the recession and the corresponding values of the "fear index":

03/17/2008 VIX=35.6 Collapse of Bear Stearns
09/15/2008 VIX=31.9 Collapse of Lehman Brothers
10/23/2008 VIX=96.4 Highest VIX, fear of a run on the banks
03/09/2009 VIX=51.3 S&P 500 March closing low 676.53 ("the bottom")

I just checked and the VIX this morning is 19.7. Buckaroos, I don't have a solution to this puzzle but I just bought a little gold on the dip for safe-keeping just in case. Gold has returned to its 1-year trend line which may be as good a place as any to put a little glitter under your mattress.


My dog, Loquita, just chased away the cheshire cat. Don't worry be happy!


Enough VIX in Wonderland, let's walk the walk:

4-WD is OFF - the VIX or "fear index" remains below 25; smoother road market conditions expected to continue (what's this?)

Yellow light is ON for possible adverse regulation/legislation: Cortez Hills & mercury emissions

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

Oil is down $0.49 in early trading to $78.28 (February contract, most active); Gold is down $7.7 to $1100.2 (February contract, most active); Silver is down 0.320 to $17.240 (March contract); Copper is down $0.0370 to $3.2995 (March contract); Molybdenum is steady at $12.25.

The DOW is up 8.46 points to 10555.54; the S&P 500 is down 0.43 points to 1127.35. The miners are mixed:

Barrick (ABX) $39.79 down 1.80%
Newmont (NEM) $47.44 down 0.77%
General Moly (Eureka Moly, LLC) (GMO) $2.16 up 0.47%
Freeport McMoran (FCX) $82.52 up 0.88% (a bellwether mining stock spanning gold, copper & molybdenum)

The Steels are mixed, (a "tell" for General Moly):

Nucor (NUE) $46.13 down 0.99% - domestic steel manufacturing
ArcelorMittal (MT) $46.60 up 1.99% - global steel producer
POSCO (PKX) $130.80 down 0.31% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.35% to $1,290,094.30 (what is this?).

Cheers,

Colonel Possum

Headline Photograph by Mariana Titus

Monday, December 28, 2009

Santa Claus Was Good to Eureka!


Morning Miners!

It is 6:23 AM. Welcome back to the break room, grab a cup and sit a spell with the ole Colonel. It looks like Santa Claus was good to Eureka. We'll get to that in a minute, first I'd like to draw your attention to the headline quote above this article:

"The history of Eureka is in its future" - Lambert Molinelli, 1878


Lambert Molinelli was the Mining Recorder for Eureka County during its boom years and one of its more ardent promoters. I bought his famous book Eureka and its Resources some time ago but waited for this holiday to absorb its terrific detail about mining and the Eureka's world class smelting process. I thought his quote would be a great theme for the Report as we look beyond 2009; a future where strategic metals rise in importance for our county and gold production continues to be a major factor for economic growth. The Colonel also plans to share some of Molinelli's mining insights in upcoming reports.

Now what about that Christmas stocking? It was stuffed with new highs for the broader markets and a nice rally for all our favorite metals and miners. Gold notched an intraday low of $1075.2 on 12/23 only to head steadily higher to $1108.9 in early morning trading on the COMEX, molybdenum got a nice 5% pop too. Here is a summary from 12/23 until this morning:

Gold up 3.1% to $1108.9
Silver up 2.4% to $17.615
Copper up 5.6% to $3.325
Molybdenum up 5.45% to $12.25

And our local miners at today's opening price from intraday lows on 12/17:

Barrick (ABX) up 6.4% to $40.64
General Moly (GMO) up 21.6% to $2.25

That deserves a Colonel Yee-ha! Let's keep the good times rolling through this short week to year's end!

Enough hollering, let's walk the walk:

4-WD is OFF - the VIX or "fear index" remains below 25; smoother road market conditions expected to continue (what's this?)

Yellow light is ON for possible adverse regulation/legislation: Cortez Hills & mercury emissions

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

Oil is up $0.58 in early trading to $78.63 (February contract, most active); Gold is up $4.1 to $1108.9 (February contract, most active); Silver is up 0.175 to $17.615 (March contract); Copper is up $0.0325 to $3.3250 (March contract); Molybdenum is steady at $12.25.

The DOW is up 8.69 points to 10528.79; the S&P 500 is up 0.37 points to 1126.85. The miners are mixed with ABX and GMO pulling back some from their opening price:

Barrick (ABX) $39.99 down 0.89%
Newmont (NEM) $47.31 down 1.40%
General Moly (Eureka Moly, LLC) (GMO) $2.20 unchanged
Freeport McMoran (FCX) $82.60 up 0.96% (a bellwether mining stock spanning gold, copper & molybdenum)

The Steels are up, (a "tell" for General Moly):

Nucor (NUE) $47.85 up 1.59% - domestic steel manufacturing
ArcelorMittal (MT) $46.16 up 1.34% - global steel producer
POSCO (PKX) $131.31 up 0.30% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.20% to $1,299,129.63 (what is this?).

Cheers,

Colonel Possum

Headline Photograph by Mariana Titus

Wednesday, December 23, 2009

The Colonel Wishes You A Merry Christmas!


***BREAKING NEWS*** General Moly closed the day with a greater than 10% gain at $2.14, the Eureka Miner's Grubstake portfolio jumped 2.13% to close at $1,280,939.41. Thanks Santa!

Morning Miners!

It is 7:38 AM and time for the ole Colonel to wish you all a very Merry Christmas! We're going to pull the plug on the break room coffee pot today, tomorrow is just a half-day on the exchanges. Looks like Santa is being good to miners, no sense in pressing our luck. Gold has bounced to $1093.0 on the COMEX halting its slide, Barrick is over $40 again and General Moly is only 3 pennies away from $2.

If the miner rally continues today, the readers (yup, that's you) have stuffed nearly $270,000 in their Christmas stocking from a million dollar investment in Eureka's future last May. A 27% gain for a little more than a half-year's work is not all bad. If you are new to the Report, the Eureka Miner's Grubstake portfolio is a collection of 12 stocks that directly or indirectly influence Eureka County. You can check it out here:

The Eureka Miner's Million Dollar Grubstake

The Colonel will be back bright and early Monday, December 28.

Put a little Christmas brandy in your coffee and let's walk the walk:

4-WD is OFF - the VIX or "fear index" remains below 25; smoother road market conditions expected to continue (what's this?)

Yellow light is ON for possible adverse regulation/legislation: Cortez Hills & mercury emissions

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

Oil is up 2.00 in early trading to $76.40 (February contract, most active); Gold is up $6.3 to $1093.0 (February contract, most active); Silver is up 0.150 to $17.180 (March contract); Copper is up $0.0430 to $3.1810 (March contract); Molybdenum is steady at $11.62.

The DOW is down 11.79 points to 10452.31; the S&P 500 is down 0.13 points to 1117.89. The miners are stuffing their Christmas stockings:

Barrick (ABX) $40.26 up 3.52%
Newmont (NEM) $48.10 up 2.90%
General Moly (Eureka Moly, LLC) (GMO) $1.97 up 1.55%
Freeport McMoran (FCX) $80.22 up 2.26% (a bellwether mining stock spanning gold, copper & molybdenum)

The Steels are mixed, (a "tell" for General Moly):

Nucor (NUE) $45.66 up 0.71% - domestic steel manufacturing
ArcelorMittal (MT) $44.36 down 0.54% - global steel producer
POSCO (PKX) $128.63 up 1.18% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 1.17% to $1,269,003.97 (what is this?).

Cheers,

Colonel Possum

Headline Photograph by Mariana Titus

Tuesday, December 22, 2009

A Little Perspective on Gold & General Moly


Morning Miners!

It is 6:46 AM, let me pour you a cup as you shake off some of that winter snow. The month of December has been pretty tough so far on the price of gold and our local miners. It all started with the Dubai debt crisis at the end of November followed by concerns about the economic health of some members of the European Union. What has been bad for gold has been good for our own greenback which has received a much needed lift from its doldrums.

The ole Colonel thought it might be time to do a little head scratching and get some perspective on these pullbacks. Let's start with gold, one year ago it sat at $850/oz and this morning's COMEX is trading down $8 to $1087/oz. It is easy to be discouraged when you remember the recent shot at $1225+/oz but the 1-yr trend line puts us at $1080/oz which is pretty durn close to where we're at. Hmm...that's not all bad. Palm trees will grow in Eureka before an unhedged Barrick can't turn a King's ransom on gold north of $1000/oz!

Let's do a tougher one. One year ago molybdenum was $11/lb and today it is $11.62/lb. Rising above $18 this summer the return to $11 territory may seem that we're stuck in reverse. Remember, however, that moly dipped to $8 this April and the 1-year trend line puts us at roughly $14/lb. Much of the rise in moly was due to Chinese stimulus and their frenetic restocking of strategic metals. Today's price may be more representative of supply/demand fundamentals of a recovering global steel industry. According to Kevin Loughrey, President and CEO for Thompson Creek Metals (TC), things are on the mend in the world of moly. Thompson Creek and Freeport McMoran (FCX) are two major producers of moly today.


It is worth repeating Mr. Loughrey's points during the CNBC interview with Maria Bartiromo (Molybdenum on CNBC News, 11/24/2009):

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.

A year ago, General Moly's share price was a dismal $0.78 when moly was $11/lb. Yesterday's closing price was $1.96 for a moly price of $11.62/lb. Even though GMO has retreated from a the lofty $3+ levels this summer, the present price still represents a considerable increase in investor confidence from last December. Here is a 1-year comparison of GMO with moly producers Thompson Creek (TC) and Freeport McMoran (FCX):

GMO 12/22/08 $0.78
GMO 12/21/09 $1.96 (up 151%)

TC 12/22/08 $3.68
TC 12/21/09 $11.10 (up 201%)

FCX 12/22/08 $21.32
FCX 12/21/09 $77.96 (up 265%)

OK Colonel, what's your point? I remain bullish on gold and General Moly. I grabbed a few shares at $2.17 and $2.05 the other day and have an average cost basis of $2.23. If you have any faith in the moly outlook, I think GMO will do just fine and gold will get some of its mojo back early next year too.

Enough talk, let's walk the walk:

4-WD is OFF - the VIX or "fear index" remains below 25; smoother road market conditions expected (what's this?)

Yellow light is ON for possible adverse regulation/legislation: Cortez Hills & mercury emissions

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

Oil is down $0.52 in early trading to $73.20 (February contract, most active); Gold is down $8.1 to $1087.9 (February contract, most active); Silver is down $0.105 to $16.930 (March contract); Copper is up $0.0310 to $3.1275 (March contract); Molybdenum is steady at $11.62.

The DOW is up 115.86 points to 10444.75; the S&P 500 is up 13.08 points to 1115.55. The miners are mixed:

Barrick (ABX) $38.56 down 1.03%
Newmont (NEM) $46.52 down 0.98%
General Moly (Eureka Moly, LLC) (GMO) $1.96 unchanged
Freeport McMoran (FCX) $78.11 up 0.19% (a bellwether mining stock spanning gold, copper & molybdenum)

The Steels are mixed, (a "tell" for General Moly):

Nucor (NUE) $44.85 up 0.52% - domestic steel manufacturing
ArcelorMittal (MT) $44.33 down 0.49% - global steel producer
POSCO (PKX) $126.29 up 1.60% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.11% to $1,246,374.91 (what is this?).

Cheers,

Colonel Possum

Headline Photograph by Mariana Titus

Monday, December 21, 2009

Is China Coming to Lovelock?



Morning Miners!

It is 6:45 AM, grab a cup and let's put the last bells on this short sleigh ride to Christmas. Speaking of short; Happy Winter Solstice, the shortest day of the year! Actually you need to wait for 9:47 PM (PST) tonight to feel Old Man Winter's first breath and it looks like a pretty good snow storm will follow.

There is some interesting news rumbling in Northern Nevada. U.S. mining company Firstgold (FGD.TO) is seeking to complete a partnership deal with a Chinese mining company for their heap leaching operation at the Relief Canyon Mine just outside Lovelock, Nevada. The complete story appeared on Mineweb this weekend:

Obama asked to block Chinese investment in U.S. gold mine on security grounds (Mineweb/Reuters, 12/19/2009)

Here is the website for Firstgold:

Relief Canyon Mine - Firstgold

There are apparently national security concerns that could cause President Barack Obama to block the transaction since Firstgold's mine is close to Fallon Naval Air Station and other military installations (roughly 50 miles northeast of Fallon). The controlling agency is part of the Treasury Department called the Committee on Foreign Investment in the United States, or CFIUS.

CFIUS is recommending that the request for China's Northwest Nonferrous International Investment Company to buy 51 percent of the company be rejected. If Obama rejects the deal, it would be only the second time a U.S. president has intervened to block an investment on national security grounds. We won't have to wait long for an answer, once the President receives the CFIUS recommendation, he has 15 days to announce his decision. Stay tuned buckaroos, this may be a sign of things to come.

Enough talk, let's walk the walk:

4-WD is OFF - the VIX or "fear index" remains below 25; smoother road market conditions expected (what's this?)

Yellow light is ON for possible adverse regulation/legislation: Cortez Hills & mercury emissions

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

Oil is up $0.64 in early trading to $74.06 (February contract, most active); Gold is down $2.7 to $1105.2 (February contract, most active); Silver is down $0.160 to $17.160 (March contract); Copper is up $0.0060 to $3.1415 (March contract); Molybdenum is steady at $11.62.

The DOW is up 115.86 points to 10444.75; the S&P 500 is up 13.08 points to 1115.55. The miners are mixed:

Barrick (ABX) $39.04 down 1.21%
Newmont (NEM) $47.14 2.32%
General Moly (Eureka Moly, LLC) (GMO) $1.95 down 2.01%
Freeport McMoran (FCX) $77.25 up 0.93% (a bellwether mining stock spanning gold, copper & molybdenum)

The Steels are mixed, (a "tell" for General Moly):

Nucor (NUE) $43.90 up 0.16% - domestic steel manufacturing
ArcelorMittal (MT) $44.27 up 2.71% - global steel producer
POSCO (PKX) $125.0 down 0.01% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.24% to $1,247,738.08 (what is this?).

Cheers,

Colonel Possum

Monday, December 14, 2009

The Colonel Is On the Road Again



Morning Miners!

It is 6:25 AM and time to kick start a Monday on the road to the holidays. I'll be on the road too so the Report will be off the air for a few days. Here are some interesting news items this morning that point in the direction of a good close for 2009.

As December rolled in, the Dubai debt crisis sent gold down the shaft elevator (Dubai, A World Away?). Over the weekend, Dubai's government received $10 billion in financing from Abu Dhabi, which will pay part of the debt held by conglomerate Dubai World and its property unit, Nakheel. Dubai has authorized $4.1 billion toward paying Nakheel's Islamic bond obligations due today. Spot gold took a leg up on the news and sits at $1124 on the COMEX in early trading. The euro also strengthened as concerns about Dubai debt held by European banks waned. This is not the last of the sovereign debt story but a positive step.

General Moly (GMO) stock price took a wild ride Friday (Moly & POSCO Head Northh). The Colonel bought a few shares at $2.17 in the morning after positive price action from molybdenum, nickel and South Korean steel producer (and GMO investor) POSCO. Then some big party pooper sold a ton of shares mid morning creating the largest volume move since 9/10. Share price collapsed to $1.99 and thankfully buyers rushed in to close GMO at $2.04, the Colonel bought a few more shares at $2.05 on the updraft. This morning, GMO is heading north again leading the Eureka Miner's Grubstake with a 4% jump to $2.12. Overall, it looks like a good day for miners. I may be all wet but this looks a great price for General Moly if you believe in improving global steel demand and moly price for 2010.

Speaking of the Grubstake portfolio, the Report readers hold one integrated oil and one natural gas stock; Conocco Philips (COP) and EOG Resources(EOG). The natural-gas industry got a tremendous boost on the news that Exxon Mobil plans to acquire XTO Energy (XTO) for $31 billion in stock, plus the assumption of $10 billion in XTO's debt. This will increase Exxon's presence in an industry seen by many as producing the "transition fuel" to reduce oil dependence and bridge to future alternative energy sources. You have no doubt heard oil legend T. Boone Pickens pitch this idea on television ads. XTO has been one of his favorite plays and news of its acquisition has helped our own EOG investment jump 5% this morning. That's a natural gas Yee-ha!

Let's close on gold with another good article from Mineweb:

Weekend Top Story: Four digit gold "magical" for investment psychology (Mineweb, 12/14/2009)

Tocqueville fund manager John Hathaway gives us some of his interesting and balanced insights on what may lay ahead for gold next year.

So there, the Colonel leaves you with some thoughts to mull over until I run into you on Main Street!

Enough talk, let's walk the walk:

4-WD is OFF - the VIX or "fear index" remains below 25; smoother road market conditions expected (what's this?)

Yellow light is ON for possible adverse regulation/legislation: Cortez Hills & mercury emissions

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

Oil is up $0.01 in early trading to $71.966 (January contract, most active); Gold is up $4.4 to $1124.3 (February contract, most active); Silver is up $0.185 to $17.275 (March contract); Copper is up $0.0235 to $3.1565 (March contract); Molybdenum is ia staedy at $11.62.

The DOW is up 51.62 points to 10457.45; the S&P 500 is up 4.74 points to 1107.09. The miners are mixed:

Barrick (ABX) $39.70 up 0.30%
Newmont (NEM) $51.82 up 1.25%
General Moly (Eureka Moly, LLC) (GMO) $2.12 up 3.68%
Freeport McMoran (FCX) $77.65 up 1.09% (a bellwether mining stock spanning gold, copper & molybdenum)

The Steels are mixed, (a "tell" for General Moly):

Nucor (NUE) $42.37 up 0.28% - domestic steel manufacturing
ArcelorMittal (MT) $41.93 down 0.17% - global steel producer
POSCO (PKX) $127.69 up 0.76% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up a solid 1.14% to $1,257,757.56 (what is this?).

Cheers,

Colonel Possum

Photograph by Mariana Titus

Friday, December 11, 2009

Moly & POSCO Head North



Morning Miners!

It is 6:00 AM sharp. Let me pour you a simmering cup of that splendorous Raine's TGIF coffee and explain why I just threw a few more shares of General Moly in the back of the F-250. Sometimes the daily buzz gets so focused on one or two hot topics that it is easy to forget that there are other important things happening in the marketplace. Most of December has been consumed with the rise and fall of gold in the shadow of sovereign debt. In truth gold has pulled back from its lofty $1225+ high a 100-bucks or so but so what? Sovereign debt will be bugs on the global wind shield for some months to come (Dubai, A World Away?, A Stronger Dollar for 2010?). If it gets so bad we can't see where we're going, the Colonel will stop the truck and we can scrap those nasty critters off together. In the meantime let's take a look at another metal important to Eureka's future, molybdenum.

Moly has been holding steady a tad above $11 , stumbling down from $12 during all the Dubai ruckus. Moly rose to $11.62 yesterday along with a rise in nickel, another important metal in the production of steel. It is foolish to draw a big conclusion from a daily fluctuation in commodity prices, but when several things occur together the ole Colonel takes notice. This morning gold and oil are both down while silver and copper are up, that's interesting too. I checked out Korean steelmaker, POSCO (PKX) who owns a 20% share in our Mt. Hope project, and they are up a healthy 3% this morning. Aluminum giant Alcoa (A) is up 5%. All of this against a backdrop of a dollar rally, a drop in gold, a drop in oil...very interesting.


Checkout the performance of POSCO for the last 3-months (since 9/11 to be exact) compared to steel goliath ArcelorMittal (MT) and domestic steelmaker Nucor (NUE):

Posco (PKX) up 28%
ArcelorMittal up 9%
Nucor (NUE) down 10%

and General Moly (GMO) down 33%

I may be wrong but at $2.17 I think I just heard someone holler, "Back up the truck" over at Eureka Moly. A few shares of our local miners might look good in your Christmas stocking this year, they will in mine.

Enough Christmas stocking stuffing, let's walk the walk:

4-WD is OFF - the VIX or "fear index" remains below 25; smoother road market conditions expected (what's this?)

Yellow light is ON for possible adverse regulation/legislation: Cortez Hills & mercury emissions

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

Oil is down $0.48 in early trading to $70.06 (January contract, most active); Gold is down $2.7 to $1123.5 (February contract, most active); Silver is up $0.047 to $17.235 (March contract); Copper is up $0.0170 to $3.1200 (March contract); Molybdenum is jumped to $11.62.

The DOW is up 51.62 points to 10457.45; the S&P 500 is up 4.74 points to 1107.09. The miners are mixed:

Barrick (ABX) $40.33 down 1.66%
Newmont (NEM) $51.80 up 0.21%
General Moly (Eureka Moly, LLC) (GMO) $2.17 up 0.93%
Freeport McMoran (FCX) $78.26 up 0.67% (a bellwether mining stock spanning gold, copper & molybdenum)

The Steels are mixed, (a "tell" for General Moly):

Nucor (NUE) $42.37 up 0.78% - domestic steel manufacturing
ArcelorMittal (MT) $41.70 up 0.90% - global steel producer
POSCO (PKX) $126.40 up 3.07% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.20% to $1,254,880.60 (what is this?).

Cheers,

Colonel Possum

Photograph of HWY 50 heading north by Mariana Titus (2006)

Thursday, December 10, 2009

Eureka County Takes the AP Stess Test



Morning Miners!

It is 6:08 AM, have a cup of Thor's java and let's see how Eureka County is doing in the Great Recession compared to 3,099 other counties in the United States. The Associated Press (AP) conducts a monthly analysis of economic stress across the country and computes the AP Economic Stress Index for each county. Below is a link to their interactive map. You can click on a county to find out its stress score together with a host of other data:

AP Economic Stress Index Interactive Map

The Stress Index weighs three economic variables - unemployment, foreclosures and bankruptcy - to produce a score on a scale of 0-100 that measures how the recession is affecting a county compared to all others. Their latest data is for October of this year and they compare the recent index to October 2007, several months before the recession officially began.

The national average stress index score is 10.1 for October with Nevada having the dubious honor of being the "most stressed state" weighing in a statewide score of 21.09. Fortunately for us Eurekans, the heavy players are all south where the real estate collapse hit the hardest. Clark County registers 22.95 compared a lowly score of 7.93 for Eureka County. Before the recession Clark was a relatively mellow 9.24; Eureka, a sleepy 5.02. We're a little worse off than Elko by a whisker, 7.93 compared to 7.75, and were a little more stressed than our northern neighbor before things got bad, 5.02 Eureka vs 3.84 Elko. Of course they've got nearly thirty times as many folks up in Elko so our county's statistics are more sensitive to one family's duress.

If you want to take a break from all the hussle and bussle, head over to visit Whiskey Mike in Delta, Utah. Millard County sits at 5.07 now, roughly the same level as Eureka in 2007. Millard chilled out at a lower 2.62 in those days - I'm trying to remember when Mike moved over there, a good question for Eric.

In October the Report compared Eureka to Saginaw, Michigan to illustrate the resilience of a commodity based economy to an industrial one in these difficult times (Eureka Is Not Saginaw, Michigan). The AP Stess Index bears this out giving the automobile-centric Saginaw a score of 15.14 compared to Eureka's 7.93. Interestingly Saginaw and Eureka Counties weren't that far apart in 2007 when folks were still buying cars; Saginaw 6.30 vs Eureka 5.02.

There now, don't you feel a little better? Say, COMEX gold popped up nearly 10 bucks this morning to $1130, who says we're not the best little town in the country?

Enough stress test talk, let's walk the walk:

4-WD is OFF - the VIX or "fear index" remains below 25; smoother road market conditions expected (what's this?)

Yellow light is ON for possible adverse regulation/legislation: Cortez Hills & mercury emissions

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

Oil is up $0.44 in early trading to $73.06 (January contract, most active); Gold is down $4.3 to $1139.1 (February contract, most active); Silver is down $0.032 to $17.775(March contract); Copper is down $0.0010 to $3.1640 (March contract); Molybdenum is steady at $11.15

The DOW is up 70.44 points to 10407.49; the S&P 500 is up 6.98 points to 1102.93. The miners are mixed:

Barrick (ABX) $40.92 down 0.87%
Newmont (NEM) $51.58 down 0.31%
General Moly (Eureka Moly, LLC) (GMO) $2.17 up 1.88%
Freeport McMoran (FCX) $78.10 down 0.34% (a bellwether mining stock spanning gold, copper & molybdenum)

The Steels are mixed, (a "tell" for General Moly):

Nucor (NUE) $43.59 down 1.30% - domestic steel manufacturing
ArcelorMittal (MT) $41.07 up 1.11% - global steel producer
POSCO (PKX) $122.59 up 0.90% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.20% to $1,249,290.79 (what is this?).

Cheers,

Colonel Possum

Wednesday, December 9, 2009

Timeo Danaos et Dona Ferentes



Morning Miners!

It is 6:25 AM. Grab a cup and let's hike to the top of Whiskey Flats. No, we don't have to go outside; it's too darn cold. Let's just imagine the climb above Eureka for a broader view. With all the market calamity of the last ten days and related plunge in gold, it is easy to lose perspective. Things started to unravel with worries about Dubai's massive debt (Dubai, A World Away?) and accelerated with yesterday's panic over the solvency of Greece and other European nations with heavy debt loads (A Stronger Dollar for 2010?). This morning's Mineweb is awash with articles about gold bubbles and Nouriel Roubini's (aka Dr. Doom) latest warnings about the fragility of the "barbarous relic". Here's a sample:

"So all the gold bugs who say gold is going to go to $1,500, $2,000, they're just speaking nonsense. Without inflation, or without a depression, there's nowhere for gold to go. Yeah, it can go above $1,000, but it can't move up 20-30% unless we end up in a world of inflation or another depression. I don't see either of those being likely for the time being. Maybe three or four years from now, yes. But not anytime soon." (Nouriel Roubini quote, Mineweb 12/9/2009)

Is gold a Trojan horse filled with wicked speculators and central governments with a nasty aversion to U.S. dollar reserves? I can't help but use this metaphor given the latest state of Greek finances:

Equo ne credite, Teucri. Quidquid id est, timeo Danaos et dona ferentes.
Do not trust the horse, Trojans! Whatever it is, I fear the Greeks, even bringing gifts. (Book II of Virgil's Aeneid, the siege of Troy)

Nay. Looking out from Whiskey Flat, the ole Colonel is going to bet all this gold gloom-doom is a bit overdone. Gold north of $1225 was due for a correction and we got a nudge down. Dubai's rich neighbors will resuscitate their profligate cousin and the European Union will no doubt rescue Greece and other errant members. Sovereign debt remains a global issue but isn't going to return us to the level of financial crisis we experienced just one year ago.

I was actually pleased to see oil pop up a bit from its recent decline this morning. Gold and silver are stabilizing too as the dollar runs out of Popeye spinach. Copper wobbled this week but is still comfortably above $3. If Barrick can't make money on $1000/oz gold and Freeport McMoran suffers to make ends meet on $3 copper, we might as well gather up gifts for the Trojan horse and return to living in caves.

Things are sure nicer up here on Whiskey Flat. Glad we had a chance to share the view together.


Enough talk, let's walk the walk:

4-WD is OFF - the VIX or "fear index" remains below 25; smoother road market conditions expected (what's this?)

Yellow light is ON for possible adverse regulation/legislation: Cortez Hills & mercury emissions

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

Oil is up $0.44 in early trading to $73.06 (January contract, most active); Gold is down $4.3 to $1139.1 (February contract, most active); Silver is down $0.032 to $17.775(March contract); Copper is down $0.0010 to $3.1640 (March contract); Molybdenum is steady at $11.15

The DOW is down 14.44 points to 10271.53; the S&P 500 is down 2.86 points to 1089.08. The miners are drinking Uzo:

Barrick (ABX) $41.19 up 1.68%
Newmont (NEM) $51.33 up 1.99%
General Moly (Eureka Moly, LLC) (GMO) $2.18 up 2.35%
Freeport McMoran (FCX) $76.86 up 0.77% (a bellwether mining stock spanning gold, copper & molybdenum)

The Steels are mixed, (a "tell" for General Moly):

Nucor (NUE) $42.75 up 1.04% - domestic steel manufacturing
ArcelorMittal (MT) $39.71 up 1.02% - global steel producer
POSCO (PKX) $118.79 down 1.44% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.75% to $1,242,288.85 (what is this?).

Cheers,

Colonel Possum

Photographs by Mariana Titus (Whiskey Flat, Eureka, 2005)

Tuesday, December 8, 2009

A Stronger Dollar for 2010?



Morning Miners!

It is 6:07 AM, grab a cup and let's warm up. If Uncle Sam appeared on the Suze Orman Show he'd get a pretty bruising lecture on reducing his household debt. He wouldn't be alone, there are a bunch of European countries in the green room waiting their turn for a tongue lashing by T.V.'s financial counseling Diva. National debt in developed countries has gone ballistic to assuage the Great Recession and is having a major impact on the relative value of currencies and the price of gold. Hold that thought, especially the word "relative".

Suze Orman advises households to compare their household debt to annual salary to determine their financial outlook. She reduces hapless guests to tears when the ratio of debt-to-salary approaches 100% or greater. Suzie exhorts, "Honey, you're technically bankrupt!"

It isn't too different for countries. The national debt as a percent of Gross Domestic Product (GDP) has been used as a measure of economic viability since wagons had wheels. At the end of World War II this ratio was highest at 121% (1946); presently the United States sits at 90% (2009) and is expected to approach the dreaded 100% mark next year and exceeding that by 2011. Below is a chart from 1900 to the present and you can checkout the numbers for yourself at the government website:


U.S. Government Spending



Now, how about our European friends? This is an important question because the euro has been recently strong against the U.S. dollar and comprises 58% of the dollar index (a basket of currencies used to gauge "relative" dollar strength, Whistling Dixie...What is a Weak Dollar?, 10/14/2009). The British pound sterling weighs in for another 12% so the European region plays a very important role in determining the worth of the greenback.

So how are those folks doing? On the surface it seems that the Euro area is doing slightly better than ourselves with an average debt-to-GDP ratio of 88% projected for 2011. Looking at individual counties things are not quite so rosy, here are some of the big'uns (note 1):

Greece 135%
Italy 118%
Ireland 96%
Portugal 91%
France 88%
Germany 80%
Spain 74%

The accumulation rate of debt (deficit) is also important; here are the same players with projected deficits as a percent of GDP for 2010:

Greece 12%
Italy 5.5%
Ireland 15%
Portugal 8%
France 8.5%
Germany 5%
Spain 10%

Greece, Ireland and Spain are headed for trouble; S&P and Fitch gave Greece a significant credit downgrade this week. We're in the credit rater's cross hairs too along with the Brits:

Moody's Investors Service warned that the U.K. and the U.S. need to rein in their deficits in order to hold onto their triple-A credit ratings. The agency also set the U.S. and U.K. economies apart from other top borrowers, labeling them "resilient," in contrast to Canada, Germany and France, which are seen as "resistant." (WSJ, 12/8/2009)

So what's the Colonel's point? This week the U.S. dollar has rallied and gold has fallen given emerging concerns about the true health of the European continent. As I said earlier, "relative" is key to understanding who's doing better in a kennel full of sick puppies. I believe we'll convalesce a lot quicker than some of our friends across the pond which bodes well for the dollar in 2010. The ole Colonel remains bullish on America; stronger dollar, improving economy.

Enough talk, let's walk the walk:

4-WD is OFF - the VIX or "fear index" remains below 25; smooth road market conditions expected (what's this?)

Yellow light is ON for possible adverse regulation/legislation: Cortez Hills & mercury emissions

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

Oil is down $1.11 in early trading to $72.82 (January contract, most active); Gold is down $14.8 to $1149.2 (February contract, most active); Silver is down $0.435 to $17.925(March contract); Copper is down $0.0430 to $3.1660 (March contract); Molybdenum is steady at a notch above $11.

The DOW is down 80.94 points to 10309.17; the S&P 500 is down 7.88 points to 1095.37. The miners are still grumpy:

Barrick (ABX) $41.36 down 2.54%
Newmont (NEM) $51.14 down 1.34%
General Moly (Eureka Moly, LLC) (GMO) $2.19 down 1.80%
Freeport McMoran (FCX) $77.35 down 1.70% (a bellwether mining stock spanning gold, copper & molybdenum)

The Steels are down, (a "tell" for General Moly):

Nucor (NUE) $42.60 down 0.91% - domestic steel manufacturing
ArcelorMittal (MT) $39.77 down 0.40% - global steel producer
POSCO (PKX) $121.41 down 2.85% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 1.37% to $1,250,353.08 (what is this?).

Cheers,

Colonel Possum

Note 1: Data source - The Economist 11/21/2009

Photograph by Mariana Titus (Eureka, 2006)

Monday, December 7, 2009

Stormy Monday, Barrick & Gold Falling


Morning Miners!

It is 6:04 AM, the Colonel has the coffee brewing and you can stay in the break room all day if you'd like. There are more than Pacific storms passing through this Monday with Barrick and gold taking another leg down. Barrick has had a tough go of it lately with gold price and a mixed court decision on Cortez Hills weighing on its share price. At 5:08 AM (PST), Credit Suisse downgraded the gold miner to "neutral" from "outperform". Gold slipped another $25 from Friday's close on the COMEX to $1144 as the U.S. dollar enjoys a rally sparked by a positive jobs report for November (A Positive Surprise for Jobs, Gold Stumbles).

Now hold your horses, pardner! Gold was due for a correction and we're still far north of $1000/oz. Operations at Cortez Hills are continuing and Barrick has a team of Perry Masons to work through the legal issues. Here is an article from the Canadian Press to give the latest court ruling with some needed perspective:

Barrick Gold evaluating impact of a U.S. court ruling on its Cortez Hills mine in Nevada (Canadian Press, 12/4/2009)

Like the weather, this too shall pass. By the by, remember the Report has a quick link to the NOAA El Niño update as well as National Weather Service forecasts for Eureka. They are in the Local Weather & Climate section to your right, above the picture of the Eureka Courthouse.


Cheer up buckaroos, tis' the season to be jolly. If Barrick gets any cheaper, you might want to put a few shares in your Christmas stocking!

Enough talk, let's walk the walk:

4-WD is OFF - the VIX or "fear index" remains below 25; smooth road market conditions expected (what's this?)

Yellow light is ON for possible adverse regulation/legislation: Cortez Hills & 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 $74.85 (January contract, most active); Gold is down $25.5 to $1144.0 (February contract, most active); Silver is down $0.390 to $18.130(March contract); Copper is up $0.0605 to $3.1770 (March contract); Molybdenum is dropped to $11.50.

The DOW is up 39.00 points to 10427.90; the S&P 500 is up 3.28 points to 1109.26. The miners are grumpy:

Barrick (ABX) $41.34 down 3.14%
Newmont (NEM) $51.48 down 1.10%
General Moly (Eureka Moly, LLC) (GMO) $2.22 down 2.63%
Freeport McMoran (FCX) $79.29 down 0.73% (a bellwether mining stock spanning gold, copper & molybdenum)

The Steels are up, (a "tell" for General Moly):

Nucor (NUE) $43.15 up 0.02% - domestic steel manufacturing
ArcelorMittal (MT) $40.02 up 0.15% - global steel producer
POSCO (PKX) $125.78 up 0.67% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.98% to $1,264,370.45 (what is this?).

Cheers,

Colonel Possum

Christmas bulb photograph by Mariana Titus (Eureka, 2006)

Friday, December 4, 2009

A Positive Surprise for Jobs, Gold Stumbles


***BREAKING NEWS***
Appeals Court Remands Decision to District Court on Cortez Hills Project (link) - Possibly adverse consequences for Barrick's Cortez Hills Project, ".... It is premature to predict the extent of any potential injunction impact on the timing and completion of construction of Cortez Hills, which is now largely complete. The District Court will have to determine the extent to which any action, including any suspension of operations, may be required to respond to the decision of the Court of Appeals."

Barrick (ABX) share price is down nearly 10% in mid-morning trading - CP


Morning Miners!

It is 5:21 AM, I made that famous Raine's TGIF coffee extra strong this morning for the monthly jobs report. I'm going to checkout Becky Quick on CNBC Business News, the government numbers will be up in a moment...

Hey, that's not bad at all, pardner. The nonfarm payrolls fell by just 11,000 last month, the expected job loss was 125,000 (note 1). Did someone slip a decimal? In October we went down 111,000. This new 5-digit number is the best showing since December 2007 when the "Great Recession" began.

Further good news from the report are positive revisions to previous months showing that fewer than 159,000 jobs were actually lost. This gives us a new unemployment figure of 10%; an improvement from last month's 10.2%, the highest level since April 1983.

Let's give all this some perspective. The loss of any job in America is bad news especially if you are the one walking out of the door. We need positive job growth to truly recover the economy not just smaller negative numbers. In fact, the U.S. needs to add no less than 120,000 new jobs each month to stabilize employment. The reason to feel positive about today's significant drop is an encouraging change in the so-called "trajectory" to happier times. If there is follow through next month, the economic recovery in the U.S. may very well be moving faster than most economists predicted. Stay tuned.

Do you think the world cares about our jobs report? You bet. Spot gold traded at $1206 on the London exchange moments prior to the announcement and dropped like the heavy metal it is to $1188 after the news. The 10-year Treasury note, a favorite of foreign investors, jumped more than 10 basis points to a yield of 3.467% and the U.S. dollar rallied. The DOW and S&P just opened higher and European stock markets got a nice bump up.


Yesterday the Report noted that lately gold, the U.S. dollar and stock markets have moved with the predictability of a synchronized swimming team: gold up, dollar down, markets up (Gold's on Hold...?). Today's jobs numbers may very well blow everyone out of the pool. Ultimately we would like the dollar and stock markets to move upwards together for a strong American recovery. Let's wait and see. For the time being it will be a little rocky for precious metals and gold miners like Barrick given the intensity of their autumn rally. There is a good article about this by Lawrence Williams in Mineweb this morning:

Gold price stumbles after China and Barrick doubts, but longer term the only way is up (Mineweb, 12/04/09)

Hold on to your gold and silver buckaroos in case today's news is just a one-day wonder!

Enough talk, let's walk the walk:

4-WD is OFF - the VIX or "fear index" remains below 25; smooth 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 $0.64 $0.53 in early trading to $79.96 (January contract, most active); Gold is down $24.3 to $1194.0 (February contract, most active); Silver is down $0.343 to $18.785(March contract); Copper is up $0.0160 to $3.2610 (March contract); Molybdenum is steady at $12.00

The DOW is up 133.84 points to 10499.99; the S&P 500 is up 39.12 points to 1117.02. The gold miners are getting clobbered but GMO heads up:

Barrick (ABX) $44.30 down 5.42%
Newmont (NEM) $53.12 down 2.50%
General Moly (Eureka Moly, LLC) (GMO) $2.30 up 1.73%
Freeport McMoran (FCX) $83.60 down 0.24% (a bellwether mining stock spanning gold, copper & molybdenum)

The Steels are up, (a "tell" for General Moly):

Nucor (NUE) $43.88 up 1.98% - domestic steel manufacturing
ArcelorMittal (MT) $41.18 up 2.64% - global steel producer
POSCO (PKX) $127.01 up 2.78% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.35% to $1,308,500.37 (what is this?).

Cheers,

Colonel Possum

Headline photograph by Mariana Titus

Note 1 - Economists surveyed by Dow Jones Newswires had expected a payroll decrease of 125,000.

Thursday, December 3, 2009

Gold's on Hold...?


Morning Miners!

It is 5:29 AM, the coffee is on and it is all hands on deck in the shop this morning. The ole Colonel will be back a bit after the markets open.

OK folks, back in the saddle. It is really nuts to watch the daily fluctuation of any one thing in the marketplace and draw all kinds of conclusions. Lately we have been paying a lot of attention to gold (and its poor cousin silver) because the action has been extraordinary. Interestingly, the focus on precious metals pretty much does tell you everything else. When the gold goes up, the U.S dollar goes down and the stock market rallies. On the rare days the dollar is strong; the process reverses. Recently the correlation between the three is so strong, the Report could just as easily focus on the dollar or the flips and dips of the DOW Jones to read the global tea leaves.

The last 24 hours is a good example. We have been hitting new gold highs almost daily and gold pegged $1,226.30 overnight on fresh Japanese buying. Japan joins the growing list of countries that are buying gold to diversify away from the U.S. dollar. Later in the day the dollar recovered from its 16-month low against the euro after the European Central Bank President Jean-Claude Trichet expressed support for a strong dollar and announced small steps toward the withdrawal of liquidity measures in Europe. Spot gold obediently dropped on the London spot exchange, the markets followed and now are trading flat. This is like watching an Esther Williams synchronized swimming movie. If your're a young'un and miss the metaphor don't worry, I doubt that movie genre is ever coming back!


Where do we go next? I think for the moment gold is on hold and catching its breath in the pool. The next big gold/dollar/stock market swimming exercise will be kicked off tomorrow with the monthly jobs report. The Colonel will be up and at'um at 5:30 AM to watch the new government numbers on unemployment cross the wire. I suggest you hit the snooze button and catch a few extra winks, this movie will go on for a long long time.

Enough talk, let's walk the walk:

4-WD is OFF - the VIX or "fear index" remains below 25; smooth 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 0.36 $0.53 in early trading to $79.96 (January contract, most active); Gold is up $2.4 to $1215.4 (February contract, most active); Silver is down $0.260 to $19.065(March contract); Copper is down $0.0060 to $3.2525 (March contract); Molybdenum is steady at $12.00

The DOW is down 6.50 points to 10446.18; the S&P 500 is up 0.87 points to 1110.11. The miners are mixed:

Barrick (ABX) $47.74 down 0.40%
Newmont (NEM) $55.38 down 0.81%
General Moly (Eureka Moly, LLC) (GMO) $2.34 up 1.30%
Freeport McMoran (FCX) $85.09 down 0.11% (a bellwether mining stock spanning gold, copper & molybdenum)

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

Nucor (NUE) $44.00 down 0.81% - domestic steel manufacturing
ArcelorMittal (MT) $41.06 up 1.11% - global steel producer
POSCO (PKX) $126.40 up 0.03% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.11% to $1,336,230.23 (what is this?).

Cheers,

Colonel Possum

Headline photograph by Mariana Titus

Wednesday, December 2, 2009

Silver Gets Its Giddy-Up Go!



Morning Miners!

It is 6:04 AM, have a cup and let's take a ride in the way-back machine. For us old timers that love trucks and the open road there is a special place in our hearts for Red Sovine's song "Giddy-Up Go" (1966). Red's song is spoken, rather than sung, by an old long-distance truck driver who rediscovers his long-lost son driving another truck on Route 66. I'll bet if you hear this one some rainy night on Highway 278 there will be more than water on the windshield to wipe away. Well pardner, I'm here to tell you with silver at $19.24 this morning, gold's poor cousin has found its own giddy-up go!

The Report has been puzzled lately about silver's lazy pace down the gold rally highway (Why is Silver So Cheap?). It looks like someone has finally put the hammer down. There is a Gold Report interview with financial adviser and market analyst Peter Grandich that offers a plausible explanation. Here is this morning's Mineweb link to the interview; the silver discussion appears near the end:

Silver's turn to shine (Mineweb, 12/2/2009)

"Silver has been overlooked, in part due to the onslaught of short positions by a select few major houses on the Comex. So far, that's suppressed silver from sharing in the major run-up we've seen in gold and platinum, but I think silver's turn to lead is near." (Peter Grandich)

Yesterday we said the fair value of silver was $18.98 in a range of 18.16 to $19.80 (A Barrick Surprise & The Colonel's December Predictions). In 24 hours, we've gone from an undervalued price to a trajectory headed for the upper bound. If gold continues to rally, the ole Colonel wouldn't be surprised to see silver with a twenty handle fairly soon. We can see this movement on my charts of COMEX silver versus gold (a larger, more readable version is included at the bottom of this blog page):


The large white arrow shows a 20-day average following gold in an undervalued state (the magenta line represents the fair value of silver compared to gold). The red arrow curving up is the most recent price movement which crosses the magenta line on a path to the upper bound (aqua line). Technically speaking, this is called giddy-up go buckaroos!

"Well, now the lines on the highway have got a much brighter glow,
As we go roaring down the road,
And we stare at that little sign that reads Giddy Up, Go."
(Giddy-up Go, Red Sovine)

Enough singing charts, let's walk the walk:

4-WD is OFF - the VIX or "fear index" remains below 25; smooth 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 $0.53 in early trading to $77.84 (January contract, most active); Gold is up $9.1 to $1209.3 (February contract, most active); Silver is up $0.030 to $19.240(March contract); Copper is down $0.0020 to $3.2290 (March contract); Molybdenum is steady at $12.00

The DOW is up 1.51 points to 10473.09; the S&P 500 is up 1.75 points to 1110.61. The miners are up:

Barrick (ABX) $47.71 up 3.55%
Newmont (NEM) $56.20 up 0.97%
General Moly (Eureka Moly, LLC) (GMO) $2.32 up 1.75%
Freeport McMoran (FCX) $85.45 up 1.84% (a bellwether mining stock spanning gold, copper & molybdenum)

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

Nucor (NUE) $44.16 up 2.01% - domestic steel manufacturing
ArcelorMittal (MT) $40.96 up 2.50% - global steel producer
POSCO (PKX) $126.58 up 1.54% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 1.33% to $1,330,282.74 (what is this?).

Cheers,

Colonel Possum

Headline photograph by Mariana Titus (Country Roads, HWY 278)

Tuesday, December 1, 2009

A Barrick Surprise & The Colonel's December Predictions


Morning Miners!

It is 6:26 AM and it doesn't get much better than this. Grab a cup and let's see what's on the wire. Spot gold courted $1200 this morning before falling back a small nugget and Barrick just posted a surprise release that they are now free of all gold hedges:

Barrick Gold Corporation (NYSE: ABX)(TSX: ABX) announced today that it has completed the elimination of all of its Gold Hedges(1) and now has full leverage to the gold price on the industry's largest gold production and reserves.

"Our positive view on the gold price led us to accelerate the elimination of these contracts ahead of the schedule we had established. With their elimination we no longer have any gold price related mark-to-market exposure and will now fully benefit from increases in the gold price," said Aaron Regent, Barrick's President and Chief Executive Officer.

The Report first covered the Barrick hedge story last September (Barrick Takes a Bold Move, Moly Drops). At that time they anticipated a 12-month unwind of their hedge commitments and now they are done on the first day of December. Their strategy is to take full advantage of the gold market on the belief that the yeller stuff will continue to rise in price. Their stock is up over 6% this morning and that deserves a Colonel Yee-ha!


I just updated my commodity models for the month of December and this is where we sit for silver, copper and oil given $1200/oz gold:

The fair value of silver is $18.983 in a range of $18.163 to $19.802

The fair value of copper is $3.1858 in a range of $3.0349 to $3.3368

The fair value of oil is $82.70 in a range of $76.26 to $89.14

Given this morning's prices it appears that silver remains undervalued at $18.83. I bought at bit of silver during last week's Dubai crisis; although it doesn't have its usual zip, silver should hang in there with gold just fine. If you believe gold has further to go, silver is not a bad play to buy on the dips (Why is Silver So Cheap?). In fairness, lack luster silver performance for the last several months could still signal a top in precious metals so it is always caveat emptor (buyer beware) at these levels. It is important to remember that the downside of Barrick removing all their hedges is the loss of a major gold buyer to support price going forward. Potential liquidations of precious metals in the Middle East to raise capital for sickly Dubai could put some pressure on prices also. My bet is that animal spirits in the marketplace will prevent either of these issues from stopping a continued uptrend in gold and silver for now.

Copper price continues to rip and is only slightly overvalued with respect to gold. Goldman Sachs downgraded Freeport McMoran (FCX) yesterday but the Colonel remains bullish on copper and FCX for the New Year (it is a little scary to bet against the smartest kids in the classroom).

Unfortunately with the recent nuclear problems with Iran, oil prices may head back to $80 territory this month. We're looking undervalued presently following the "Dubai Dip" last week but oil got a nice pop up this morning to $78.45. Let's hope we stay clear of the upper range that teeters on $90.

So there you go buckaroos. Where next for gold?...$1300? Here's a Mineweb link for that thought process:

New gold rush may soon see the yellow metal test US$1,300 - Scotiabank (MineWeb, 12/01/2009)

I'm still pinching myself that we crossed $1000/oz just a short while ago! Caveat emptor, pardner.

Enough prognostication, let's walk the walk:

4-WD is OFF - It appears the Dubai credit crisis is contained for now and the VIX or "fear index" is happily below 25 again; 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 $1.17 in early trading to $78.45 (January contract, most active); Gold is is up $14.5 to $1196.8 (February contract, most active); Silver is up $0.305 to $18.830(March contract); Copper is up $0.0225 to $3.1995 (March contract); Molybdenum is steady at $12.00

The DOW is up 93.94 points to 10438.78; the S&P 500 is up 9.60 points to 1105.23. The miners are on fire:

Barrick (ABX) $45.53 up 6.65%
Newmont (NEM) $55.60 up 3.65%
General Moly (Eureka Moly, LLC) (GMO) $2.28 up 1.33%
Freeport McMoran (FCX) $84.48 up 2.03% (a bellwether mining stock spanning gold, copper & molybdenum)

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

Nucor (NUE) $43.19 up 1.84% - domestic steel manufacturing
ArcelorMittal (MT) $40.03 up 1.94% - global steel producer
POSCO (PKX) $124.45 up 4.40% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 2.57% to $1,310,698.71 (what is this?).

Cheers,

Colonel Possum

Headline photograph by Mariana Titus (Country Roads, HWY 278)