"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.

Friday, December 31, 2010

Quadra (QUX) & Copper Rock in the New Year



Morning Miners!

It is 6:13 AM and time for the ole Colonel to wish you all a Happy New Year! We are brewing up the last pot of Scott Raine's 2010 Red Label and he tells me he has a surprise for us after ten becomes eleven...

Copper is still the King

Just for fun, the ole Colonel checked out last year's sign-off blog (The Colonel Wishes You a Happy New Year). COMEX copper had posted a new high:

"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." (Eureka Miner's Market Report, 12/31/2009)

A good omen indeed. All the miners are doing better than last December by a good margin and COMEX copper has set another new high early this morning at $4.4320/lb. The red metal has posted an amazing 9 new records in 18 trading days starting December 7th with a Pearl Harbor high of $4.1320/lb.

What else was going on last year?

"Unless a lightning bolt hits the markets later 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." (Eureka Miner's Market Report, 12/31/2009)

Our favorite Norseman Thor promised not to throw any lightning bolts today so I believe it's fair to say we've got another good'un. This morning the S&P 500 is trading at pre-Lehman Brother levels up 88% from the March 2009 bottom. COMEX gold has been in a tight range above $1400/oz for 3 days ($1402/oz to $1415/oz), the greenback is plumbing a new low for December but the Eureka Miner's Grubstake Portfolio has now nearly doubled since our initial one million dollar investment in May, 2009.

Checkout our favorite miners, then and now

Barrick (ABX) $39.80 (12/31/09 AM) $52.66 (today) up 32.3%
Newmont (NEM) $47.65 (12/31/09 AM) $61.27 (today) up 28.5%
General Moly (Eureka Moly, LLC) (GMO) $2.07 (12/31/09 AM) $6.51 (today) up 214%
Freeport McMoran (FCX) $80.92 (12/31/09 AM) $119.15 (today) up 47.2%

We weren't tracking US Gold then but added them to the Eureka Miner's Grubstake in January:

US Gold (UXG) $2.48 (12/31/09 AM) $7.97 (today) up 221%

What's good for Ely is good for Eureka, Quadra FNX rocks

The Robinson copper mine outside Ely and just down the road a piece from Eureka has been on a tear too. The mine's opertator, Quadra FNX (QUX on the Toronto Exchange), has enjoyed a good bounce in share price (blue) with the red metal this month coming off its 200-day moving average (green) at the beginning of December:



Although up more than 19% in December Quadra is still down a bit from its March high as shown by this 1-year chart:


The best of cheer to the Quadra crew in the new year. It is terrific to have copper, gold, silver and molybdenum in our neighborhood - all four metals with a promising future for 2011 and beyond!

Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Miner's Index(EMI)

This morning the Eureka Miner's Index(EMI) is above-par at 773.82, slightly down from yesterday's record 780.11. The 1-month moving average is now 629.60.

The 2010 record high for the EMI is now 780.11 set 12/30/2010; the low was set 6/7/2010 at 50.7. An EMI greater than 100 signals better times for the metals & miners relevant to Eureka County, the EMI re-established an upward trend on Friday, 12/3.

200-day averages are used in the EMI to normalize current mining company share price and are updated monthly. Upper and lower trend lines are updated weekly.

Eureka Outlook Dashboard

4-WD is OFF - Markets are stable; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) in the low-$100s above its 200-day average of $79.39 (our new warning level, 12/06 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

The GREEN light is turned back on for Commodity Reflation with copper trading comfortably above $3.50/lb

The GREEN light is turned on for Stable Markets with the VIX below the 30 level (what's this?)

The YELLOW light is turned on for Inflation Watch as the Federal Reserve resumes buying Treasurys (aka QE2)

The GREEN light is turned back on for Investor Confidence as investment returns to the equity markets

The YELLOW light is turned on our Fuel Gauge with oil falling below $90 but above $80

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions , General Moly Mt. Hope Water Rights, U.S. House committee debates miner workplace safety bill

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is down $0.46 in early trading at $89.38 (February contract, most active); Gold is up $7.3 to $1413.2 (February contract, most active); Silver is up $0.167 to $30.680 (March contract, most active); Copper is up $0.0525 to $4.4150 (March contract, most active)

Western Molybdenum Oxide is $16.00; European Molybdenum Oxide is $16.70; LME moly 3-month seller's contract is $17.01, LME cash seller is $16.78

Stock Market Morning Update

The DOW is down 32.20 points to 11,537.51; the S&P 500 is down 2.93 to 1254.95. Miners are resting for the New Year's party:

Barrick (ABX) $52.66 up 0.11%
Newmont (NEM) $61.27 up 0.31%
US Gold (UXG) $7.97 up 1.27%
General Moly (Eureka Moly, LLC) (GMO) $6.51 down 2.54%
Thompson Creek (TC) $14.74 up 0.14%
Freeport-McMoRan (FCX) $119.15 up 0.17% (a bellwether mining stock spanning copper, gold & molybdenum)

The Steels are too (a "tell" for General Moly & Thompson Creek):

ArcelorMittal (MT) $37.92 up 0.37% - global steel producer
POSCO (PKX) $107.13 down 0.29% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.09% at $1,950,747.51 (what's this?).

Cheers,

Colonel Possum

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Headline photograph by Mariana Titus

Thursday, December 30, 2010

Moly Target for 2011 - GMO, EMI, UXG, Cu & Ag New Highs



Þūnresdæg
Morning Miners!

It is 6:09 AM. Our favorite Norseman Thor just brewed a new pot of Winter Storm Joe. Grab a cup and don't forget to wear double long johns tonight...

Copper & Silver post new records

The news line from the London Metal Exchange (LME) couldn't have said it better, "Metals defy gravity on weak dollar, bullish sentiment." COMEX copper and silver both posted new records in the wee hours. COMEX gold took a shot at its December Pearl Harbor high but couldn't get past $1415.4/oz For the record keepers here's where we stand for the big three:

COMEX Gold $1432.5/oz 08:25:00 ET 12/7/2010, February contract most active
COMEX Silver $30.930/oz 04:20:00 ET 12/30/2010, March contract most active
COMEX Copper $4.3740/lb 07:50:00 ET 12/30/2010, March contract most active

Here are two articles on copper's moonshot that show a mix of fundamentals as well as investor zeal:

METALS-Copper hits record on demand expectations (Melanie Burton, Thomson Reuters, 12/23/2010)

China’s Stock Index Rises for Second Day on Yuan, Copper Rally (Irene Shen, Bloomberg News, 12/30/2010)

Who says Christmas is over?

General Moly & US Gold set new 52-week highs

Investor money continues to pile into the junior miners. Our two local favorites, General Moly (GMO) and US Gold, have enjoyed the rush. US Gold made a new 52-week high yesterday at $8.11/share; General Moly touched $7.25/share this morning. To give this some perspective, let's look back just three months:

General Moly $3.50 (low, 10/4/10) $7.25 (high, today) up 107%
US Gold $4.78 (low, 10/4/10) $8.00 (high, yesterday) up 67.4%

Now don't you wish you'd listened to the ole Colonel earlier this year? Of course, maybe you did...

Eureka Miner's Index (EMI)

The Eureka Miner's Index (EMI) gives us the market temperature for the sectors that have the greatest impact on mining in Eureka County. After a terrific run, the EMI showed some signs of cooling earlier this week. This morning's EMI is white hot at 780.1, a new record for 2010. Last June the EMI hit a low of 50.7, an EMI of at least 100 (par) is needed to claim we're grazing in green pasture.

The Colonel's Moly Target for 2011


The London Metal Exchange (LME) launched futures markets for minor metals cobalt and molybdenum last February. These exchanges are in their infancy and are thinly traded. The moly futures are however showing some signs of maturing and I plan to start modeling the 3-month seller contracts against reference commodities next year.

As this model develops, the Report will hopefully be able to see what's ahead for molybdenum as we currently do for COMEX copper, silver and gold and NYMEX oil futures. In the meantime, we can use some horse sense to develop a 2011 mid-range price target for molybdenum. Here is a plot of the 3-month seller contract from launch to the present:



As we have pointed out before, with the exception of a little front end enthusiasm, the 3-month seller has traded in a range of $30,000 to $40,000 per metric ton ($13.61 to $18.14 per pound). Lacking a model, I chose to take the geometric mean of this range (see note 1) to develop a mid-range price target for 2010 of $34,640/metric ton or $15.71/lb.

Moly mid-range price target (2010) = SQRT (30,000 x 40,000) = $34,640/metric ton

Until my new molybdenum price model gets some legs, let's use a similar approach to develop a target for 2011. Desjardins Securities John Redstone believes that moly could spike to $30/lb in 2011. If you missed his prediction in Monday's report, here's the link:

John Redstone Interview (BNN, 12/23/2010)

If $30/lb ($66,140/metric ton) proves to be the top for 2011 and we conservatively use the bottom of the 2010 range for support, we can compute a new mid-range target for 2011:

Moly mid-range price target (2011) = SQRT (66,140 x 30,000) = $44,540/metric ton

Or $20.21/lb for us folks out here in the West. How about another beer bet?

Western Moly Oxide will break $20/lb before the Fourth of July 2011

Stay tuned buckaroos (The Colonel's Beer Derby bets can be checked out in the right hand column at the bottom of this blog page)

Daily Market Roundup

Enough prognostication, let's walk the walk:

Eureka Miner's Index(EMI)

This morning the Eureka Miner's Index(EMI) sets a new record at 780.11, up from yesterday's 708.35. The 1-month moving average is now 615.97.

The 2010 record high for the EMI is now 780.11 set 12/30/2010; the low was set 6/7/2010 at 50.7. An EMI greater than 100 signals better times for the metals & miners relevant to Eureka County, the EMI re-established an upward trend on Friday, 12/3.

200-day averages are used in the EMI to normalize current mining company share price and are updated monthly. Upper and lower trend lines are updated weekly.

Eureka Outlook Dashboard

4-WD is OFF - Markets are stable; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) in the low-$100s above its 200-day average of $79.39 (our new warning level, 12/06 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

The GREEN light is turned back on for Commodity Reflation with copper trading comfortably above $3.50/lb

The GREEN light is turned on for Stable Markets with the VIX below the 30 level (what's this?)

The YELLOW light is turned on for Inflation Watch as the Federal Reserve resumes buying Treasurys (aka QE2)

The GREEN light is turned back on for Investor Confidence as investment returns to the equity markets

The ORANGE light is turned on our Fuel Gauge with oil above $90

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions , General Moly Mt. Hope Water Rights, U.S. House committee debates miner workplace safety bill

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is down $0.29 in early trading at $91.20 (February contract, most active); Gold is up $2.1 to $1407.7 (February contract, most active); Silver is up $0.207 to $30.530 (March contract, most active); Copper is up $0.0010 to $4.3270 (March contract, most active)

Western Molybdenum Oxide is $16.00; European Molybdenum Oxide is $16.70; LME moly 3-month seller's contract is $17.24, LME cash seller is $17.01

Stock Market Morning Update

The DOW is down 12.04 points to 11,573.34; the S&P 500 is down 1.23 to 1258.55. Miners are mostly up except the big golds:

Barrick (ABX) $52.99 down 0.17%
Newmont (NEM) $61.17 down 0.03%
US Gold (UXG) $7.95 up 0.13%
General Moly (Eureka Moly, LLC) (GMO) $7.13 up 1.86%
Thompson Creek (TC) $14.73 up 1.24%
Freeport-McMoRan (FCX) $120.69 up 1.29% (a bellwether mining stock spanning copper, gold & molybdenum)

The Steels are up (a "tell" for General Moly & Thompson Creek):

ArcelorMittal (MT) $38.19 up 0.90% - global steel producer
POSCO (PKX) $107.32 up 1.00% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.67% at $1,980,746.75 (what's this?).

Cheers,

Colonel Possum

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Note 1: The Colonel prefers the geometric to the arithmetic mean in estimating range mid-points. Markets tend to be ratio-metric and not additive in nature. This is just a mathematical nuance pardner, pick your poison.

Headline photograph by Mariana Titus

Wednesday, December 29, 2010

$10+ General Moly (GMO) Next Year?



Wōdnesdæg
Morning Miners!

It is 6:11 AM. Grab a cup of java and sit a spell with Old Miner Woden and me in the break room. That ole boy has been spinning tall tales every since he fired up the day. I think it is high time for a tall tale of my own and a beer bet to boot...

Dennis Gartman plugs General Moly on CNBC


Dennis Gartman, "Commodity King" and author of the Gartman Letter, plugged General Moly and molybdenum on CNBC Business News yesterday morning. If you've followed this Report for a while, you know that I believe he deserves his regal title for being one of the wisest traders in the commodity space. Gartman is high on steelmakers for 2011 and believes that metals & miners related to that industry (such as molybdenum & General Moly) will have a good year too.

General Moly Investor Relations Director Seth Foreman reminded the ole Colonel that this wasn't the first time that Gartman thought well of General Moly, "Dennis was a big backer of our stock going back to 2007, when we were a $12/share company." Unfortunately the economy soon cratered sending all the miners down the mineshaft and the Commodity King fled for higher ground.

Earlier that year, I had my own brief moment on the CNBC Business News show "Fast Money." On 4/25/2007, the Colonel asked Fast Money's Eric Bolling some questions about GMO (I believe they were called Idaho General Mines at that time) and the outlook for the molybdenum market. Bolling had recently received the Maybach "Man of the Year" award from Trader Monthly and was the show's expert on metals & mining companies. His reply was very positive for both GMO and the important steel alloying metal, molybdenum. I wrote about this experience last November in the blog Molybdenum on CNBC News.

At the time of the Bolling conversation GMO closed the day at $6.40/share. By that December GMO reached a record closing high of $12.42/share (intraday high of $12.58/share) and moly oxide was selling in $33/lb territory. The onset of the "Great Recession" in that same month cast a great shadow on the entire mining sector and General Moly was trading below a buck by the following December.

With some irony, GMO closed yesterday at $6.36/share yesterday just 4 cents below the price when I asked my question on CNBC more than three years ago. It's only natural to ask the question again. Fortunately, things are looking up for the metals & miners in 2011 with the emerging world feeling its oats and the big western economies on the mend.

Investors are pouring into the junior miners as evidenced by the recent surge in share price of General Moly and US Gold (UXG). With Mt. Hope expected to come online, the prospects for General Moly haven't looked this promising for some time. Experts seem to agree given the Gartman plug yesterday and Desjardins Securities John Redstone positive comments on Thompson Creek (TC) and molybdenum just before Christmas. Here's the link to the Redstone interview if you missed Monday's report:

John Redstone Interview (BNN, 12/23/2010)

(Note: be patient with this video link, you may get a short BNN front end piece)

$10+ General Moly (GMO) Next Year?

Let's close with two ballpark calculations to see if General Moly has a shot at double digits in the new year. When GMO hit their peak in December 2007, the ratio of moly oxide-to-share price was about 2.66, that is:

($33/lb)/($12.42/share) = 2.66

At yesterday's close the price of Western moly oxide was $16.00/lb and our ratio is pretty close to the 2007 number at 2.52:

($16/lb)/($6.36/share) = 2.52

If we believe John Redstone's prediction that moly may spike to $30/lb in 2011, we can use our ratios to take a wag at expected share price. Let's split the difference and use 2.6:

($30/lb)/(2.6) = $11.5

I admit this is not very rigorous but I believe it does shows that $10+/share isn't a completely outrageous expectation if investor interest and moly prices continue to trend positive. Shucks, I'll even make it a Beer Derby bet for next year:

General Moly (GMO) will break $10/share before New Year's Eve 2011

How's that for putting your money (or beer) where your mouth is! Stay tuned buckaroos (The Colonel's Beer Derby bets can be checked out in the right hand column at the bottom of this blog page)

Daily Market Roundup

Enough prognostication, let's walk the walk:

Eureka Miner's Index(EMI)

This morning the Eureka Miner's Index(EMI) is above-par at 708.35, up from yesterday's 654.78. The 1-month moving average is now 609.62. If we break below this level in the coming days, the recent EMI uptrend may reverse.

The 2010 record high for the EMI is 739.13 set 12/7/2010; the low was set 6/7/2010 at 50.7. An EMI greater than 100 signals better times for the metals & miners relevant to Eureka County, the EMI re-established an upward trend on Friday, 12/3.

200-day averages are used in the EMI to normalize current mining company share price and are updated monthly. Upper and lower trend lines are updated weekly.

Eureka Outlook Dashboard

4-WD is OFF - Markets are stable; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) in the low-$100s above its 200-day average of $79.39 (our new warning level, 12/06 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

The GREEN light is turned back on for Commodity Reflation with copper trading comfortably above $3.50/lb

The GREEN light is turned on for Stable Markets with the VIX below the 30 level (what's this?)

The YELLOW light is turned on for Inflation Watch as the Federal Reserve resumes buying Treasurys (aka QE2)

The GREEN light is turned back on for Investor Confidence as investment returns to the equity markets

The ORANGE light is turned on our Fuel Gauge with oil above $90

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions , General Moly Mt. Hope Water Rights, U.S. House committee debates miner workplace safety bill

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is down $0.29 in early trading at $91.20 (February contract, most active); Gold is up $2.1 to $1407.7 (February contract, most active); Silver is up $0.207 to $30.530 (March contract, most active); Copper is up $0.0010 to $4.3270 (March contract, most active)

Western Molybdenum Oxide is $16.00; European Molybdenum Oxide is $16.70; LME moly 3-month seller's contract is $17.24, LME cash seller is $17.01

Stock Market Morning Update

The DOW is up 35.99 points to 11,611.53; the S&P 500 is up 2.29 to 1260.80. Miners are mostly up:

Barrick (ABX) $53.01 up 0.09%
Newmont (NEM) $61.44 down 0.18%
US Gold (UXG) $7.85 down 1.38%
General Moly (Eureka Moly, LLC) (GMO) $6.55 up 5.76%
Thompson Creek (TC) $13.52 up 2.99%
Freeport-McMoRan (FCX) $118.93 up 0.55% (a bellwether mining stock spanning copper, gold & molybdenum)

The Steels are up (a "tell" for General Moly & Thompson Creek):

ArcelorMittal (MT) $37.58 up 0.86% - global steel producer
POSCO (PKX) $106.63 up 0.34% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.62% at $1,939,991.39 (what's this?).

Cheers,

Colonel Possum

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Headline photograph by Mariana Titus

Tuesday, December 28, 2010

Cu Breaks $4.30 - Au, Ag, General Moly (GMO) Surge



Morning Miners!

It is 6:09 AM. Grab a cup of joe and let's see what Sweet Ruby T has loaded on her lo-boy trailer. On Pearl Harbor Day she hauled in new records for copper, gold and silver. Looks like today's load has a new high for the red metal and new life for our favorite precious metals...

Copper breaks $4.30 - Gold, Silver Surge

COMEX copper broke the elusive $4.30/lb level in the early morning hours. Asian supply tightness and depreciating global currencies are the reasons sited by Bloomberg's Glenys Sims in Singapore:

Copper Futures Gain to Record on Currency Alternative, Demand (Glenys Sim, Bloomberg News - Singapore, 12/28/2010)

At the time of this article COMEX copper was trading at $4.3075/lb; it went on to peg $4.3200/lb at 9:00:00 ET. COMEX gold surged to $1406.0/lb 30 minutes earlier and silver followed making its morning high of $29.880/oz at the same time as copper. The moves in the precious metals were welcome after lackluster performance since their 12/7 highs.

It is startling that copper has posted 7 new highs in the 14 market days since its Pearl Harbor Day record. Here's where we stand for the big three:

COMEX Gold $1432.5/oz 08:25:00 ET 12/7/2010, February contract most active
COMEX Silver $30.75/oz 08:25:00 ET 12/7/2010, March contract most active
COMEX Copper $4.3200/lb 09:00:00 ET 12/28/2010, March contract most active

General Moly (GMO) & Freeport-McMoRan (FCX) post new 52-week highs

The broader markets are now open and it looks like the miners are following the metal's bounce. General Moly (GMO), which popped 9.3% yesterday, has set a new 52-week high of $6.36/share on the open. Copper giant Freeport-McMoRan (FCX) posted its new 52-week mark at the same time at $119.72/share.

Do the Metals & Miners need a rest?

This Report devised the Eureka Miner's Index (EMI) to give us the market temperature for the sectors that have the greatest impact on mining in Eureka County. Although this morning's market performance is impressive, the EMI is showing some signs of cooling off. On December 7th, the EMI set it's record for the year at 739.1. On December 16th and 27th, the EMI dropped uncomfortably close to its 1-month moving average at 555.2 and 596.5 respectively. This morning's bounce gets us back to 654.8 but more than short throw from our Pearl Harbor high.

Although our benchmark miners are doing well, rising oil prices (NYMEX crude is $91.45/bbl this morning) and interest rates (10-year Treasury is 3.378%) are increasing headwinds for the index. This holiday week is thinly traded so it is also difficult to determine new trends. I'm betting that the Pearl Harbor EMI will remain the record for 2010, everyone needs a rest. Let's break 1,000 in 2010!!

POSCO raises stainless steel prices

South Korean steel producer and 20% owner of the Mt. Hope molybdenum project decided to raise the prices for its stainless steel products. Molybdenum is a key alloy in the manufacture of stainless steel. The ole Colonel remains bullish on the steelmakers for 2011 and this is a bullish another sign:

Stainless steel: 5.5% price hike by South Korea's POSCO (Hyunjoo Jin, Reuters, 28 Dec 2010)

Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Miner's Index(EMI)

This morning the Eureka Miner's Index(EMI) is above-par at 654.78, up from yesterday's 596.47. The 1-month moving average is now 602.93. If we break below this level in the coming days, the recent EMI uptrend may reverse.

The 2010 record high for the EMI is 739.13 set 12/7/2010; the low was set 6/7/2010 at 50.7. An EMI greater than 100 signals better times for the metals & miners relevant to Eureka County, the EMI re-established an upward trend on Friday, 12/3.

200-day averages are used in the EMI to normalize current mining company share price and are updated monthly. Upper and lower trend lines are updated weekly.

Eureka Outlook Dashboard

4-WD is OFF - Markets are stable; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) in the low-$100s above its 200-day average of $79.39 (our new warning level, 12/06 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

The GREEN light is turned back on for Commodity Reflation with copper trading comfortably above $3.50/lb

The GREEN light is turned on for Stable Markets with the VIX below the 30 level (what's this?)

The YELLOW light is turned on for Inflation Watch as the Federal Reserve resumes buying Treasurys (aka QE2)

The GREEN light is turned back on for Investor Confidence as investment returns to the equity markets

The ORANGE light is turned on our Fuel Gauge with oil above $90

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions , General Moly Mt. Hope Water Rights, U.S. House committee debates miner workplace safety bill

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is up $0.45 in early trading at $91.45 (February contract, most active); Gold is up $21.3 to $1404.2 (February contract, most active); Silver is up $0.590 to $29.845 (March contract, most active); Copper is up $0.0320 to $4.3120 (March contract, most active)

Western Molybdenum Oxide is $16.00; European Molybdenum Oxide is $16.70; LME moly 3-month seller's contract is $17.24, LME cash seller is $17.01

Stock Market Morning Update

The DOW is down 7.15 points to 11,547.88; the S&P 500 is up 0.21 to 1257.75. Miners are up:

Barrick (ABX) $52.18 up 1.13%
Newmont (NEM) $60.79 up 1.16%
US Gold (UXG) $7.40 up 1.47%
General Moly (Eureka Moly, LLC) (GMO) $6.24 up 5.76%
Thompson Creek (TC) $13.52 up 2.27%
Freeport-McMoRan (FCX) $118.68 up 0.06% (a bellwether mining stock spanning copper, gold & molybdenum)

The Steels are mixed (a "tell" for General Moly & Thompson Creek):

ArcelorMittal (MT) $37.24 down 0.35% - global steel producer
POSCO (PKX) $106.75 up 0.24% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 1.45% at $1,893,152.18 (what's this?).

Cheers,

Colonel Possum

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Headline photograph by Mariana Titus

Monday, December 27, 2010

$30 Moly for 2011? Metals & Miners Weekly Roundup


*** BREAKING NEWS *** General Moly (GMO) made a significant move up in afternoon trading. It hit a high of $6.01/share (2:50 p.m. ET) a 11.2% pop from its opening price of $5.40. GMO has since pulled back but is still above $5.80 at 3:30 p.m. ET. UPDATE: GMO closed on the day $5.90 up 9.26% from its prior close on 12/23/2010

Morning Miners!

It is 6:05 AM. Have a Monday cup of why-am-I-working-today coffee. There's a lot going on pardner, let's roll...

China's Christmas Surprise

China raised its key lending and deposit rates on Christmas Day to curb growing inflation concerns. This will no doubt throw the metals & miners for a loop as investor's worry again about China's rate of growth; the Shanghai exchange closed down 1.90% for the day.

The news didn't slow didn't slow COMEX copper which set $4.2985/lb as new record at the stroke of midnight just a nudge above $4.2960/lb set 12/22. It has since fallen back to $4.2595/lb in early morning trading. Gold is up a bit from Thursday at $1383/oz; and silver down a tad at $29.240/oz. NYMEX Oil remains ominously above the $90 level at $90.90/bbl.

It is hard to draw conclusions in a thinly traded holiday market. Our discussion below on oil, gold and copper correlations may give us some clues as to where we go next. First, let's check out one analyst's thoughts on moly prices for next year...

$30 Moly for 2011? Weekly Molybdenum Roundup



A faithful reader of the Report sent me a Canadian Business News Network (BNN) video of an interview with metals analyst John Redstone, Desjardins Securities. Mr. Redstone believes molybdenum, aluminum and zinc, and the companies that mine those metals, will be ones to watch. He thinks molybdenum could see a $30/lb price spike in the first-half of the year and chooses Thompson Creek (TC) as his "top pick" moly producer for 2011:

John Redstone Interview (BNN, 12/23/2010)

(Note: be patient with this video link, you may get a short BNN front end piece)

Spot prices of molybdenum oxide are now both in $16/lb territory in the West and Europe. Moly futures indicate a growing contango between spot prices and the London Metal Exchange (LME) 3-month and 15-month seller contracts both of which are now above $17/lb with the latter approaching $18/lb (contango occurs when the price of a commodity for future delivery is higher than the spot price, or a far future delivery price is higher than a nearer future delivery; backwardation is the opposite of contango).

The 3-month seller at $17.24/lb is comfortably above the Colonel's mid-range moly price target for 2010 of $15.71/lb. I will update my target for 2011 as we roll into the front end of January. Spot and futures data all look promising for a solid 2011. Is $30 moly in the cards? Stay tuned buckaroos.

Here is a detailed pricing summary for last week:

Western Moly Oxide $16.00/lb (the price tracked by Base Metals on the General Moly Website)

Moly Oxide, Europe (Mo Drummed Molydbic Oxide EU) $16.70/lb (the price reported in the Metals Bulletin)

LME Futures Contracts

LME cash seller is at $37500/metric ton $17.01/lb

3-Month (Buyer) $37,000/metric ton $16.78/lb
3-Month (Seller) $38,000/metric ton $17.24/lb

15-Month (Buyer) $38,150/metric ton $17.30/lb
15-Month (Seller) $39,150/metric ton $17.76/lb

Here is a chart of the LME 3-month contract (seller) from the February launch to the present:



Eureka Miner's Index (EMI)

The Eureka Miner's Index (EMI) gives us the market temperature for the sectors that have the greatest impact on mining in Eureka County. Below is a chart of the EMI at Friday's close. The magenta line is the EMI with a low interest cap of 3% on 10-year Treasurys (LIRC) and adjustments for gold and silver prices (i.e., Au:Ag ratio). A 1-month moving average is given by the blue line. A larger and more readable chart appears near the bottom of this blog page.


This morning the Eureka Miner's Index(EMI) is above-par at 596.47, down from Thursday's 677.46 on the China interest rate headline. The 1-month moving average is 596.06 periously close to this morning's EMI. If we break below this level in the coming days, the recent EMI uptrend may reverse.

The 2010 record high for the EMI is 739.13 set 12/7/2010; the low was set 6/7/2010 at 50.7. An EMI greater than 100 signals better times for the metals & miners relevant to Eureka County, the EMI re-established an upward trend on Friday, 12/3.

200-day averages are used in the EMI to normalize current mining company share price and are updated monthly. Upper and lower trend lines are updated weekly.

Oil & Copper Correlations with Gold

Oil & copper correlations with gold give us insight into what may happen next for the metals & miners.

Here are the latest correlations given this morning's NYMEX/COMEX trading:

Oil/Au correlation +0.4723 (1-month) +0.8103 (3-month)
Cu/Au correlation +0.3132 (1-month) +0.7126 (3-month)
Cu/Oil correlation +0.9117 (1-month) +0.9191 (3-month)

Here are the numbers from the last Monday's roundup (12/20/2010):

Oil/Au correlation +0.7717 (1-month) +0.8828 (3-month)
Cu/Au correlation +0.5897 (1-month) +0.8000 (3-month)
Cu/Oil correlation +0.9017 (1-month) +0.9113 (3-month)

All these correlations remain positive which is a typically a bullish condition for the metals & miners but some bearish trends are starting to emerge. The correlation of copper & gold continues to break down with copper showing a very over-valued state with respect to gold (nearly 7-standard deviations above the December model "fair vale" line). Though less severe, oil and gold are also showing some divergence. Oil is presently overvalued with respect to gold by nearly 4-standard deviations. The 1-month and 3-month correlations of copper & oil remain above 0.9 suggesting copper and oil prices continue to move in lockstep.

One way to visualize these correlations over time is to plot the "near-term" 3-month versus the "short-term" 1-month correlations (aka "rho") as shown below in a graph of oil versus gold and copper versus gold. The blue line indicates the correlation trajectory since October 1st; the magenta line is recent data since December 1st (ref: China to the Rescue?):




In the case of oil versus gold, we start out on 10/1/10 in the "+,-" or "yellow" quadrant and move upward until both are positively correlated (i.e. in the "+,+" or "green" quadrant). Copper correlated positively faster than oil and has been in the green quadrant for this entire period. Correlation data in this region is typically considered bullish. The trend toward the "-,+" quadrant for both oil & copper is worrying and potentially bearish (white arrow). We'll keep our eye on these two rascals as we enter the new year.

Gold/Oil & Oil/Copper Ratios

The Report has been tracking the recent rock solid stability (<3%) of the gold/oil and oil/copper ratios. This morning's gold/oil ratio is 15.2 suggesting $90/bbl oil should support $1370/oz gold; $100/bbl oil, $1520 gold. The oil/copper ratio is presently 21.3 suggesting $90/bbl oil should support $4.23/lb copper; $100/bbl oil, $4.69/lb copper.

For the past 3-months we have these statistics:

Au/Oil ratio

mean 16.15 bbl/oz
variation 2.57% (1-standard deviation/mean)

Oil/Copper ratio

mean 21.71 lbs/bbl
variation 1.88% (1-standard deviation/mean)

Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Outlook Dashboard

4-WD is OFF - Markets are stable; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) in the low-$100s above its 200-day average of $79.39 (our new warning level, 12/06 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

The GREEN light is turned back on for Commodity Reflation with copper trading comfortably above $3.50/lb

The GREEN light is turned on for Stable Markets with the VIX below the 30 level (what's this?)

The YELLOW light is turned on for Inflation Watch as the Federal Reserve resumes buying Treasurys (aka QE2)

The GREEN light is turned back on for Investor Confidence as investment returns to the equity markets

The ORANGE light is turned on our Fuel Gauge with oil above $90

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions , General Moly Mt. Hope Water Rights, U.S. House committee debates miner workplace safety bill

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is down $0.61 in early trading at $90.90 (February contract, most active); Gold is up $2.9 to $1383.0 (February contract, most active); Silver is down $0.088 to $29.240 (March contract, most active); Copper is up $0.0010 to $4.2595 (March contract, most active)

Western Molybdenum Oxide is $16.00; European Molybdenum Oxide is $16.70; LME moly 3-month seller's contract is $17.24, LME cash seller is $17.01

Stock Market Morning Update

The DOW is down 53.43 points to 11,520.06; the S&P 500 is down 5.01 to 1251.76. Miners are down except for US Gold:

Barrick (ABX) $51.34 down 0.56%
Newmont (NEM) $59.98 down 0.17%
US Gold (UXG) $7.33 up 0.14%
General Moly (Eureka Moly, LLC) (GMO) $5.36 down 0.74%
Thompson Creek (TC) $13.25 down 0.97%
Freeport-McMoRan (FCX) $117.48 down 0.58% (a bellwether mining stock spanning copper, gold & molybdenum)

The Steels are down (a "tell" for General Moly & Thompson Creek):

ArcelorMittal (MT) $37.01 down 0.59% - global steel producer
POSCO (PKX) $106.82 up 0.86%

The Eureka Miner's Grubstake Portfolio is is down 0.46% at $1,839,411.56 (what's this?).

Cheers,

Colonel Possum

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Headline photograph by Mariana Titus

Thursday, December 23, 2010

The Colonel Wishes You a Merry Christmas!



Morning Miners!

It is 5:59 AM. Have a cup from our last pot of Scott Raine's delicious Jingle Bell Java. Here's a toast from the break room - Sweet Ruby T, Old Miner Woden, our favorite Norseman Thor and the ole Colonel wish you and your family a very Merry Christmas. Let's rattle a few gifts for the metals & miners...

LME Molybdenum Futures Pop

It looks like Santa arrived early for our Miss Moly in London. The London Metal Exchange (LME) 3-month and 15-month seller contracts broke $17/lb yesterday re-establishing a nice contango with Western and European Moly Oxide spot prices (see note 1). This has reversed a "flattening trend" between spot and futures pricing suggesting a shift from stability to optimism for moly prices going forward into the new year:

Western Moly Oxide $16.00/lb ($35,274/metric ton)
European Moly Oxide $16.45/lb ($36,266/metric ton)
LME 3-month futures contract $17.01/lb ($38,000/metric ton)
LME 15-month futures contract $17.77/lb ($39,175/metric ton)

These 3-month charts show the shift in trend for futures pricing, first the 3-month contract:



And the 15-month contract:



The latest spot and futures price action suggests healthy near term demand coupled with optimistic expectations for 2011 and beyond - a little holiday cheer amidst volatile days for the other industrial metals.

Gold, Silver & Copper Wobbly

It looks like our other favorite metals may have got into the eggnog a little early. London spot gold & silver took a noticeable drop from recent trading ranges:




London gold bug Lawrence Williams comments on large flows in and out of the world's largest gold Exchange Traded Fund (SPDR Gold Trust GLD, held by the Eureka Miner's Grubstake Portfolio) :

SPDR Gold yoyo - big ups and downs in a week (Lawrence Williams, Mineweb, 12/23/2010)

After setting new highs, copper is getting roughed up today by persistent concerns about diminishing Chinese demand for the red metal. Moscow metals watcher, Maria Kolesnikova, reports this for Bloomberg:

Copper Falls in London Trading on Speculation That China's Demand May Slow (Maria Kolesnikova, Bloomberg News, 12/23/2010, 1:59 AM PT)

We will have to wait and see if all this is just volatility in a thinly traded holiday market or warning signs of things to come. Stay tuned.

Christmas Then & Now

I thought it would be fun to close today with a look at where we were one year ago. We've come a long way pardner. In the early morning trading for both years:

Western Moly $11.62/lb (12/23/2009) $16.00/lb (today) up 37.7%
General Moly (GMO) $1.97 (12/23/2009) $5.54 (today) up 181%

COMEX gold $1,093.0/oz (12/23/2009) $1,376.1/oz (today) up 25.9%
Barrick Gold (ABX) $40.26 (12/23/2009) $51.02 (today) up 26.7%

And the Eureka Miner's Grubstake Portfolio (EMGP) which has twelve stocks that relate directly or indirectly to mining in Eureka County (original investment was $1,000,000 in May 2009):

EMGP $1,269,004 (12/23/2009) $1,848,344 (today) up 45.6%

Looks like more candy than coal in our stockings buckaroos!

Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Miner's Index(EMI)

The Eureka Miner's Index(EMI) is above-par at 705.89, up slightly from yesterday's 704.16. The 1-month moving average is 589.83. The 2010 record high for the EMI is 739.13 set 12/7/2010; the low was set 6/7/2010 at 50.7. An EMI greater than 100 signals better times for the metals & miners relevant to Eureka County, the EMI re-established an upward trend on Friday, 12/3.

200-day averages are used in the EMI to normalize current mining company share price and are updated monthly. Upper and lower trend lines are updated weekly.

Eureka Outlook Dashboard

4-WD is OFF - Markets are stable; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) in the low-$100s above its 200-day average of $79.39 (our new warning level, 12/06 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

The GREEN light is turned back on for Commodity Reflation with copper trading comfortably above $3.50/lb

The GREEN light is turned on for Stable Markets with the VIX below the 30 level (what's this?)

The YELLOW light is turned on for Inflation Watch as the Federal Reserve resumes buying Treasurys (aka QE2)

The GREEN light is turned back on for Investor Confidence as investment returns to the equity markets

The ORANGE light is turned on our Fuel Gauge with oil above $90

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions , General Moly Mt. Hope Water Rights, U.S. House committee debates miner workplace safety bill

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is up $0.03 in early trading at $90.53 (February contract, most active); Gold is down $11.3 to $1376.1 (February contract, most active); Silver is down $0.290 to $29.095 (March contract, most active); Copper is down $0.0410 to $4.2340 (March contract, most active)

Western Molybdenum Oxide is $16.00; European Molybdenum Oxide is $16.45; LME moly 3-month seller's contract is $17.23, LME cash seller is $17.01

Stock Market Morning Update

The DOW is up 10.26 points to 11,569.75; the S&P 500 is down 0.60 to 1258.24. Miners are mixed:

Barrick (ABX) $51.02 down 0.38%
Newmont (NEM) $59.42 up 0.19%
US Gold (UXG) $7.38 up 0.54%
General Moly (Eureka Moly, LLC) (GMO) $5.54 unchanged
Thompson Creek (TC) $13.49 up 0.67%
Freeport-McMoRan (FCX) $116.13 down 0.22% (a bellwether mining stock spanning copper, gold & molybdenum)

The Steels are mixed (a "tell" for General Moly & Thompson Creek):

ArcelorMittal (MT) $37.07 down 2.16% - global steel producer
POSCO (PKX) $106.95 up 0.04% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.20% at $1,848,343.65 (what's this?).

Cheers,

Colonel Possum

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Note 1 - Contango occurs when the price of a commodity for future delivery is higher than the spot price, or a far future delivery price is higher than a nearer future delivery; backwardation is the opposite of contango.

Headline photograph by Mariana Titus

Wednesday, December 22, 2010

Copper Stalls, Gold Sleeps, Euro Moly on the Rise



Wōdnesdæg
Morning Miners!

It is 6:15 AM. Have a cup of last-minute-shopping java and don't be surprised to see Old Miner Woden ho-ho-ing down Main Street. He's all dressed up like Santa and headed to Raine's to buy something for his sweetheart. He didn't tell me who but I understand things have been pretty lively in senior housing since he moved in last week...

Copper Stalls

If you can explain copper's latest mysteries, you can probably predict what's in store for the metals & miners next year. Yesterday the S&P 500 passed pre-Lehman Brothers highs and COMEX copper set yet another record late in the day at $4.2960/lb. We have supply tightness, mining strikes in Chile and persistent hoarding rumors to keep the red metal center stage in a rapidly evolving drama in the base metals. "Is it real or is it Memorex?" as the old ad line used to go.

The Wall Street Journal broke unusual goings on at the London Metal Exchange (LME) earlier this month (Rustler's Moon) and has another bombshell this morning. Carolyn Cui & Andrea Hotter tell us that:

"...a single trader has reported it owns 80%-90% of the copper sitting in London Metal Exchange warehouses, equal to about half of the world's exchange-registered copper stockpile and worth about $3 billion." (WSJ, 12/21/2010)

Earlier it was reported that J.P. Morgan held a substantial position for its clients. Surprisingly these large holdings extend to other base metals:

"Single traders also own large holdings of other metals. One trader holds as much as 90% of the exchange's aluminum stocks. In the nickel, zinc and aluminum alloy markets, single traders own between 50% and 80% of those metals, and one firm has 40%-50% of the LME's tin stockpiles." (WSJ, 12/21/2010)

It is suspected that investor's are increasingly turning to metals as an alternative asset class for investment and this may explain these large holdings. For example, a copper exchange traded fund will soon be launched backed by physical holdings of the red metal. What will this do to base metal prices? Stay tuned.

Bloomberg's Maria Kolesnikova in Moscow provides more pieces to the copper puzzle with further details on the Collahuasi copper mine strike and recent the rise in LME inventories:

Copper Fluctuates in London Before U.S. Growth Report, as Stockpiles Gain (Maria Kolesnikova, Bloomberg News, Dec 22, 2010 4:36 AM PT)

Below is a chart of the continued uptick in LME copper inventories, you may remember that they have been in nearly constant decline since the early year highs of 550,000 metric tons:



In early trading, copper price futures appear to be taking a breather as traders digest the up-revision to U.S. GDP for the third quarter; 2.6% versus the last reported 2.5%. It still falls below economist's expectation of 2.9%. Meanwhile, inflation is milder than expected. The government's price index for personal consumption showed a 0.8% rise July through September, compared to a previously estimated 1.0% increase. Stay tuned.

Gold Sleeps

The Report has also been less than impressed by the lackluster performance of gold lately especially in relation to copper and oil. Yesterday, we pointed to a statistically dramatic departure of copper and gold prices (nearly 7-standard deviations from the Colonel's fair value line for December). Today NYMEX oil broke the $90/bbl level chasing Brent crude that topped it yesterday. With oil and copper on a tear, COMEX gold has been sleep-walking in the $1,380/oz neighborhood for most of this week. Below are the 3-month of COMEX copper versus NYMEX oil and COMEX gold.

First, copper (blue) versus oil (orange):



Note that for the most part copper and oil prices have risen together - copper moving up 20%; oil, 14%. Now here is copper (blue) versus gold (orange).



Although over this 3-month period copper and gold initially rose together, gold essentially flat-lined for December as copper spiked higher. For copper's 20% move over this period, gold has only come up 7%.

Euro Moly Oxide on the Rise

European molybdenum oxide nudged up another 15 cents to $16.45/lb. Although these are small steps, they have been fairly constant for euro-moly which is now just a thin flat washer above the LME 15-month futures contract at $16.42/lb. The backwardation (see note 1) with respect to the 3-month contract is more noticeable which has stayed at $15.88/lb for some time. By comparison, Western moly oxide has been pretty steady at $16.00/lb.

Although not dramatic the latest spot and futures prices suggest healthy near term demand and long term stability - not a bad place to be in these volatile days for the other industrial metals.

Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Miner's Index(EMI)

The Eureka Miner's Index(EMI) is above-par at 704.16, up slightly from yesterday's 697.07. The 1-month moving average is 581.45. The 2010 record high for the EMI is 739.13 set 12/7/2010; the low was set 6/7/2010 at 50.7. An EMI greater than 100 signals better times for the metals & miners relevant to Eureka County, the EMI re-established an upward trend on Friday, 12/3.

200-day averages are used in the EMI to normalize current mining company share price and are updated monthly. Upper and lower trend lines are updated weekly.

Eureka Outlook Dashboard

4-WD is OFF - Markets are stable; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) in the low-$100s above its 200-day average of $79.39 (our new warning level, 12/06 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

The GREEN light is turned back on for Commodity Reflation with copper trading comfortably above $3.50/lb

The GREEN light is turned on for Stable Markets with the VIX below the 30 level (what's this?)

The YELLOW light is turned on for Inflation Watch as the Federal Reserve resumes buying Treasurys (aka QE2)

The GREEN light is turned back on for Investor Confidence as investment returns to the equity markets

The ORANGE light is turned on our Fuel Gauge with oil above $90

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions , General Moly Mt. Hope Water Rights, U.S. House committee debates miner workplace safety bill

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is up $0.46 in early trading at $90.28 (February contract, most active); Gold is up $0.8 to $1389.6 (February contract, most active); Silver is down $0.019 to $29.375 (March contract, most active); Copper is down $0.0115 to $4.2645 (March contract, most active)

Western Molybdenum Oxide is $16.00; European Molybdenum Oxide is $16.45; LME moly 3-month seller's contract is $15.88, LME cash seller is $15.74

Stock Market Morning Update

The DOW is up 4.35 points to 11,537.51; the S&P 500 is up 2.30 to 1256.90. Miners are down except for Freeport:

Barrick (ABX) $51.47 down 0.41%
Newmont (NEM) $59.82 down 0.37%
US Gold (UXG) $7.52 down 0.79%
General Moly (Eureka Moly, LLC) (GMO) $5.53 down 1.07%
Thompson Creek (TC) $13.45 down 0.52%
Freeport-McMoRan (FCX) $116.43 up 0.20% (a bellwether mining stock spanning copper, gold & molybdenum)

The Steels are down (a "tell" for General Moly & Thompson Creek):

ArcelorMittal (MT) $37.95 down 0.55% - global steel producer
POSCO (PKX) $106.86 down 0.28% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.35% at $1,860,732.52 (what's this?).

Cheers,

Colonel Possum

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Note 1 - Contango occurs when the price of a commodity for future delivery is higher than the spot price, or a far future delivery price is higher than a nearer future delivery; backwardation is the opposite of contango.

Headline photograph by Mariana Titus

Tuesday, December 21, 2010

Copper, Oil, S&P New Highs - Where's Gold?



Morning Miners!

It is 6:08 AM. Nothing like a total lunar eclipse and the first day of Winter to bring in a new Tuesday - I'd say Sweet Ruby T out did herself. Grab a cup and enjoy one of her Christmas cookies on the tray. I like the silver frosted ones shaped like a Peterbilt 379 radiator grill...

General Moly Press Release

I posted this important General Moly press release in the afternoon for yesterday's blog. In case you missed it:

GENERAL MOLY CLOSES FIRST $40 MILLION EQUITY TRANCHE WITH HANLONG
(2:16 PM PT, 12/20/10)

Copper & Oil set new Highs, Gold & Silver lag

The moon must have been pulling on our favorite metals in the early morning. COMEX copper was the first to rise setting a new record of $4.2895/lb at 5:30 a.m. PT. Supply concerns continue for the red metal after Chile's Collahuasi mine halted shipments and with a falling dollar supporting prices. COMEX Gold and silver followed copper 5 minutes later but fell short of their recent highs posting $1393/oz and $29.605/oz respectively.

It is important to note that copper led the charge ahead of the precious metals. My December copper/gold model indicates an amazing departure from the copper's fair value line (6.8 standard deviations). We would normally say that copper is extremely overvalued with respect to gold but in this case I'm tempted to turn the tables on gold.

Clearly copper is the value leader recently bolstered by supply tightness while gold continues to sell-off after intraday peaks. Some of this is end-of-the-year profit taking but Doug Kass of Seabreeze Partners Management sounded a more ominous warning yesterday on CNBC Business News. The ole Colonel tends to listen to Kass who called the S&P 500 bottom in 2009 but I am somewhat skeptical of his latest gold prediction. He claims that hedge funds will sell-off their gold holdings in 2011 to rotate into income producing assets as the world's economies pickup (gold does not generate income, it appreciates or depreciates in value). Kass sees a drop of at least $250/oz; at present levels this would get us down to $1135/oz territory. I'm sticking with my prediction that COMEX gold will see $1570/oz before the Fourth of July. I believe global currency instability, central banks and China retail sales will keep gold up for 2011. Stay tuned buckaroos.

This Report tracks NYMEX crude light oil on a daily basis and it stayed below its highs for the year so far today. However, it is important to note that front-month Brent crude on the ICE futures exchange hit a two-year high of $93.22. This may be a harbinger for higher oil prices as we enter the new year. This Report believes we will see $100/bbl oil before mid-year 2011.

The S&P 500 at the gate of the bull pasture

The broader markets are now open and the S&P 500 just broke the 1,251 level. Last March, I predicted that the S&P 500 would break 1,251 before Christmas, phew finally made it! (Still Fearless in 2010? The Colonel's Market Prediction, 3/19/2010). On the 14th of this month we talked about why this is important:

"The S&P 500 moving above the 1,250 level has some significance. Before the so-called 'Great Recession', the S&P 500 closing high was set 10/9/2007 at a lofty 1,565.15. Technically we entered a bear market when the index fell 20% from this peak or 1,252. That occurred in September 2008 as the collapse of Lehman Brothers accelerated the financial crisis. The market bottom followed on March 6, 2009 for an intraday low of 666.79. We've come a long way from the bottom of that canyon buckaroos."

Here we are at the gate of the S&P 500 bull pasture, time to head in or return to bear country? You know me, I'm an optimist until proved wrong!

Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Miner's Index(EMI)

The Eureka Miner's Index(EMI) is above-par at 697.07, down slightly from yesterday's 705.78. The 1-month moving average is 567.89. The 2010 record high for the EMI is 739.13 set 12/7/2010; the low was set 6/7/2010 at 50.7. An EMI greater than 100 signals better times for the metals & miners relevant to Eureka County, the EMI re-established an upward trend on Friday, 12/3.

200-day averages are used in the EMI to normalize current mining company share price and are updated monthly. Upper and lower trend lines are updated weekly.

Eureka Outlook Dashboard

4-WD is OFF - Markets are stable; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) in the low-$100s above its 200-day average of $79.39 (our new warning level, 12/06 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

The GREEN light is turned back on for Commodity Reflation with copper trading comfortably above $3.50/lb

The GREEN light is turned on for Stable Markets with the VIX below the 30 level (what's this?)

The YELLOW light is turned on for Inflation Watch as the Federal Reserve resumes buying Treasurys (aka QE2)

The GREEN light is turned back on for Investor Confidence as investment returns to the equity markets

The YELLOW light is turned on our Fuel Gauge with oil above $80

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions , General Moly Mt. Hope Water Rights, U.S. House committee debates miner workplace safety bill

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is down $0.22 in early trading at $89.15 (February contract, most active); Gold is down $0.9to $1385.2 (February contract, most active); Silver is down $0.185 to $29.170 (March contract, most active); Copper is up $0.0675 to $4.2735 (March contract, most active)

Western Molybdenum Oxide is $16.00; European Molybdenum Oxide is $16.30; LME moly 3-month seller's contract is $15.88, LME cash seller is $15.74

Stock Market Morning Update

The DOW is up 33.12 points to 11,511.25; the S&P 500 is up 4.25 to 1251.33. Miners are mixed:

Barrick (ABX) $51.47 down 0.81%
Newmont (NEM) $59.61 down 0.96%
US Gold (UXG) $7.27 down 1.36%
General Moly (Eureka Moly, LLC) (GMO) $5.44 up 0.55%
Thompson Creek (TC) $13.41 up 0.37%
Freeport-McMoRan (FCX) $114.60 up 0.49% (a bellwether mining stock spanning copper, gold & molybdenum)

The Steels are mixed (a "tell" for General Moly & Thompson Creek):

ArcelorMittal (MT) $38.52 down 0.21% - global steel producer
POSCO (PKX) $106.97 up 4.65% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is unchanged at $1,841,497.75 (what's this?).

Cheers,

Colonel Possum

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Headline photograph by Mariana Titus