"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, January 29, 2010

Freeport "Broken", Miners in Correction


Morning Miners!

It is 6:24 AM and that famous Raine's TGIF coffee never tasted so good. What a week this has been for metals and miners. Fortunately it looks like we're closing the month on an upbeat note with a better than expected fourth quarter rise in U.S. GDP (5.7%) and signs that the European Union is moving to help struggling Greece with its debt problems. This effort is no doubt to stem the sovereign debt crisis from cascading to Portugal and Spain which are also on shaky ground.

The latest news has stopped the fall in copper prices and given some of the miners a much needed lift for the day. The question is whether this will be enough to stem the latest sell-off in the commodity space. Yesterday we tried to gauge investor confidence in our favorite miners. The jury was split with half of the miners below their 200-day moving average, General Moly sitting right at this critical line and Freeport McMoRan and Thompson Creek above.

The fate of Freeport is important because it is often considered the bellwether of mining stocks by the investment community. Yesterday on CNBC, Dennis Gartman, the "Commodity King", declared Freeport "technically broken" and saw rocky roads ahead for metals and miners in the near term. A stock that is technically broken is expected to fall further based on its chart performance even if the company's fundamentals are positive. All our miner's (local and benchmark) are in a bearish correction (i.e., greater than 20% decline) from recent closing highs:

Barrick (ABX) $47.93 (12/2/09) $35.91 (1/28/10) -25.1%
Newmont (NEM) $55.83 (12/2/09) $43.99 (1/28/10) -21.2%
US Gold (UXG) $3.09 (12/2/09) $2.32 (1/28/10) -24.9%

Freeport McMoRan (FCX) $88.2 (1/8/10) $68.82 (1/28/10) -22.0%
Thompson Creek (TC) $15.2 (1/14/10) $11.51 (1/28/10) -24.3%
General Moly (GMO) $3.08 (1/19/10) $2.40 (1/28/10) -22.1%

By comparison, the S&P 500 is only down 5.7% from its closing high of 1150.23 on the 19th of this month. With great reluctance, the ole Colonel has turned the "Investor Confidence" indicator to YELLOW on the Eureka Outlook Dashboard to your right.

So where do we go from here? Presently the broader markets are in "consolidation". This is a polite way of saying things are lousy but not bad enough to jump in the lifeboats. If the S&P goes down 10% it will be said to be in "correction" but a bearish correction is still another 10% away (i.e. 20% below 1/19/10 level). I'm scratching my head but think a 10% drop might be in the cards followed by a rebound and gradual recovery in the commodity space. This would follow last year's model without the severity; a market low (March for 2009) followed by a climb from the bottom by the metals and miners. For the latter, much depends on the economic growth outlook for China in 2010. I continue to believe that worry about their tightening monetary policy is overdone. As long as interest rates are low and China/India continue to have a healthy appetite for raw materials, investment money should return to the metals and miners.

The ole Colonel remains bullish for 2010 although I did lighten up a bit on Freeport on today's bounce. I'm not letting any General Moly or Barrick out of the corral pardner.

Enough talk, let's walk the walk:

4-WD is ON - the VIX or "fear index" is too close to 25 for my comfort, rougher markets are expected (what's this?)

Yellow light is ON for waning investor confidence in the metal and mining sectors

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 $0.72 in early trading to $74.36 (March contract, most active); Gold is down $4.0 to $1080.8 (April contract, most active); Silver is down $0.037 to $16.175 (March contract); Copper is up $0.0090 to $3.1070 (March contract); Molybdenum falls to $15.00

The DOW is up 113.66 points to 10234.12; the S&P 500 is up 11.86 points to 1096.39. The miners are mixed:

Barrick (ABX) $35.79 down 0.33%
Newmont (NEM) $43.89 down 0.23%
US Gold UXG) $2.33 up 0.43%.
General Moly (Eureka Moly, LLC) (GMO) $2.46 up 2.50%
Thompson Creek (TC) $11.85 up 2.95%
Freeport McMoRan (FCX) $70.31 up 2.17% (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $39.46 up 1.99% - global steel producer
POSCO (PKX) $115.89 down 1.52% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.94% to $1,199,342.35 (what is this?).

Cheers,

Colonel Possum

Headline Photograph by Mariana Titus

Thursday, January 28, 2010

Investor Confidence in Our Local Miners


Morning Miners!

It is 6:29 AM, have a cup of Thor's thunderous java and let's check on our local miners. One of the key indicator lights on the Eureka Outlook Dashboard to your right is "Investor Confidence". It has been lit "Green" for a long while but we have witnessed a brutal thrashing of miners in the marketplace with emerging concern about China's monetary policy and developed country debt problems. The former has taken a whack at the base metal complex with bellwether copper falling for its third straight day; the latter has put downward pressure on gold since late November. The Eureka Miner's Grubstake Portfolio has lost over $74,500 in value since the beginning of the year, a 5.9% loss in less than a month. Ouch.

Let's see what the experts think. Kitco Metals carries a summary of Thomson One Analytics ratings for the world's top senior and junior miners. Here are the links:

Metals & Mining Analysts' Ratings & Estimates - Seniors
Metals & Mining Analysts' Ratings & Estimates - Juniors

A summary of the miners that we track in the Grubstake and daily Report is given below in their respective category. The investor ratings system is:

Buy (1.0), Buy/Hold (2.0), Hold (3.0), Sell/Hold (4.0), Sell (5.0)

Barrick (ABX) Senior, Gold, Large Cap 2.1
Newmont (NEM) Senior, Gold, Large Cap 2.5
US Gold (UXG) Junior, Gold, (not rated)

Freeport McMoRan (FCX) Senior, Base Metals & Diversified, Large Cap 2.4
Thompson Creek (TC) Senior, Base Metals & Diversified, Small Cap 2.5
General Moly (GMO) Junior, Development/Advanced Exploration Stage 2.8

OK, it's encouraging that all of our local miners (except US Gold which is not in this survey) are still "Buy/Hold" candidates whose ratings are not greatly different from bellwether Freeport McMoRan and molybdenum producer, Thompson Creek. But is there trouble on the horizon? A fairly universal benchmark is a comparison of a company's stock price with its 200-day moving average. If it breaks this line for any extended period of time, many investors head for the exits. A favored stock is generally one whose share price is above above both its 50-day (near-term) and 200-day (mid-term) line with the near-term average above the long-term and both averages trending upward. The 200-day average in this sense is the "last line of defense" for many folks. Let's give our miners a "GREEN" light if they are above their 200-day and a "YELLOW" if below. Given today's morning share prices here's where we stand:

Barrick (ABX) $36.90 (200-d) $35.46 (MKT) YELLOW
Newmont (NEM) $44.90 (200-d) $43.77 (MKT) YELLOW
US Gold (UXG) $2.66 (200-d) $2.31 (MKT) YELLOW

Freeport McMoRan (FCX) $65.50 (200-d) $70.90 (MKT) GREEN
Thompson Creek (TC) $11.40 (200-d) $11.94 (MKT) GREEN
General Moly (GMO) $2.46 (200-d) $2.46 (MKT) GREEN

Whoa, a tie with the gold miners faring worse because they have been in the soup longer (in fairness, Freeport also produces gold but their dominant copper side has kept them above the year-end fray). This tie is a little scary. For example, if General Moly doesn't bounce above $2.46 and stay there for awhile, the tie is broken and our "Investor Confidence" indicator will turn YELLOW. In fact, none of these miner's charts are very encouraging given the recent global news.

There is thankfully a flip-side to all this. Savy investors wait for pullbacks if they believe things will recover to a strong upside. Legendary investor Ken Hebner said yesterday on CNBC that he believes the China jitters are overdone and he is in a buying mode. I'm in his camp, few have said commodity-sensitive stocks wouldn't see some volatility in 2010. Here is a good article on the subject of commodity volatility in the Financial Post:

Commodities set for volatile year: Scotiabank (Finacial Post, 1/27/2010)

Hang in there buckaroos! This ole Colonel is holding on to his Barrick and General Moly stock with both hands!

Enough talk, let's walk the walk:

4-WD is ON - the VIX or "fear index" is still bobbing around 25, rougher markets are 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 $0.08 in early trading to $73.59 (March contract, most active); Gold is up $2.2 to $1087.9 (April contract, most active); Silver is up $0.035 to $16.475 (March contract); Copper is down $0.0455 to $3.1770 (March contract); Molybdenum is steady at $15.50

The DOW is down 75.12 points to 10161.04; the S&P 500 is down 7.14 points to 1090.36. The miners are mixed:

Barrick (ABX) $35.46 down 0.78%
Newmont (NEM) $43.77 down 0.95%
US Gold UXG) $2.31 up 0.43%.
General Moly (Eureka Moly, LLC) (GMO) $2.46 up 1.23%
Thompson Creek (TC) $11.94 0.76%
Freeport McMoRan (FCX) $70.90 down 0.49% (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $39.30 down 3.56% - global steel producer
POSCO (PKX) $118.36 down 1.03% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.83% to $1,199,256.32 (what is this?).

Cheers,

Colonel Possum

Headline Photograph by Mariana Titus

Wednesday, January 27, 2010

Nevada Mining Tax, China's Moly Story


Morning Miners!

It is 6:10 AM, let the Colonel pour you a cup and let's get to work. Some mornings are busy than others; this is one of them. First things first. As reported by the Reno Gazette Journal, "An organization known as the Progressive Leadership Alliance of Nevada (PLAN) is proposing a ballot initiative that would significantly raise taxes on Nevada’s mines by amending the Nevada State Constitution to require a tax of not less than 5% of the gross proceeds of minerals." The RGJ is conducting a poll this week asking "Should Nevada raise the tax on gold mining companies to help ease the budget deficit?" The ole Colonel just voted and the "No" folks lead by 82%. There have been only 2,048 votes so far so your vote counts. Here's the link:

RGJ Nevada Mining Tax Poll

There is a lot of news on the wires about China and molybdenum yesterday and today. China Mining reports that last year, China produced 215,579 tons of molybdenum, an upswing of 17.5% compared to 2008. Their December production was a startling 65% greater than December 2008 and 1.7% greater than the prior month:

2009 China's nickel, moly output rose to over 210,000 t, respectively
(China Mining, 1/26/2010)

Last September the Report carried an excellent analysis of the China moly story submitted by General Moly (Good Golly Miss Moly). It was noted then that China had transitioned from a net exporter of molybdenum to a net importer. It looks like this trend may continue into the new year:

China to Continue Driving Molybdenum Demand (PRNews Wire, London 1/27/2010)

As reported:

"Although consumption has declined on a global level, emerging markets such as China have seen demand continue to increase in 2009. Chinese consumption is estimated to have risen by around 5% in 2009. Chinese consumption will continue to outstrip growth in the rest of the world, with an annual average rate of 9%py for the next five years, compared to accumulated growth of 2%py in the developed markets of Europe, the USA and Japan."

Furthermore, molybdenum shortages could occur given the drastic reductions form molybdenum producers and delays in starting new projects:

"In 2009, global mined molybdenum output is estimated to have declined by 12%, following annual average growth of 5% for the period 2000 to 2008. Surpluses in 2008 and 2009 have been absorbed by stockpiling, mainly in China. In the longer term, molybdenum demand is expected to recover and the market may move into deficit by 2014."

This article closes with some thoughts on the upcoming introduction of moly on the London Metal Exchange (LME). The Report believes that creating a financial market for molybdenum will be price supportive as long as interest rates are low and the investment community continues to treat metals as an alternative asset class (Miss Moly and the Platinum Looking Glass, 1/21/2010). Volatility will no doubt increase with added participants (including speculators) in the marketplace:

"The plan to turn molybdenum into an exchange traded commodity has come with mixed reviews. Many producers and consumers have voiced concerns that prices will become more volatile as a result, while others have welcomed the news."

Time will tell, stay tuned.

Enough talk, let's walk the walk:

4-WD is ON - the VIX or "fear index" is still bobbing around 25, rougher markets are 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 $0.10 in early trading to $74.61 (March contract, most active); Gold is down $6.2 to $1092.1 (February contract, most active); Silver is down $0.305 to $16.550 (March contract); Copper is down $0.0455 to $3.2705 (March contract); Molybdenum is steady at $15.50

The DOW is down 21.01 points to 10173.28; the S&P 500 is down 1.27 points to 1090.90. The miners are struggling:

Barrick (ABX) $35.57 down 1.39%
Newmont (NEM) $43.97 down 0.61%
US Gold UXG) $2.32 down 0.432.
General Moly (Eureka Moly, LLC) (GMO) $2.54 down 0.82%
Thompson Creek (TC) $11.76 down 2.00%
Freeport McMoRan (FCX) $70.48 down 2.10% (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $40.39 down 1.15% - global steel producer
POSCO (PKX) $118.09 down 2.27% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 1.95% to $1,206,484.03 (what is this?).

Cheers,

Colonel Possum

Headline Photograph by Mariana Titus

Tuesday, January 26, 2010

Chinese Theater, Gold & Silver


教育的目的
Morning Miners!

It is 6:08 AM, grab a cup and let's checkout what's playing at the Global Investor Theater. Every season has a favorite play. Last Fall it was the Dubai Credit Crisis Follies which opened in late November. That drama was about a Middle East country that built the tallest building on earth then couldn't pay for it (Dubai, A World Away?). It sent gold tumbling and investors worrying about the overhang of sovereign debt in other parts of the world. This was quickly followed by a Greek tragedy for the Christmas season about a euro-zone member country that blew its national treasure on an Olympics Game it couldn't afford just before a great financial crisis. Investors worried even more, gold tumbled further and everyone prayed the New Year shows would be more uplifting.


The first New Year play opened at the Theater of China and featured a very rich uncle who showered money on his minions, grew his kingdom swiftly and even lent money to a profligate neighbor across a great ocean. With a sudden change of heart, the uncle pulled his purse strings tight causing a great outcry from his people and worry for his neighbor. This play is still in Act I and some investors are heading for the exits. Can't we have a nice light comedy once in a great while?

Let's see what the Wall Street Journal has to say this morning about the latest Chinese theater:

"A return to risk aversion amid renewed concerns about potential Chinese tightening of monetary policy has left gold futures on the defensive along with other commodities and stock-index futures early Tuesday." (WSJ, 1/26/2010)

Whoa, that's a polite review. Maybe Act II has some happy parts; gold tripped but is pulling back up:


Silver nose dived but now swims for the surface:


The copper rally is broken, nuts:


Hang in their buckaroos, it looks like Barrick (ABX), Newmont (NEM) and US Gold (UXG) are among the few miners not in the red. Maybe they know how this lousy play turns out.


The Colonel isn't waiting for intermission, let's walk the walk:

4-WD is ON - the VIX or "fear index" is bobbing around 25, rougher markets are 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 $74.74 (March contract, most active); Gold is down $0.7 to $1096.4 (February contract, most active); Silver is down $0.550 to $16.595 (March contract); Copper is down $0.0480 to $3.3345 (March contract); Molybdenum is steady at $15.50

The DOW is up 32.88 points to 10229.74; the S&P 500 is up 0.55 points to 1097.33. The miners are mixed:

Barrick (ABX) $36.42 up 1.05%
Newmont (NEM) $44.35 up 0.50%
US Gold UXG) $2.37 unchanged
General Moly (Eureka Moly, LLC) (GMO) $2.59 down 2.73%
Thompson Creek (TC) $12.31 down 2.15%
Freeport McMoRan (FCX) $72.63 down 2.64% (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $41.22 down 3.01% - global steel producer
POSCO (PKX) $121.27 down 3.55% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 1.35% to $1,238,215.49 (what is this?).

Cheers,

Colonel Possum

Headline Photograph by Mariana Titus

Monday, January 25, 2010

Dr. Copper, General Moly , US Gold & Barrick


Morning Miners!

It is 6:15 AM, the coffee is hot and it looks like we have a few colors coming at us from the west southwest on the NOAA weather radar. Copper is the color shining in the mineshaft this morning continuing its Friday rally after last week's 3-day trouncing in the broader markets.


The Colonel has added a Kitco Metals link to the Miner's Corner so you can easily access spot prices for the base metals. Here's how copper is doing in the early hours:


The beginning of a new year seems to always have at least two mining camps of thought about markets; "everything is going to hell" and "everything is going to be better than last year." Copper has been our steadfast canary in the global recovery mineshaft since last March and she seems to be proudly flying over the second camp. For a different and (humorous) opinion about the near term fate of our little bird, here is a link to "mercenary" geologist Mickey Fulp's contrarian view from the first camp:

A Contrarian's Comment on Commodities: The Curious Case of Copper (Kitco Metals, 1/22/2010)

Although Mr. Fulp is bullish on commodities in the long run, he is nervous about what may be coming at us shortly:

"Although I remain convinced we are in the early stages of a secular bull market for commodities, basic supply and demand fundamentals for copper are currently negative and the evidence for a pending correction in the price of copper is strong. In my opinion, a long overdue correction in the S&P 500 Index will result in a significant drop in the price of copper for the short term."

Copper is also his test for upcoming events changing the metaphor from "canary" to "Doctor":

"Copper is often referred to by commodities traders as 'Dr. Copper' because it is the only metal with a 'Ph.D. in Economics'. In other words, the supply, demand, and price of copper are accurate indicators of the state of the world’s industrial economy."

This is similar to the Dennis Gartman, the "Commodity King", version which attributes the 'Ph.D. in Economics' title to the collective behavior of the base metals. Whatever the case, Dr. Copper seems to be a happy camper today.

How about our local miners? In markets there is a saying, "find strength in weakness, find weakness in strength." Last Friday on a dismal market close, General Moly (GMO) and US Gold (UXG) finished strong, both up from the previous day. On the other hand, Barrick Gold (ABX) struggled at the open today as gold saw some welcome recovery. GMO and UXG are both up today. Let's see where these three stand with respect to their 200-day averages:




General Moly continues to hang in there above the average line; if GMO can stay north of $2.50 this quarter, I think we're in good shape. The gold miners, however, are suffering with UXG lingering below line and ABX just touching down. Since Barrick is so heavily bought and sold institutionally, it is interesting to note that the last times it has neared the 200-day line its share price has enjoyed a bounce back. Maybe today?... maybe not?

Enough running between mining camps, let's walk the walk:

4-WD is ON - the VIX or "fear index" remains above 25, rougher markets are 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 $0.01 in early trading to $74.53 (March contract, most active); Gold is up $7.7 to $1097.4 (February contract, most active); Silver is up $0.138 to $17.070 (March contract); Copper is up $0.0430 to $3.3900 (March contract); Molybdenum is steady at $15.50

The DOW is up 23.35 points to 10196.33; the S&P 500 is up 5.03 points to 1096.79. The miners are mixed:

Barrick (ABX) $36.35 down 0.41%
Newmont (NEM) $44.50 up 0.16%
US Gold UXG) $2.38 up 0.42%
General Moly (Eureka Moly, LLC) (GMO) $2.74 up 4.58%
Thompson Creek (TC) $12.71 down 1.70%
Freeport McMoRan (FCX) $75.01 up 1.05% (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $42.61 up 2.45% - global steel producer
POSCO (PKX) $125.14 up 1.66% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.64% to $1,257,453.46 (what is this?).

Cheers,

Colonel Possum

Headline Photograph by Mariana Titus

Friday, January 22, 2010

Copper Shines a Ray of Hope


*** BREAKING NEWS *** The VIX or so-called "fear index" spiked 22.6% to close at 27.31. Any level above 25 indicates rocky market conditions may be ahead putting us in 4-WD on the Eureka Outlook Dashboard to your right. General Moly (GMO) and US Gold (UXG) were the only stocks that ended up for the day in the Eureka Miner's Grubstake Portfolio. The worst performer was POSCO, down 4.98%

Morning Miners!

It is 6:15 AM and that famous Raine's TGIF coffee has never tasted better. It might just be the pause that relieves a week of rough weather and rougher markets. Fears about China's monetary tightening and choppy earnings reports for the last quarter have sent gold below $1100, cratered oil and brought the broader markets to a net loss for the new year. To make matters worse, Goldman Sachs downgraded metals and the steel sector this morning. Ouch, that's a one-two punch for Eureka!

STOCKS NEWS US-Goldman downgrades metals, steel sectors

Aw come on Colonel, give us some hope on a Friday! OK, the weather is going to get better once the fourth Pacific storm passes and our old canary in the global recovery mine shaft, copper, is showing some spirit. Let's start with a short CNBC video of yesterday's interview with Feeport McMoRan (FCX) CEO Richard C. Adkerson. Freeport is the world's number two copper miner (note 1) and Adkerson is considered by some to be one of mining's best CEOs. You can find the video near the bottom of this blog.

This interview was conducted shortly after their quarterly report and FCX stock was down more than 8%. Their stock continues to get pummeled today after the Goldman downgraded FCX from "buy" to "neutral". Adkerson makes the point that last year also started out with a lot of glum opinions about China's economy. This was important then and is still relevant now because the greatest demand growth for copper and other base metals comes from China. Of course, China surprised everyone in 2009 and registered a GDP growth in excess of 10% last quarter. In Adkerson's words, "...for the time being, China looks very strong."

This strength has brought concerns of economic "overheating" and the recent moves by China's leaders to put the brakes on bank lending. From my viewpoint, the question is a matter of degree; if China's growth slows to 8 or 9% does the demand for metals drop off a cliff? For the now, I'll side with Adkerson's cautious optimism for 2010 although it is always scary to bet against Goldman (who have been fairly consistent in predicting a 2010 commodity correction since last fall: The Devil, Oil, Gold & Goldman). Here are some additional thoughts from this morning's Wall Street Journal:

"China bulls remain optimistic about that nation's appetite for commodities such as copper, iron ore, gold and aluminum. A combination of investment and stimulus packages have helped revive China's economy. Recent Chinese trade data showed imports surged 56% in December from a year earlier, while exports grew 17.7%.

But China's growth may face some obstacles of its own. China's central bank recently raised reserve requirements with an eye toward reducing speculative lending. Such moves could curb China's growth and, by extension, its appetite for commodities." (WSJ, 1/22/2010)

What does copper think? In early morning trading, copper was one of the few metals that up as gold and oil tumbled. Several days ago I ran my models of copper versus gold and copper versus oil and these charts are encouraging (a larger and more readable version is included at the bottom of this blog below the Adkerson interview).



In both cases copper is near or outside its expected range with good upward momentum in its 20-day moving average (large white arrow). If this trend continues, the ole Colonel will bet all these China jitters are a bit overdone and metals should recover.

On the other hand, there is caution in the wind. The VIX or "fear index" (what is this?) has moved close to the 25 level where the Report starts turning on caution lights after waddling around comfortably below 20 for most of the new year. Another worrisome sign is a technical "inversion" of gold and oil prices which (on a 3-month basis) began January 6th. An inversion means that oil prices move (on average) in the opposite direction to gold even though there can be days where both move up or down together. There were two inversions last year, 2/12 to 3/20 and 4/14 to 5/26. The first was quite possibly a precursor to the frightening stock market bottom in March (S&P 500 intraday low of 666.79 on 3/9/2009). Let's hope the current inversion does not repeat history.

Enough worrying about everything, let's walk the walk:

4-WD is OFF - the VIX or "fear index" remains below 25 but just barely, rougher markets may be ahead (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 $0.44 in early trading to $75.64 (March contract, most active); Gold is down $17.4 to $1085.8 (February contract, most active); Silver is down $0.450 to $17.060 (March contract); Copper is up $0.0055 to $3.30.05 (March contract); Molybdenum is steady at $15.50

The DOW is down 25.01 points to 10364.87; the S&P 500 is down 4.22 points to 1112.26. The miners are mixed:

Barrick (ABX) $37.24 up 1.97%
Newmont (NEM) $45.46 up 2.30%
US Gold UXG) $2.36 up 0.21%
General Moly (Eureka Moly, LLC) (GMO) $2.74 up 4.58%
Thompson Creek (TC) $12.23 down 0.61%
Freeport McMoRan (FCX) $75.64 down 0.84% (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $42.58 up 0.50% - global steel producer
POSCO (PKX) $127.58 down 1.52% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.27% to $1,276,030.89(what is this?).

Cheers,

Colonel Possum

Note 1: Freeport McMorRan is the world's number two copper miner (after Chile's state-owned Codelco), a top five global gold miner, number one in molybdenum, and an upcoming leader in cobalt.

Headline Photograph by Mariana Titus

Thursday, January 21, 2010

Miss Moly and the Platinum Looking Glass


Morning Miners!

It is 6:22 AM, grab a cup and let's see what's up for molybdenum in the next several months. As reported at the tail end of last year (The Colonel Wishes You a Happy New Year), minor metals moly and cobalt will make their debut in early February on the London Metal Exchange (LME):

Cobalt and Molybdenum 2010

This will expose these metals to a larger group of market participants (including speculators) by creating futures contracts similar to those of more well known commodities such as gold, copper and oil. In the current economic environment of low interest rates and continuing global recovery, the expanded market will most likely be supportive of molybdenum price in the near term.

The futures contracts are "physically delivered" which in the literal sense means if you bought it you got it although this rarely happens at the LME. Traders on the LME usually sell their contracts to someone else to avoid delivery of the physical metal. In the words of the Exchange:

"The LME is primarily a financial, rather than a physical market, where trading is used to manage risks rather than secure metal. Less than 1 percent of contracts traded on the LME result in physical delivery, so the chances of being stuck with metal you cannot use are very low. In the unlikely event that a contract goes to physical settlement, lots can be swapped or sold at a premium or discount to the LME price. The cobalt industry is already used to this way of doing business, as it already trades metal at a premium or discount to the Metal Bulletin cobalt price."

The LME will enable a moly miner in production like Thompson Creek Metals (TC) to hedge against volatility in prices. From the LME's view, "Hedging is the process of managing the risk of a price change by offsetting it in the futures market. The ability to hedge gives producers, consumers and merchants in the industry the choice of how much price risk they are prepared to accept. The process of hedging will also create for the first time a truly transparent and representative market price."

We have recently witnessed the downside to carrying a hedge book by the example of Barrick Gold (ABX). As they now perceive an increasing gold price trend, Barrick reduced their hedges to zero to take the fullest advantage of current market prices. The choice between low price volatility and greatest return is made by all producers; the LME adds a powerful tool for managing this risk/reward trade-off.

For a molybdenum miner in a pre-production phase like General Moly (GMO), the LME should help boost current moly prices given recent investor interest in metals as a "pseudo-asset" class. Higher future metal prices will improve GMO's estimated margins with respect to estimated production cost. This in turn strengthens their position in the eyes of investors and the ability to borrow capital.

This is the point at which Miss Moly passes into a somewhat surreal environment similar to Alice passing through the looking glass. Although only members of the LME will be allowed to participate in molybdenum futures contracts this will include speculators who see opportunity in putting easy money to work to bid up metal prices and reap handsome rewards. These folks are not evildoers, speculation adds liquidity to markets and in the end is always dampened by the laws of true supply and demand. Speculators with a natural sense (or luck) to know when to get in and out do well; those that bet poorly are crushed. That's the fun of markets, pardner.


I thought it might be interesting this morning to look at the platinum group metals to draw a comparison for what might be in store for molybdenum and cobalt. A U.S. subsidiary of London's Exchange Traded Fund Securities launched platinum and palladium exchange-traded funds (ETF) earlier this month, PPLT and PALL. Both of these metals are traded on the London Platinum and Palladium Market (not the LME) and now the ETFs expand participation to a massive base that includes retail investors like you and me. It is highly unlikely that there will be a moly or cobalt ETF launch any time soon; the point of this comparison is to illustrate how an expanded investor base can influence metal price in the near term.

Let's give this some perspective. Moly and cobalt are about to enter the financial high school of metals, platinum and palladium are seniors earning their own ETFs and gold and silver have graduated to become ETF mega-asset pools. Here's a comparison of ETF market capitalization (ETF share price x outstanding shares):

Platinum (PPLT) $0.0165B
Palladium (PALL) $0.0915B
Silver (SLV) $5.3B
Gold (GLD) $40.7B

The Gold ETF alone represents more than 1,100 metric tons of gold; the two new funds have accumulated a bit more than 100,000 ounces each of platinum and palladium to date. The platinum market is about 6 million ounces, and showed a small surplus last year. A 100,000-ounce swing is big enough to turn the market to a deficit. Platinum has just stepped through the looking glass - investors can easily trump supply and demand (at least for awhile) in a thinly traded market. And guess what happened? The price of platinum and palladium have shot up even even as gold has pulled back:

Platinum and palladium prices rocket (MineWeb, 1/19/2010)

So Colonel what's your point? Molybdenum will not have ETF exposure but its LME launch next month will broaden it's investor base through LME membership. As long as the "China/India will help recover the steel industry" story rings true, moly prices should be on an uptrend for 2010. With molybdenum listed on the LME, this uptrend may get an additional boost from speculative money seeking high return. Of course markets giveth and taketh away, so increased volatility in LME moly prices may result if the "China is tightening monetary policy and we're headed for trouble" story gains momentum. Not to worry, soon moly producers can hedge their bets with LME futures contracts. Aren't markets awesome?...oh, oh here comes the Mad Hatter!


If you just can't get enough of this metallic wonderland, here are some additional reasons why launching molybdenum and cobalt on the LME is a good idea:

London Metal Exchange cobalt and molybdenum FAQ

Here comes the Red Queen, 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 $0.25 in early trading to $77.99 (March contract, most active); Gold is down $4.4 to $1108.2 (February contract, most active); Silver is down $0.030 to $17.850 (March contract); Copper is up $0.0070 to $3.3620 (March contract); Molybdenum is steady at $15.25

The DOW is down 201.03 points to 10402.12; the S&P 500 is down 19.14 points to 1118.90. The miners are still hunkered down:

Barrick (ABX) $37.25 down 1.63%
Newmont (NEM) $45.40 down 2.18%
US Gold UXG) $2.37 down 4.44%
General Moly (Eureka Moly, LLC) (GMO) $2.75 down 7.72%
Thompson Creek (TC) $13.46 down 4.27%
Freeport McMoran (FCX) $82.62 down 1.85% (a bellwether mining stock spanning gold, copper & molybdenum)

The Steels are still in the same foxhole, (a "tell" for General Moly & Thompson Creek):

ArcelorMittal (MT) $42.60 down 5.06% - global steel producer
POSCO (PKX) $130.70 down 3.58% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 3.78% to $1,290,289.06(what is this?).

Cheers,

Colonel Possum

Headline Photograph by Mariana Titus

Wednesday, January 20, 2010

Hunker Down or Stand and Fight?


Morning Miners!

It is 6:13 AM. The coffee's extra strong this morning, the Colonel is all for a good fight but some days it is just good to hunker down. There are two storms a brewin'; one west of here and the other east. On the weather front checkout the colors on the latest NOAA radar animation. In the markets, spot gold took a trouncing in London dropping more than $20 on further news that China is tightening its economic policy and a new housing report showed new-home construction fell far more than expected in December. Ouch, be right back.


OK, the markets are open in New York and predictably with gold down our poor miners are being taken to the wood shed. Now wait a durn minute! Yesterday the S&P 500 hit a new intraday high at 1150.45, we haven't been at these levels since October, 2008. The VIX or so-called "Fear Index" (what is this?) has been below 20 for the last several weeks and the Report doesn't start turning on warning lights until it breaks 25. This morning it is only a thin flat washer above 19. Buckle up, buckaroos!


Today, the approaching weather is probably more concerning than the fickle markets. From my view, as long as interest rates are low and the VIX is low, there is less resistance for equity and commodity prices to go up than down. I'm betting some folks are taking profits today and like storm fronts, this too shall pass. I say we stand and fight...or at least get ready to shovel snow!

Enough shaking in our boots, 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 $1.51 in early trading to $77.81 (March contract, most active); Gold is down $18.5 to $1121.5 (February contract, most active); Silver is down $0.510 to $18.290 (March contract); Copper is down $0.0615 to $3.3850 (March contract); Molybdenum is steady at $15.25

The DOW is up 149.56 points to 10575.87; the S&P 500 is down 13.94 points to 1136.29. The miners are hunkered down:

Barrick (ABX) $38.22 down 3.63%
Newmont (NEM) $46.55 down 3.90%
US Gold UXG) $2.53 down 2.32%
General Moly (Eureka Moly, LLC) (GMO) $2.97 down 3.51%
Thompson Creek (TC) $13.95 down 5.49%
Freeport McMoran (FCX) $82.62 down 1.85% (a bellwether mining stock spanning gold, copper & molybdenum)

The Steels are in the same foxhole, (a "tell" for General Moly & Thompson Creek):

ArcelorMittal (MT) $44.88 down 4.63% - global steel producer
POSCO (PKX) $134.37 down 1.21% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 2.87% to $1,343,646.29(what is this?).

Cheers,

Colonel Possum

Headline Photograph by Mariana Titus

Tuesday, January 19, 2010

Buffet Wants More POSCO, Both Want Lithium


Morning Miners!

It is 6:39 AM. Let the Colonel pour a cup and brace you up for a few more Pacific storms. We've got some exciting news on the wires this morning but first a word about the Christmas Child, El Niño. You may have taken down your holiday lights but El Niño doesn't want you to forget the season. The readers are reminded that the Report has links to NOAA's El Niño Page as well as the National Weather Service Report for Eureka in the Local Weather and Climate section in the lower right column. For the latter, checkout the 28km infared radar animation for the Western states. This gives you the big picture for what is going on, a climate drama stretching from Japan to Nevada.


I like to think of this weather pattern as the tracks on a bulldozer. The upper track moves from west to east bringing us a series of storms often called the "Pineapple Express" due to their proximity to the Hawaiian Islands. Like road wheels, each storm rotates counterclockwise as it rolls closer to our neck of the woods. The lower track returns along the equator moving in the opposite direction, east to west. This bulldozer has a mean drive sprocket, four road wheels wheels and a big snow plow, pardner.


Now for some really great news that could affect our County. The venerable Sage of Omaha, billionaire Warren Buffet, has expressed a desire to invest more in South Korean steelmaker, POSCO (PKX). POSCO is an investor in General Moly (GMO) and presently owns a 20% share in our Eureka Moly Mt. Hope project.


Buffett wants to buy more POSCO stock - POSCO


Let's connect the dots and there are several. As announced today, Mr. Buffet presently owns 4.5 percent of the world's No.4 steelmaker and has indicated he wants to buy more POSCO stocks. Let's look at some more news. Last week POSCO announced that it is planning to invest $5 million in Pan American Lithium Corp. (TSX-V: PL).

AXcess News: POSCO to Invest in Pan American Lithium

Lithium? Hmm, that's a favorite metal of this Report. Lithium is a key strategic material in advanced battery chemistries for future electric and electric hybrid vehicles. The Report has covered how emerging battery technologies may become very important to our County and State (a complete list of links to these reports is given below the signoff). Who else likes lithium?

Why Warren Buffet is investing in lithium

And how does POSCO think about lithium? From today's announcement:

POSCO CEO Joon-yang Chung said during a signing ceremony in late November for a letter of understanding relating to a magnesium refinery business to be built in Gangwon Province South Korea, "POSCO will be aggressively pursuing projects and future materials like lithium as the new growth engines for the next generation of the company." (Axcess News, 1/18/2010)

The Colonel believes it is not unreasonable to conclude that Warren Buffet isn't just picking a up little more of an Asian steelmaker but seriously investing in a company with a vision of the future. Incidentally, he didn't buy POSCO stock when it was half of what it is today last year. No, Mr. Buffet will probably buy more POSCO near 52-week highs. He is no fool and I'm inclined to believe he now sees promise in a company aligned not only with the expected uptrend in steel production but the demands of future technologies for strategic materials.

A recurring theme of this report is the importance of strategic metals like lithium, vanadium and molybdenum, to the future of Northern Nevada. I believe what has been on the wires lately is encouraging news for the kids and grandkids of Eureka. The next time you drive by Mt. Hope find some comfort in the fact that America's grandpa from Nebraska owns 1% of that mountain and that interest is likely to increase.

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 down $0.44 in early trading to $79.93 (March contract, most active); Gold is up $5.8 $1136.3 (February contract, most active); Silver is up $0.238 to $18.665 (March contract); Copper is up $0.0530 to $3.4190 (March contract); Molybdenum is steady at $15.25

The DOW is up 77.47 points to 10687.12; the S&P 500 is up 9.14 points to 1145.17. The miners are mixed:

Barrick (ABX) $39.19 down 1.28%
Newmont (NEM) $47.79 up 0.38%
US Gold UXG) $2.56 up 0.39%
General Moly (Eureka Moly, LLC) (GMO) $3.10 up 3.16%
Thompson Creek (TC) $14.43 down 1.22%
Freeport McMoran (FCX) $84.02 down 0.34% (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $46.63 up 0.73% - global steel producer
POSCO (PKX) $135.50 up 3.40% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.75% to $1,374,709.30(what is this?).

Cheers,

Colonel Possum

Headline Photograph by Mariana Titus

If you're just catching up with this exciting story on strategic metals, here are some background articles on how emerging battery technologies may become very important to our County and State:

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

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

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

What's in a Battery for Eureka County? (The Eureka Miner's Market Report, 11/23/2009)

Wednesday, January 13, 2010

The Colonel Hits the Open Road


Morning Miners!

It is 6:42 AM, have a cup and let's check the NOAA weather radar. I plan to hit the open road after this snow storm and will be back on the air bright and early next Tuesday, 1/19/10. Late is never good especially with storms and this one has been a slowpoke getting here. It looks like we've got colors coming in from the south southwest:


The markets are pretty quite today so I think I'm leaving you in good shape. Oil has edged below $80, molybdenum has moved up to $15.25 and gold is fairly stable near the $1130 level. Gold has returned to where we did our price predictions earlier this month (Moly Inches Higher, The Colonel's Outlook for January):

The fair value of silver is $17.918 in a range of $17.064 to $18.771 (Today, $18.405)

The fair value of copper is $3.1105 in a range of $2.8862 to $3.3348 (Today, $3.3615)

The fair value of oil is $76.610 in a range of $69.98 to $83.24 (Today, $79.58)

Traders are expecting large increases in U.S. oil and fuel inventories which has taken some shine off the recent run up in oil. Moly has popped 22% this month and I wouldn't be surprised if it stays put for a while given recent concerns about China's growth and a down tick in nickel prices. Silver is looking at little toppy with respect to gold and copper is moving back towards its expected range after a shot at $3.50 failed.

The Colonel will call this a pretty stable market after a lot of giddy-up go for the last two weeks. Stable is good.

Enough watching paint dry, 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 $1.21 in early trading to $79.58 (February contract, most active); Gold is flat at $1129.4 (February contract, most active); Silver is up $0.150 to $18.405 (March contract); Copper is up $0.0120 to $3.3615 (March contract); Molybdenum moves to $15.25

The DOW is up 8.63 points to 10635.88; the S&P 500 is downup 0.42 points to 1136.64. The miners are resting:

Barrick (ABX) $40.06 down 0.60%
Newmont (NEM) $48.40 down 0.25%
US Gold UXG) $2.56 down 0.39%
General Moly (Eureka Moly, LLC) (GMO) $2.76 up 2.22%
Thompson Creek (TC) $14.00 up 1.08%
Freeport McMoran (FCX) $88.61 up 0.58% (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $46.48 down 0.45% - global steel producer
POSCO (PKX) $134.18 down 0.86% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.24% to $1,359,232.35 (what is this?).

Cheers,

Colonel Possum

Headline Photograph by Mariana Titus

Tuesday, January 12, 2010

More News on US Gold & Western Lithium


Morning Miners!

It is 6:37 AM, grab a cup and get ready for a little snow coming our way. The markets woke up grumpy this morning snapping the broader market rally of the past several days. Apparently that old bugaboo Reality crept in and put a damper on our new year surge of optimism. Aluminum giant Alcoa (A) announced disappointing results after the market close, China did a pinch of monetary tightening and the U.S. trade deficit widened more than expected in November as surging oil prices helped imports to out gain exports.

What do we do now, pardner? The ole Colonel picked up a little US Gold (UXG) on the pullback and I feel better already. In fact, yesterday's Dahlman Rose report on US Gold's prospects in Eureka County (Eureka Good News: US Gold, General Moly & POSCO) got me so fired up, I added them to the Eureka Miner's Grubstake for 2010 . A little sour news isn't going to slow us down!


For those of you that have been tracking Western Lithium's (WLC) progress in Humboldt County, there is some encouraging news on the wire this morning. Western Lithium will hold a conference call today to discuss their positive scoping study results. Here's the information if you've got a little time this afternoon:

Date: Tuesday, January 12, 2010
Time: 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time)
Webcast: www.westernlithium.com
Dial in: 1-416-340-8018 or toll-free 1-866-223-7781
Replay: 1-416-695-5800 or toll-free 1-800-408-3053
Replay Passcode: 3211655

Their deposits of lithium carbonate in King's Valley could prove very beneficial to Northern Nevada as future electric and electric hybrid vehicles become a greater part of America's transportation story. In their words today:

"Western Lithium’s Kings Valley property has one of the largest known lithium deposits in the world, based on a historical resource estimate done by Chevron Resources of 11 million tonnes of LCE(2). The NI 43-101 compliant PAEE results for Stage I considers only 8% of the historical near-surface lithium deposit. Successful development of Stage I will allow the company to consider further expansion of production to meet anticipated growth of the lithium-ion battery industry. In December 2009, drilling was completed on the Stage II lithium historical resources and results are expected later in 2010. The company believes that its Nevada property has the potential to become a major USA-based global supplier of high quality lithium carbonate that can economically compete with other global producers of LCE." (WLC press release, 1/12/2010)

If you're just catching up with this exciting story here are some background articles on how emerging battery technologies may become very important to our County and State:

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

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

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

What's in a Battery for Eureka County? (The Eureka Miner's Market Report, 11/23/2009)

Something for the kids and grand kids buckaroos!

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 our fuel gauge with oil above $80

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 $1.08 in early trading to $81.44 (February contract, most active); Gold is up $0.1 to $1151.1 (February contract, most active); Silver is down $0.125 to $18.570 (March contract); Copper is down $0.0525 to $3.3885 (March contract); Molybdenum is steady at $14.25.

The DOW is down 30.68 points to 10633.31; the S&P 500 is down 6.56 points to 1140.22. The miners are grumpy too:

Barrick (ABX) $41.16 down 1.15%
Newmont (NEM) $49.26 down 1.83%
US Gold (UXG) $2.66 down 0.38%
General Moly (Eureka Moly, LLC) (GMO) $2.82 down 4.42%
Thompson Creek (TC) $14.02 down 0.43%
Freeport McMoran (FCX) $85.50 down 2.94% (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $46.86 down 2.34% - global steel producer
POSCO (PKX) $136.86 down 2.31% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 2.10% to $1,372,426.25 (what is this?).

Cheers,

Colonel Possum

Headline Photograph by Mariana Titus

Monday, January 11, 2010

Eureka Good News: US Gold, General Moly & POSCO


Morning Miners!

It is 6:37 AM, grab a cup and let's get to work. Nothing like starting out the week out with a buckboard loaded with good news. For the big picture the 2010 metals rally continues to rock with COMEX gold moving up $17 to $1156 and copper only a few pennies from $3.50. For Eureka County, there is positive news about US Gold, General Moly and POSCO. Let's take these in order:

US Gold

Investment Banker Dahlman Rose is sponsoring an Emerging Miners CEO Conference this week in New York City. There is a a MineWeb report this morning about their thoughts on junior mining in Nevada:

Nevada still offers excellent potential for discovering and developing gold assets (MineWeb, 1/11/2009)

Adam Graf, director of equity research for Dahlman Rose, suggests that when compared to mining giants Barrick and Newmont, "junior miners stand to gain from existing processing facilities and well developed infrastructure, as well as the desire of major gold producers to replace existing assets."

One of Graf's top picks is US Gold (Amex, TSX: UXG) which includes their Tonkin and Gold Bar projects in Eureka, "US Gold holds one of the largest land positions on Nevada's gold trends, consolidating most of the southern portion of the Battle Mountain-Eureka trend, just south of the Cortez district and Barrick's Cortez Hills deposit." (the geology of this trend was recently covered in the Report's Mountains Move slowly, Time Passes Quickly).

"We believe the company's land position encompasses several prospective areas with the potential to discover new Carlin-type ounces," Graf said and has faith that US Gold head, Rob McEwen, makes "no secret of his goal to build another U.S. domiciled gold major and S&P 500 listed gold miner."

Here is a link to the US Gold website discussing the status of their projects in Eureka County:

Exploration Overview: Cortez Trend

The Gold Bar deposits were mined in the late 1980’s and early 1990’s by Atlas Gold Corporation (Atlas) and remain some of my fondest memories of Eureka:

Johnny Horton and Atlas Mine Memories (Eureka Miner's Market Report, 11/02/2009)

General Moly (Eureka Moly LLC)

General Moly (GMO) broke $3 in early morning trading. In late December the Report indicated that it may be a good time to buy some GMO stock since their share price had dipped below its 200-day moving average (POSCO & Miss Moly Go Dancing). We also warned that GMO stock needed to move quickly above the 200-day line to maintain momentum for 2010. Last Friday General Moly made a 13.4% move up on high trading volume. Predictably, momentum traders moved in this morning to jump on the band wagon to break the $3 mark. That deserves a Colonel Yee-ha!


Moly prices have been steadily moving upwards too hitting $14.25 Friday:


POSCO Goes to India

In addition to positive price action for molybdenum there is encouraging news from our favorite steelmakers, ArcelorMittal (MT) and POSCO (PKX). Both have investments in General Moly (South Korean steel producer POSCO has a 20% share in our own Mt. Hope) and are presently expanding their presence in India:

Arcelor, POSCO gear up for new India ventures (Reuters, 01/07/2010)

As reported, "The global steel industry is expected to experience a long-awaited recovery in demand this year, but the revival will vary across regions, with mature economies facing a slow and painful improvement and emerging markets enjoying a robust comeback." With this backdrop, demand growth in China and India are key to maintaining investor interest in the steel sector and derivative plays like General Moly.

There is an additional MineWeb article on the India developments:


POSCO plans $7.1bn steel plant in India
(MineWeb, 01/07/2010)

I think all this positive news deserves another Colonel Yee-ha for the morning!

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 our fuel gauge with oil above $80

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 $0.55 in early trading to $83.30 (February contract, most active); Gold is up $17.3 to $1156.2 (February contract, most active); Silver is up $0.300 to $18.770 (March contract); Copper is down $0.0730 to $3.4735 (March contract); Molybdenum is steady sits at $14.25.

The DOW is down 2.19 points to 10616.00; the S&P 500 is down 1.48 points to 1143.55. The miners are happy-pappy except for Thompson Creek:

Barrick (ABX) $41.82 up 0.95%
Newmont (NEM) $50.17 up 1.11%
General Moly (Eureka Moly, LLC) (GMO) $3.08 up 9.97%
Thompson Creek (TC) $14.07 down 1.68%
Freeport McMoran (FCX) $88.61 up 0.58% (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $48.03 down 1.90% - global steel producer
POSCO (PKX) $139.06 up 1.80% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up a strong 1.27% to $1,404,720.23 (what is this?).

Cheers,

Colonel Possum

Headline Photograph by Mariana Titus

Friday, January 8, 2010

Unemployment Holds at 10%, Gold & Dollar Dance


Morning Miners!

It is 6:10 AM. Scott dropped off a can of his new 2010 TGIF coffee, he thought we might need it for the monthly jobs report. There are no data regarded by economists to be more important than the Labor Department's labor statistics. It is the barometer for economic revival domestically, will someday trigger a Fed decision to raise interest rates and is closely watched abroad to gauge global recovery.

Today's report is a real mind bender. The good news is that the November numbers were revised to show the U.S. economy added jobs for the first time since the recession began two years earlier; the bad news is that the December payroll numbers are worse than forecast:

"Nonfarm payrolls fell by 85,000 last month, compared with a revised 4,000 gain in November, the Labor Department said Friday. Economists surveyed by Dow Jones Newswires had expected a payroll decrease of just 10,000. The November figure originally showed an 11,000 drop in payrolls.

The unemployment rate, calculated using a survey of households as opposed to companies, remained at 10% in December, the same level as the previous month. Economists had forecast the jobless rate would edge higher to 10.1%." (WSJ, 1/8/2009)

Global response? Spot gold on the London Exchange jumped $19 in minutes to $1139 and then retreated. Since gold sold off prior to the report, the day-to-day change is less dramatic. When gold jumped, the dollar dropped; then gold flopped and the dollar hopped - their old familiar dance. The broader markets are down but not by much, The German DAX is only off fractionally. Nobody said this recovery is going to be easy or fast pardner.

Here are charts of spot gold and the U.S. Dollar (UUP). The rise in the dollar corresponds to the fall in gold (EST vs London time):



In local news, a hearing was conducted by District Judge Dan L. Papez on the Eureka Moly LLC water rights issue in Kobeh Valley. The State Engineer’s March 26th, 2009 granting of water rights to Eureka Moly was appealed by the County and some community members. Legal arguments were heard yesterday from both sides and the judge said he will review the case carefully. This may take approximately 60 days.

You may be interested to know that two new Exchange Traded Funds (ETF) will be made available so that the individual investor can participate in the platinum and palladium markets. The Eureka Miner's Grubstake portfolio holds ETFs in gold (GLD) and silver (SLV). Here's the link to more information:

US platinum, palladium ETFs to start trade Friday

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 our fuel gauge with oil above $80

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 $0.34 in early trading to $82.32 (February contract, most active); Gold is down $5.2 to $1128.5 (February contract, most active); Silver is up $0.020 to $18.365 (March contract); Copper is down $0.0070 to $3.4200 (March contract); Molybdenum is steady at $13.50.

The DOW is down 30.76 points to 10576.10; the S&P 500 is down 1.70 points to 1139.99. The miners are mixed:

Barrick (ABX) $40.83 down 0.83%
Newmont (NEM) $48.68 down 1.24%
General Moly (Eureka Moly, LLC) (GMO) $2.56 up 3.64%
Thompson Creek (TC) $14.02 up 1.89%
Freeport McMoran (FCX) $85.72 up 0.09% (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $47.81 down 0.50% - global steel producer
POSCO (PKX) $135.15 up 0.48% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.20% to $1,354,442.67 (what is this?).

Cheers,

Colonel Possum

Headline Photograph by Mariana Titus

Thursday, January 7, 2010

Mountains Move Slowly, Time Passes Quickly


Morning Miners!

It is 6:41 AM. Do you have time for a cup of Thor's java with the Colonel and a quick story? On my recent trip to Austin, I was reminded why Eureka County sits in the heart of North America's gold country, an important lesson in motion and time.

As you leave Diamond Valley on Highway 50 and pass through Devil's Gate, look to your right (headline photograph). Those layered rocks above you are are some 350 million years old, once shallow-water beds of Devonian dolomite and limestone. They sit now at an angle after being thrust up by a tremendous collision with siliceous rocks (quartzite, shale and chert) from ancient deep-water seabeds. The line of this Paleozoic fender bender is called the Roberts Mountains Thrust Belt. Along this belt gold mineralization often occurred at the point of contact between the carbonate and siliceous rocks. The Roberts trend extends through Eureka and Elko counties and has recently (at least in geologic time) been very generous to both miners and local governments through the open pit extraction of Carlin-type (microscopic) gold.

What caused this collision? Let's ask Lone Mountain, she's coming up just to the northwest of the Roberts Creek turnoff. Now you say there are grander peaks than this in the local mountain ranges, our own Diamond Peak is some 11,000 feet of towering beauty. This lowly homely mountain to our right isn't even in a range but sits alone in a vast alluvial basin. Well Pardner, don't let this old gal hear you say that! Lone Mountain may have lost her height and looks but she's the oldest around and can tell a story of travel you won't believe.


Plate tectonics is how scientists describe the process and good old Benjamin Franklin was the first to think of it way back in 1782: "The crust of the Earth must be a shell floating on a fluid interior. Thus the surface of the globe would be capable of being broken and disordered by the violent movements of the fluids on which it rested." Say, Ben is talking about our local gold-rich fender bender!

In her youth Lone Mountain grew up in the Southern Hemisphere some 10,000 miles away. She is living proof that the earth's surface is adrift; large rigid plates moving in response to the flow of a heat-softened interior near the surface (asthenosphere) and a molten interior (upper and lower mantle). At Lone Mountain's base is Pogonip limestone that dates back some 500,000,000 years. That works out to be an average of about one and a quarter inches of travel per year. She has witnessed the Roberts Mountain accident and probably many others in her long traveling career. Buckaroos, mountains move slowly but time passes quickly. I'll bet you'll pay my old friend a bit more respect the next time you pass and a little thanks for being a part of what brought gold to Eureka County.

By the by, some of this story was derived from "Traveling America's Loneliest Road" by Joseph V. Tingley and Kris Ann Pizarro (Nevada Bureau of Mines and Geology, Special Publication 26, 2000). A great book for your travels!

Enough tall tales, 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 our fuel gauge with oil above $80

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 $0.23 in early trading to $82.95 (February contract, most active); Gold is down $1.60 to $1134.9 (February contract, most active); Silver is up $0.050 to $18.225 (March contract); Copper is down $0.0260 to $3.4685 (March contract); Molybdenum got a little more jump to $13.50.

The DOW is up 2.95 points to 10576.63; the S&P 500 is up 0.29 points to 1137.43. The miners are mixed:

Barrick (ABX) $41.22 down 1.29%
Newmont (NEM) $49.15 down 0.93%
General Moly (Eureka Moly, LLC) (GMO) $2.45 unchanged
Thompson Creek (TC) $13.68 up 1.11%
Freeport McMoran (FCX) $86.27 down 1.19% (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $47.81 up 0.21% - global steel producer
POSCO (PKX) $134.08 down 1.56% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.40% to $1,350,477.92 (what is this?).

Cheers,

Colonel Possum

Headline Photograph by Mariana Titus (Devil's Gate, Nevada)