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


The author/editor of the Eureka Miner owns common shares of local mining stocks, General Moly (GMO) 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.

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?).


Colonel Possum

Headline Photograph by Mariana Titus

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