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