"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, February 26, 2010

Miss Moly Clicks Her Heels, Newmont & TC Report


Morning Miners!

It is 6:04 AM and Friday at last! Excuse me for sounding like a proud father but our Miss Moly clicked her heels in London yesterday as LME molybdenum futures broke $18/lb. We'll close the Report with a complete moly roundup. First, have a cup of that terrific Raine's TGIF Red Label and let's look at some more good news to close out an otherwise rocky week in the mines. Newmont (NEM) and major moly producer, Thompson Creek (TC), both reported 2009 financial results yesterday and have words of optimism for 2010 (with the exception of lower expected Newmont production in Nevada). Here are the links to their reports:

Newmont Records Record Breaking Cash Flow of $2.9 Billion and Adjusted Net Income of $1.4 Billion ($2.79 per share) in 2009

Thompson Creek Announces 2009 Financial Results


I'm including the Newmont Nevada Report in full because it offers a lot of useful information about the Carlin operational status and outlook for 2010:

"Nevada - Nevada sold 567,000 equity ounces of gold at costs applicable to sales of $495 per ounce during the fourth quarter. Equity gold sales were above expectations due to higher grade from the underground operations and improved leach pad recoveries. During the quarter, costs applicable to sales were lower than expected as higher production was partially offset by higher underground mining costs and production taxes. Equity sales for the year were 2.0 million ounces at costs applicable to sales of $521 per ounce."

"In 2010, the Company expects equity gold production from Nevada of approximately 1.6 to 1.7 million ounces due to lower production from the Carlin operations and the closure of Deep Post, partially offset by increased production at Leeville. Production from the Carlin operations is expected to be impacted by a geotechnical event that occurred at Gold Quarry in late December 2009, limiting access to ore that was originally scheduled to be mined in 2010 and 2011. Following a series of geotechnical, mine planning and ore blending analyses conducted by the Company in January and February 2010, the Company now expects up to approximately 150,000 equity ounces of gold production to be deferred from Gold Quarry in 2010 and 2011. The Company currently anticipates mining these deferred ounces in 2012 and 2013, while continuing to study opportunities to safely accelerate that production. 2010 costs applicable to sales in Nevada are expected to increase to between $590 and $630 per ounce, primarily due to lower production and higher contracted mining costs, diesel and input commodity price assumptions."


Thompson Creek CEO, Kevin Loughrey, has this to say about 2010:

"As we begin 2010, the world economy is showing signs of recovery and Thompson Creek and its shareholders are in an excellent position to benefit financially from improving market conditions..."

"Thompson Creek's mines are currently operating at full capacity and the Company expects molybdenum production in 2010 to reach a record level of 29 to 32 million pounds. At the same time, cash costs are expected to be in the range of $6 to $7 per pound, which is well below current world molybdenum prices of approximately $17 per pound."

"The medium-term outlook for molybdenum prices remains favorable, especially as the world industrial economy returns to a more normal growth rate and that growth stimulates additional demand for molybdenum."

These statements remain consistent with Mr. Loughrey's interview on CNBC Business News last November (Molybdenum on CNBC News, 11/24/2009). Thompson Creek is up over 1% in early trading, the leading miner today in the Eureka Miner's Grubstake Portfolio.

Below is a wrap up of molybdenum 2/25 price action. The 3-month LME futures contract broke $18/lb, an encouraging sign:

Western Moly Oxide (FeMo65) $17.50/lb (the price reported by Infomine and tracked by Base Metals on the General Moly Website)

Moly Oxide, Europe (Mo Drummed Molydbic Oxide EU) $17.42/lb (the price reported in the Metals Bulletin)

LME Futures Contracts

3-Month (Buyer) $38,000/metric ton $17.24/lb
3-Month (Seller)$40,000/metric ton $18.14/lb

15-Month (Buyer) $37,000/metric ton $16.78/lb
15-Month (Seller)$39,000/metric ton $17.69/lb

Here is the price action of the LME 3-month contract (seller) from this Monday's launch:


Enough talk, let's walk the walk:

4-WD is OFF - the VIX or "fear index" is below 25, improving broader markets are expected; metals & miners have a smoother road with FCX slightly above $74 (what is this?)

The GREEN light is our fuel gauge has returned with oil just below $80

An ORANGE light is ON for possible adverse regulation/legislation: Miner Taxation, Cortez Hills & mercury emissions

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

NYMEX/COMEX: Oil is down $1.92 in early trading to $78.08 (April contract, most active); Gold is down $3.7 to $1093.5 (April contract, most active); Silver is down $0.198 to $15.730 (May contract); Copper is up $0.0125 to $3.1830 (May contract); Western Molybdenum Oxide is up $0.25 to $17.50

The DOW is up 10.73 points to 10331.76; the S&P 500 is up 1.61 1104.55. The miners are mixed:

Barrick (ABX) $37.78 up 0.91%
Newmont (NEM) $49.09 up 0.14%
US Gold UXG) $2.70 down 1.10%
General Moly (Eureka Moly, LLC) (GMO) $2.35 down 1.26%
Thompson Creek (TC) $13.57 up 1.80%
Freeport-McMoRan (FCX) $74.68 up 0.82% (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $38.10 down 0.78% - global steel producer
POSCO (PKX) $113.74 down 1.09% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.22% to $1,249,553.85 (what is this?).

Cheers,

Colonel Possum

Headline photograph from Life 123

Thursday, February 25, 2010

Miss Moly Teaches the Texas Two-Step



There are in that country, small pine trees and the cones are like small eggs, but the seeds are better than those of Castille - Cabeza de Vaca; Spanish adventurer, healer, and lost wanderer commenting on the Piñon Pine of the Southwest


Morning Miners!

It is 6:04 AM and it's Thor's Day again. That old Scandinavian gray beard sent the Colonel a nice present yesterday. If you haven't heard, he has retired to a comfortable Airstream trailer in the Four Corners region of New Mexico. When he isn't thrilling the locals with lightning bolts of yore, he's sitting outside sipping some delicious New Mexico Piñon Coffee. I had a can waiting for me at the post office and it's brewing in the pot. Have a tall cup, you'll need it - there's some lightning going on in the markets. As reported in the Wall street Journal this morning:

NEW YORK—U.S. stocks dropped sharply after Thursday's opening bell as jobless claims hit their highest level in more than three months. U.S. Federal Reserve Chairman said in Congressional testimony that he was looking into U.S. banks' swaps with Greece, adding to nervousness about the debt woes of some European countries. (WSJ, 2/26/2010)

Like the front bumper of a truck in a slow speed collision, commodities and industrial stocks are getting crunched first with Caterpillar (CAT) leading the Dow Jones Industrial Average down 136 points at the open. Copper continues to fall and bellwether miner Freeport McMoRoan (FCX) has dipped to $71.36 in early trading well below the $74-and-all's-well level identified yesterday (Freeport, Faith and Ice Fishing). Nuts. Piñon nuts!


How's our dear Miss Moly doing in this fender bender of a week? From yesterday's close at the London Metal Exchange (LME), I'd say she at least has her seat belt on. Here's a roundup of molybdenum prices as of 2/24:

Western Moly Oxide (FeMo65) $17.50/lb (the price reported by Infomine and posted by Base Metals on the General Moly Website)

Moly Oxide, Europe (Mo Drummed Molydbic Oxide EU) $17.42/lb (the price reported in the Metals Bulletin)

LME Futures Contracts

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

15-Month (Buyer) $36,000/metric ton $16.33/lb
15-Month (Seller)$37,000/metric ton $16.78/lb

This is not a very exciting chart but for the record here is the price action of the 3-month contract (seller) from Monday's launch:


So what's your point Colonel? With all the hubbub in the commodity space nickel and molybdenum are doing well (so far). Western Moly Oxide price actually bumped up two-bits yesterday while nickel dipped slightly:


There was some fear that the introduction of a molybdenum futures market may attract wild-eyed speculation. Three data points do not make a track record but so far so good. Neither the three or fifteen-month contracts show much spread from the physical market albeit it is early in the game to draw any real conclusions. Miss Moly has just started to teach her new London friends the Texas Two-Step at the beginning of a very long dance.

Have another cup of Thor's Piñon coffee, you can order some for your shelf with this link:

NM Piñon Coffee

Enough talk, let's walk the walk:

4-WD is OFF - the VIX or "fear index" is below 25, smoother broader markets are expected; metals & miners may have a rough road with FCX below $74 (what is this?)

The GREEN light is our fuel gauge has returned with oil falling below $80

An ORANGE light is ON for possible adverse regulation/legislation: Miner Taxation, Cortez Hills & mercury emissions

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

NYMEX/COMEX: Oil is down $1.92 in early trading to $78.08 (April contract, most active); Gold is down $3.7 to $1093.5 (April contract, most active); Silver is down $0.198 to $15.730 (May contract); Copper is up $1.25 to $3.1830 (May contract); Western Molybdenum Oxide is up $0.25 to $17.50

The DOW is down 161.28 points to 10212.88; the S&P 500 is down 15.33 points to 1089.91. The miners are mixed:

Barrick (ABX) $36.94 up 0.63%
Newmont (NEM) $48.02 up 3.31%%
US Gold UXG) $2.56 down 0.78%
General Moly (Eureka Moly, LLC) (GMO) $2.36 down 3.28%
Thompson Creek (TC) $12.82 down 3.10%
Freeport-McMoRan (FCX) $71.71 down 1.33% (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $37.55 down 2.03% - global steel producer
POSCO (PKX) $114.24 down 2.63% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 1.19% to $1,219,936.24 (what is this?).

Cheers,

Colonel Possum

Headline photograph by Mariana Titus

Wednesday, February 24, 2010

Freeport, Faith and Ice Fishing



Morning Miners!

It is 6:49 AM, a little later than usual and the ole Colonel's scratching his head. Most markets are open, there are riots in Greece, the Fed's Uncle Ben has begun his testimony before the U.S. House Financial Services and there is nervousness about platinum/palladium getting hit hard from the the Toyota brouhaha. So what do the markets think? The DOW and S&P are up, the U.S. dollar and gold are down and our global growth canary, copper, has caught a welcome updraft under her wings. I think the Colonel would rather go fishing than try to explain all this today. Of course that may be ice fishing the way the local weather is setting up.


Let's take a break from explanations and fall back on faith. Freeport McMoRan's (FCX) CEO, Richard Adkerson, was on the CNBC Business Network's show "Fast Money" yesterday. I have faith in this guy. He can captain my ship in a storm anytime and he certainly has done well for one of the world's largest and best copper mining companies. He started by saying that he was probably on the wrong show; he wasn't about "fast money" but takes the "long run view." The U.S., Western Europe and Japan are suffering, there are a lot of questions about China but his company is doing well. Adkerson is absolutely confident about future copper demand and he sees his primary challenge to be developing new supplies. Freeport provides roughly half the copper for the U.S and Adkerson is very positive about the domestic side of his business even though 40% of world copper demand is in China. My kind of guy.

Here is an irony for Mr. Long-run-view. In the investment world, Freeport has become the premier proxy stock for global growth. The Report watches it daily along with our local miners. Besides being a mining bellwether, Freeport is often referred to as a "high-beta" trade and is the darling of hedge funds. Consequently, it gets batted around (up and down) by every news story that hits the wire. Look at the FCX intraday highs and lows over the past several years:

FCX 5/21/08: $127.24 (high)
FCX 12/5/08: $15.7 (low)
FCX 01/11/10: $90.55 (2010 high)
FCX today at the market open: $73.58

And you thought copper prices were volatile? Through all the gyrations of share price, Freeport makes money and,according to their CEO, will make more money. Keep the faith buckaroos.

Here's a fun yardstick. Guy Adami, a respected trader on "Fast Money", uses a $74 FCX target to gauge global temperament - higher, life is good; lower, head for the lifeboats. Today we're a thin flat washer below that target, a coin toss on where we go from here. Keep the faith.

Our January article adds further insight on Freeport if you missed it, Freeport "Broken", Miners in Correction (The Eureka Miner's Market Report, 1/31/2010).

Let's save fishing for spring, how about another cup of joe before you go back to shoveling snow?

Keep the faith, now let's walk the walk:

4-WD is OFF - the VIX or "fear index" is below 25, smoother markets are expected (what is this?)

The GREEN light is our fuel gauge has returned with oil falling below $80

An ORANGE light is ON for possible adverse regulation/legislation: Miner Taxation, Cortez Hills & mercury emissions

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

NYMEX/COMEX: Oil is up $0.25 in early trading to $79.11 (April contract, most active); Gold is down $5.8 to $1097.1 (April contract, most active); Silver is down $0.048 to $15.840 (March contract); Copper is up $1.25 to $3.2285 (March contract); Molybdenum is steady (yesterday's price) at $17.25

The DOW is up 98.10 points to 10380.51; the S&P 500 is down 9.66 points to 1104.26. The miners are (mostly) happy again:

Barrick (ABX) $37.42 up 0.40%
Newmont (NEM) $46.77 up 0.41%%
US Gold UXG) $2.60 down 0.19%
General Moly (Eureka Moly, LLC) (GMO) $2.55 up 1.19%
Thompson Creek (TC) $13.34 down 0.37%
Freeport-McMoRan (FCX) $73.80 up 0.22% (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $38.67 up 1.36% - global steel producer
POSCO (PKX) $118.41 up 1.01% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.83% to $1,249,748.65 (what is this?).

Cheers,

Colonel Possum

Headline photograph by Mariana Titus

Tuesday, February 23, 2010

Dollar Rebound Weighs on Metals & Miners


Morning Miners!

It is 5:55 AM, grab a cup of joe and let's see what's up across the pond. As we reported yesterday, metals and miners are enjoying a good bounce from their lows earlier this month and the trend should continue unless "sovereign debt worries return to the headlines or oil goes ballistic." Nuts.

We should be happy the latter hasn't occurred with oil falling a buck below the key $80 benchmark on a strengthening dollar and concerns about the upcoming inventory report. The reason behind the rallying dollar is the cause for concern. Unfortunately Greece is back in the headlines and the entire commodity space is under pressure. As reported by the Wall Street Journal this morning:

NEW YORK—The dollar strengthened as weaker-than-expected euro zone economic data and continued concern over Greece's economy sapped investors' willingness to buy riskier assets, leading commodities and European stocks lower. (WSJ, 2/23/2010)

There is a related article on a fall in copper prices with an unexpected drop in German business confidence. This is important because Germany will no doubt be an important player in keeping Greece from falling further down the sovereign debt mineshaft:

Copper Falls on Strengthened Dollar, Weaker German Confidence (Bloomberg News, 2/23/2010)


Fortunately Miss Moly is in good hands as she settles into her new flat at the London Metal Exchange (LME). Here is a story from London correspondent, Claudia Carpenter, on her first day of trading along with cousin Cobalt:

London Metal Exchange Expands With Molybdenum, Cobalt (Bloomberg News, 2/22/2010)

Molybdenum prices are holding up but could have some rough times today along with the other metals. The Report will soon start posting moly LME prices as the new market develops. Molybdenum and cobalt futures business transacted on the first day of trading totaled $5.7 million in value.

By the by, there is a lot of color coming at us from the west.


Enough talk, let's walk the walk:

4-WD is OFF - the VIX or "fear index" is below 25, smoother markets are expected (what is this?)

The GREEN light is our fuel gauge has returned with oil falling below $80

An ORANGE light is ON for possible adverse regulation/legislation: Miner Taxation, Cortez Hills & mercury emissions

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

Oil is down $1.02 in early trading to $79.29 (April contract, most active); Gold is down $1.8 to $1111.3 (April contract, most active); Silver is down $0.232 to $15.990 (March contract); Copper is down $0.0325 to $3.2740 (March contract); Molybdenum is steady (yesterday's price) at $17.25

The DOW is down 79.35 points to 10304.03; the S&P 500 is down 12.23 points to 1095.78. The miners are grumpy:

Barrick (ABX) $37.33 down 2.71%
Newmont (NEM) $47.87 down 1.80%
US Gold UXG) $2.60 down 2.24%
General Moly (Eureka Moly, LLC) (GMO) $2.60 down 3.35%
Thompson Creek (TC) $13.40 down 2.22%
Freeport-McMoRan (FCX) $74.76 down 1.94% (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $38.16 down 3.85% - global steel producer
POSCO (PKX) $118.22 down 1.72% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 2.20% to $1,249,741.66 (what is this?).

Cheers,

Colonel Possum

Headline photograph by Mariana Titus, "Little Lake"

Monday, February 22, 2010

Moly Miners on a Roll, Oil Breaks $80


Morning Miners!

It is 5:35 AM, grab a cup and let's get to work. This could be an exciting week for molybdenum; the London Metal Exchange (LME) kicks off moly futures trading today, moly and nickel prices are up and moly miners are on a roll. Before we go there, take note that our Fuel Gauge light on the Eureka Outlook Dashboard (to your right) has turned yellow. Oil closed 6 cents above $80 Friday (NYMEX April contract, most active) and is holding above this benchmark level in early trading. As reported by the Wall Street Journal this morning some of the old oil bugaboos have returned to the marketplace:

"Oil prices have been buoyed in recent sessions by a weaker dollar, reduced production at the North Sea Buzzard oil field, refinery strikes in France and concern over Iran's nuclear intentions, London-based brokerage PVM Oil Associates said. 'Throw in to the mix a good technical outlook,and the week is beginning on a potentially very strong note,' it said." (WSJ, 2/22/2010)

Remember that "good technical outlook" fares well for oil traders less well for you, me and miners with fuel costs chewing on their margins. In the big picture, a rise in oil prices is part of a revived commodity reflation that has also helped boost metal prices after a scary period of uncertainty earlier this month. Copper is back to solid $3 territory, molybdenum and nickel continue their rise together as shown in this 1-month chart:


Our favorite moly miners, General Moly (GMO) and Thompson Creek (TC,) have had a strong bounce from their early February lows:

General Moly 2/8 closing low:$2.12 This morning's open:$2.68 up 26.4%
Thompson Creek 2/4 closing low:$11.26 This morning's open:$13.63 up 21.0%

This is a good pair to watch because GMO is in a pre-production mode while TC is a major pure play molybdenum producer. Freeport McMoRan (FCX), a bellwether mining company producing copper, gold and moly, has recovered too but with less gusto:

Freeport McMoRan 1/29 closing low:$66.69 This morning's open:$77.52 up 16.2%


Miss Moly started trading at the London Metal Exchange (LME) this morning (Miss Moly Flies to London). The Report will follow her adventures and I must admit the Colonel got a little excited on the news that Asian traders were lining up to ask her for a dance last night (already Monday in their time zone).

The steelmakers have recovered too but face increasing input costs as reported by Steel Business Briefing:

"Rising prices for iron ore, coal and scrap could add $150-160/tonne to the cost of producing hot rolled coil and wire rod starting from the second quarter of this year, industry executives in Europe tell Steel Business Briefing.

A senior source close to ArcelorMittal says such cost increases will make it necessary for all steel companies to raise prices significantly. While it is not yet clear how mills will apply it, the price rises already announced for quarter 2 will not cover the rise in costs." (Steel Business briefing, 2/22/2010)

Here is how our steelmakers have done recently:

ArcelorMittal 2/12 closing low:$37.43 This morning's open:$39.64 up 5.90%
POSCO 2/8 closing low:$108.23 This morning's open:$120.6 up 11.4%

What does all this mean Colonel? I think something very positive is going on with molybdenum reflected in its recent rise in price and the related bounce in the stocks of moly miners. By comparison the recovery of more diversified miners (e.g, FCX) and the steelmakers (MT & PKX) has been solid but less spectacular. It is a little early to sort out all the pieces and if sovereign debt worries return to the headlines or oil goes ballistic, I may be reporting a very different story. Exciting times buckaroos, let's keep Miss Moly's dance card full and our local moly miner on a roll.

Enough talk, let's walk the walk:

4-WD is OFF - the VIX or "fear index" is below 25, smoother markets are expected (what is this?)

A YELLOW light is ON our fuel gauge with oil over $80

An ORANGE light is ON for possible adverse regulation/legislation: Miner Taxation, Cortez Hills & mercury emissions

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

Oil is up $0.38 in early trading to $80.44 (April contract, most active); Gold is down $0.8 to $1121.3 (April contract, most active); Silver is down $0.68 to $16.345 (March contract); Copper is down $0.0290 to $3.3280 (March contract); Molybdenum edges higher to $17.25

The DOW is down 14.43 points to 10387.92; the S&P 500 is down 1.71 points to 1107.46. The miners are mixed:

Barrick (ABX) $38.61 down 1.93%
Newmont (NEM) $47.60 down 1.94%
US Gold UXG) $2.65 down 0.38%
General Moly (Eureka Moly, LLC) (GMO) $2.66 up 0.76%
Thompson Creek (TC) $13.66 up 0.59%
Freeport-McMoRan (FCX) $76.75 down 0.53% (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $39.62 up 0.61% - global steel producer
POSCO (PKX) $119.78 up 1.68% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.18% to $1,278,497.88 (what is this?).

Cheers,

Colonel Possum

Headline photograph by Mariana Titus

The inset molybdenum symbol was designed for Metalprices.com by the artist Murray Robertson. The design is influenced by historical symbols used in the ancient science of Alchemy. This creative molybdenum symbol is adapted from lead as these elements being of similar appearance were often mistaken for each other.

Friday, February 19, 2010

Barrick Reports Record Income, The Colonel Bets on Moly


Morning Miners!

It is 6:04 AM and high time for an end-of-the-trail reward. Grab a cup of that delicious Raine's TGIF coffee; we've got some good news to review. Barrick Gold (ABX) reported a record adjusted net income of $604 million for the fourth quarter of last year. This beat analysts estimates ($0.61 per share versus $$0.57) and sets the stage for a promising 2010 now that they are unhedged and taking full advantage of higher gold prices. There is a CNBC video interview with CEO Aaron Regent at the bottom of this blog page. Here's the link to their full report:

Barrick Reports Q4 2009 Financial and Operating Results

Of note is a decision to spin off their holdings in Africa to concentrate on better growth opportunities elsewhere (Barrick's North America interests are 38% of their total; Africa is only 10%). Here is what they are saying on our Cortez Hills Project and associated legal issues:

"Barrick's three advanced projects remain on schedule and in line with their capital budgets. They begin contributing significant low cost production starting with Cortez Hills, which is essentially complete and in the final stages of commissioning. The project is anticipated to be completed in line with its $500 million pre-production capital budget and is expected to become the seventh mine in five years which Barrick has delivered on time. The entire Cortez property is expected to produce 1.08-1.12 million ounces at total cash costs of $295-$315 per ounce in 2010, subject to Cortez Hills being allowed to operate consistent with Barrick's motion for a limited preliminary injunction of activities, currently before the US District Court." (Barrick Gold Q4 2009 Report)

Switching from gold to molybdenum, how about a new bet for the Colonel's Beer Derby (lower right column of this blog)? With the first moly futures trading Monday at the London Metal Excange(LME), I bet:

The closing price for molybdenum on Friday, 2/26 will be higher than for Friday, 2/19

Molybdenum and nickel edged higher at the close yesterday (moly, $16.88/lb) while most base metals were hit by worries about the Fed's move to raise its emergency lending rate to banks and a strengthening dollar. Although they maintain the move doesn't "signal any change in the outlook for the economy or monetary policy" and is "not expected to lead to tighter financial conditions for households or businesses," the markets aren't buying it. Christopher Rupkey, an economist at Bank of Tokyo-Mitsubishi put it this way:

"The Fed can talk all day about how the discount rate hike is technical and not a policy move, but the market sees it as a shot across the bow," (as reported by the WSJ, 2/19/2010)

However, an unexpected drop in core inflation reported this morning supports the Fed's claim that they can safely keep interest rates low for an extended period:

"U.S. consumer prices rose 0.2% in January from the previous month, the same increase as in December 2009. But core prices, which strip out energy and food items and are more closely watched by the Federal Reserve, fell by a monthly 0.1% in January. The last time core prices fell was in December 1982. The drop leaves scope for the Fed to keep supporting the economy with record-low interest rates." (WSJ, 2/19/2010)

Why do we give a hoot, Colonel? I believe low interest rates and reduced fear in the marketplace will drive money into commodities even in the face of a rising dollar and that's good for metals & miners (as long as oil doesn't skyrocket). Hang in there buckaroos. Barrick (ABX) and General Moly (GMO) are both up this morning on an otherwise so-so day for miners.

Enough talk, let's walk the walk:

4-WD is OFF - the VIX or "fear index" is below 25, smoother markets are expected (what is this?)

An ORANGE light is ON for possible adverse regulation/legislation: Miner Taxation, Cortez Hills & mercury emissions

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

Oil is up $0.28 in early trading to $79.34 (April contract, most active); Gold is down $3.6 to $1115.1 (April contract, most active); Silver is up $0.050 to $16.110 (March contract); Copper is down $0.0030 to $3.2825 (March contract); Molybdenum edges higher to $16.88

The DOW is down 33.40 points to 10359.50; the S&P 500 is down 3.68 points to 1103.07. The miners are mixed:

Barrick (ABX) $39.47 up 0.61%
Newmont (NEM) $48.21 down 0.41%
US Gold UXG) $2.60 down 0.76%
General Moly (Eureka Moly, LLC) (GMO) $2.59 up 1.17%
Thompson Creek (TC) $13.25 down 0.51%
Freeport-McMoRan (FCX) $76.60 unchanged (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $38.76 up 1.48% - global steel producer
POSCO (PKX) $116.77 down 2.72% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.38% to $1,266,070.86 (what is this?).

Cheers,

Colonel Possum

Headline photoraph by Mariana Titus

Thursday, February 18, 2010

Molybdenum Bounces Back To Magic Number


Morning Miners!

It is 6:06 AM in the break room. Have a mug of Thor's lightning bolt java and let's read a postcard I just got from Miss Moly. We packed her off last week with her cousin Cobalt to attend a reception in their honor at the London Metal Exchange (Miss Moly Flies to London). Both minor metals will trade their first futures contracts on the LME this coming Monday, 2/22. Shortly after she arrived molybdenum hip-hopped from $15/lb to $16/lb; yesterday it added another four bits to make $16.50/lb. She writes that she's the toast of London town and the exchange hasn't even begun to trade her futures. Her uncle Nickel, another key metal in the manufacture of steel, has enjoyed a similar bounce. Here's a 1-month chart of both:


Last August, molybdenum hit $16.50 and the Report called it a "magic number" (see note 1) because it was roughly two times up from its 2009 low but only halfway to the high of 2008 (Moly Hits Magic Number, Dr. Doom Speaks to Miners, 8/4/2010). Ironically the same article reported economist Nouriel Roubini (aka Dr. Doom) predicting a pullback in commodity prices followed by a gradual uptrend in 2010. Hopefully we've seen the worst of this and we are back on track. Last year moly prices peaked than declined as China's stimulus and stockpiling ran its course. Kevin Loughrey, President and CEO for Thompson Creek Metals (TC), also sees a more sustainable price environment this year and next (Molybdenum on CNBC News, 11/24/2009). Our own General Moly (GMO) offered an excellent analysis of last year's price action (Good Golly Miss Moly, 9/18/2009).

One encouraging sign is a decline in the LME warehouse inventory for nickel coincident with the recent rise in prices. Similar data will be available for molybdenum after things get rolling on the Exchange. With the exception of aluminum, nickel is the only LME base metal experiencing a draw-down possibly indicating a return of real demand as opposed to speculation. Copper is the counterexample, experiencing both a rise in price and inventory making it more difficult to sort out true demand from investor bets on the future of copper prices. Here are both LME inventory profiles for comparison.



Time will tell, but the Colonel remains optimistic that molybdenum prices will continue to rise with the expansion of the market base and a steady global recovery of the steel industry. Miss Moly can't wait!

Enough chart talk, let's walk the walk:

4-WD is OFF - the VIX or "fear index" is below 25, smoother markets are expected (what is this?)

An ORANGE light is ON for possible adverse regulation/legislation: Miner Taxation, Cortez Hills & mercury emissions

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

Oil is up $0.86 in early trading to $78.19 (March contract, most active); Gold is down $1.5 to $1118.6 (April contract, most active); Silver is up $0.142 to $16.240 (March contract); Copper is up $0.0345 to $3.2740 (March contract); Molybdenum is its at $16.50

The DOW is up 23.73 points to 10332.97; the S&P 500 is up 1.78 points to 1101.29. The miners are up:

Barrick (ABX) $39.91 up 3.51%
Newmont (NEM) $48.80 up 3.30%
US Gold UXG) $2.56 down 1.99%
General Moly (Eureka Moly, LLC) (GMO) $2.51 up 0.40%
Thompson Creek (TC) $13.21 up 0.61%
Freeport-McMoRan (FCX) $76.35 up 1.64% (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $39.16 up 1.24% - global steel producer
POSCO (PKX) $119.91 up 0.34% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 1.33% to $1,267,335.46 (what is this?).

Cheers,

Colonel Possum

Headline photoraph by Mariana Titus

Note 1: The so-called magic number is more accurately called the "geometric mean" which is related to but different from the "arithmetic mean" or simple average. The former is the square root of the product of two numbers; the latter, the sum of two numbers divided by 2. In molybdenum's case the geometric mean of the 52-week high and low is $16.50 and the arithmetic mean is $21.00. The ole Colonel finds the geometric mean to be the more important metric to gauge benchmarks in volatile commodity price swings. When you are at the geometric mean you're n times up from the low and 1/n th from the top. For moly, n=2.06155 and our claim of "double the bottom and half the top" is roughly correct.

Wednesday, February 17, 2010

Nevada Miners New Taxation Worry


Morning Miners!

It is 6:01 AM. Grab a cup and let's start the day with the good news first. You'll notice that there are more green lights lit on the Eureka Outlook Dashboard (to your right) than the last several weeks. Commodity reflation appears to be intact, investor confidence is returning to the metals and miners and the enough fear has left the marketplace to drop us back into 2-WD. We'll close today on the reasons why.

Say Colonel what's with the orange light? Nuts, that's some of the scary news. There is new lead whizzing past the mineshaft this morning from the "tax-the-miners" crowd. There is enough noise coming from this hubbub to change our yellow warning to a darker shade on the Dashboard's "Adverse Regulation/Legislation" indicator light. As reported in MineWeb, the latest shots are coming right from the Governor's Office:

Pro-mining governor seeks to cap Nevada mining's total tax deductions (MineWeb, 2/17/2010)

As reported:

"Nevada miners lost a crucial ally in their fight to avoid paying higher taxes as Nevada Gov. Jim Gibbons, a former geologist and mining attorney, announced Tuesday he will seek limits on the total amount of deductions miners can enjoy in the state."

Ouch. Let's set the stage on a related issue before we read on. The British Economist, which has reported on the economic health of nations since 1843, compactly summed up the sovereign debt problem in their latest issue, "Last year it was banks; this year it is countries." The Report has been following the debt plight of Dubai and Greece with Portugal, Spain and Ireland (and possibly Italy) waiting in the wings. The solvency concerns surrounding these countries cratered the metals and miners and has only recently begun to ease with the promise of some remedial fiscal actions. The troubling fact is many of our states face massive rising deficits with economies comparable to or exceeding the troubled European countries. California, arguably the sixth largest economy in the world, is a prime example inching closer to the ledge of default canyon. Nevada is joining the major leagues too with a whopping $880 million budget deficit.

So it is no wonder that Nevada politicians are desperately searching for who has the gold (in our case, literally). One idea is to cap the deductions afforded miners and some continue to challenge the miner's constitutionally mandated tax protections dating back to 1864. Check this out:

"Nevada Department of Taxation figures reveal Nevada mines reported gross proceeds of nearly $5.7 billion in 2008 with 43.99% of those earnings reported in Eureka County, Nevada. However, net proceeds after deductions were taken out reduced that amount to $1.85 billion." (MineWeb, 2/17/2010)

The temptation to close the deduction gap is apparently too compelling to ignore for Governor Gibbons. Miner taxation sentiment has expanded from fringe groups like the Progressive Leadership Alliance of Nevada, who advocate constitutional change, to cash-strapped politicians. These flames, of course, are only part of a larger sage brush fire at the national level:

"...the battle over Nevada's taxation of mining is only part of a larger war in which the federal government is now seeking to repeal the net proceeds tax on mining in favor of a gross profits tax, which has also garnered strong opposition from the nation's hardrock mining industry." (MineWeb, 2/17/2010)

With gold mining production already down by 10% in the United States from last year, the Governor's capitulation is a very unwelcome development

So Colonel, what was that good news? Yesterday's strength in copper, gold and oil prices has convinced me that commodity reflation is still intact even though the dollar index (.DXY) remains hovering around the 80 level. The miner's are looking stronger too with both Barrick (ABX) and General Moly (GMO) crossing positively over their benchmark 200-day moving averages with yesterday's rally. Here are their charts, the 200-day average is the solid line trending modestly higher in both cases.



Enough chart talk, let's walk the walk:

4-WD is OFF - the VIX or "fear index" is below 25, smoother markets are expected (what is this?)

An ORANGE light is ON for possible adverse regulation/legislation: Miner Taxation, Cortez Hills & mercury emissions

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

Oil is up $0.15 in early trading to $77.16 (March contract, most active); Gold is down $1.4 to $1118.4 (April contract, most active); Silver is up $0.002 to $16.150 (March contract); Copper is up $0.0140 to $3.2355 (March contract); Molybdenum is steady at $16.00

The DOW is up 26.60 points to 10295.41; the S&P 500 is up 3.45 points to 1098.32. The miners are mixed:

Barrick (ABX) $37.86 up 1.21%
Newmont (NEM) $47.43 up 0.02%
US Gold UXG) $2.54 down 1.17%
General Moly (Eureka Moly, LLC) (GMO) $2.51 down 1.18%
Thompson Creek (TC) $13.19 up 1.70%
Freeport-McMoRan (FCX) $75.04 down 1.19% (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $38.98 down 0.54% - global steel producer
POSCO (PKX) $119.81 up 0.06% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.04% to $1,253,662.54 (what is this?).

Cheers,

Colonel Possum

Tuesday, February 16, 2010

Twin Fiddles and a Steel Guitar



When you hear twin fiddles and a steel guitar
You're listenin' to the sound of the American heart
- George Straight

Morning Miners!

It is 6:01 AM, have a Mardi Gras cup of joe and welcome back to the break room. I can't think of a better song to start this market week than George Straight's Heartland. Our twin fiddles today are copper and gold and our steel guitar is that heavy metal industry that loves molybdenum. All are singing and playing on key after several weeks on the Highway of Global Doldrums. What's changed the tune for metals, miners and the steel industry?

The answer is all sorts of stuff, pardner. Let's enjoy this show while it lasts because we could go back on the lonesome highway. The biggest news is Japan. It is funny how little attention the second biggest economy has received lately. China is catching up with them fast but Japan remains one of the economic powerhouses of the world with a currency that is strong as Nippon steel. Here is an article from Bloomberg News that broke yesterday:

Copper Climbs in London as Japan’s Economic Growth Accelerates
(Bloomberg News, 2/15/2010)

Japan is the world’s fourth-largest consumer of copper and the price for that and other base metals popped when it was reported that Japan’s gross domestic product grew at a surprising 4.6 percent pace in the fourth quarter. The buzz now is that any shortfall in Chinese demand will be offset by Japan and others on a solid recovery path. Expectations for the steel industry also rose on this logic.


Gold is getting back some of its mojo too. The sovereign debt crisis in Europe is by no means over and will probably hang around like a bad cold for the remainder of the year. There is some cautious optimism emerging with better-than-expected euro-zone economic data. The euro has rebounded against the dollar, but the absence of a detailed fix for Greece's debt problems has sent some investors running back to gold. Reports of rising inflation in the U.K. were also supportive of gold price. This morning gold has returned to about where it was at the beginning of this month after dipping to $1044 on February 5th (COMEX, intraday April contract). That was the darkest day for oil and copper while silver put in a low on the 4th.


Let's see how we fare against the Colonel's February model. On the second I picked $1120 as the nominal monthly price for gold; this morning COMEX gold is just about there at $1118.6. Here is how the others are doing:

The fair value of silver is $17.662 in a range of $16.959 to $18.366
Today COMEX silver is $15.950 with a intraday low of $14.65 on 2/4. Silver remains very undervalued with respect to gold with both numbers well below the expected range. The Colonel threw a few extra bars in the buckboard a week ago.

The fair value of copper is $3.1856 in a range of $2.8853 to $3.4860
Today COMEX copper is just above fair value at $3.1930 after breaking its lower bound with an intraday low of $2.810 on 2/5.

The fair value of oil is $77.263 in a range of $71.101 to $83.424
Today NYMEX crude light jumped $2.68 in early trading to $76.78 hovering just below fair value after a scary dip to $69.50 on 2/5.

After all the dips and flips of the last few weeks we have gold near its nominal and copper and oil trading near fair value. Silver is cheap if you think gold is headed higher. The biggest take away for me from today's numbers is a return of gold to its traditional role as a "safe haven" against currency volatility and possible inflation in the developed countries. For too long gold has been riding the "risk trade" with other commodities. We'll see if today is a flash in the gold pan or a turning point for the yeller stuff.

Let's close with our old friend George and sing along with the metals and miners:

Sing a song about the heartland the only place I feel at home
Sing about the way a good man works until the daylight's gone
Sing the rain on the roof on a summer night
Where they still know wrong from right
Sing a song about the heartland sing a song about my life
Sing a song about the heartland...


OK, enough singing, let's walk the walk:

4-WD is OFF - the VIX or "fear index" is below 25, smoother markets are expected (what is this?)

Yellow light remains ON with concerns about commodity reflation given a stronger dollar but we could go green if a dollar trend lower continues (U.S. Dollar Index DXY remains above 80, today we're right at 80).

Yellow light is ON for diminished investor confidence in the metal and mining sectors, let's hope we can turn this back to green soon with the latest news.

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

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

Oil is up $2.65 in early trading to $76.78 (March contract, most active); Gold is up $28.6 to $1118.6 (April contract, most active); Silver is up $0.530 to $15.950 (March contract); Copper is up $0.1105 to $3.1930 (March contract); Molybdenum is steady at $16.00

The DOW is up 93.72 points to 10192.86; the S&P 500 is up 11.09 points to 1086.60. The miners are singing with George today:

Barrick (ABX) $37.77 up 2.92%
Newmont (NEM) $47.30 up 1.65%
US Gold UXG) $2.5895 up 4.42%
General Moly (Eureka Moly, LLC) (GMO) $2.53 up 4.12%
Thompson Creek (TC) $13.28 up 3.35%
Freeport-McMoRan (FCX) $75.20 up 2.06% (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $38.94 up 4.03% - global steel producer
POSCO (PKX) $120.05 up 3.52% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 2.82% to $1,253,899.27 (what is this?).

Cheers,

Colonel Possum

Friday, February 12, 2010

Moly Jumps, Metals Dip, Barrick & POSCO Expand


The NYSE will close for President's Day. The Report will return bright and early Tuesday, February 15

Morning Miners!

It is 6:04 AM pardner. Scott brought over some of his new Triple-X TGIF coffee last night, grab a cup and let's see if we can brace for an interesting mix of news. First let's settle some bets. On the 3rd of this month, I predicted molybdenum price would be above $15 before Chinese Lunar New Year. Pardner, the new moon is Sunday and today's moly price is $16, that's a beer for the Colonel! Now before you go digging in your pockets for change, I blew our second bet that oil would see $80 before $70 by April Fool's day. Yup, that's a beer for you. The NYMEX March contract (most active) dropped to $69.50 before rebounding above $70 on the 5th, one of those black Friday's when traders fretted about Europe and China and Armageddon.

On the 26th of January the Report likened the recent news coming from Europe and China as a grand theater playing out on the global stage (Chinese Theater, Gold & Silver). The drama continues today doing damage to this weeks metal and miner's rally. In the Chinese Theater:

"U.S. stocks opened lower Friday, led by the materials sector as an increase in China's deposit-reserve ratio reignited concerns about how demand for commodities might be impacted by tightening in China...The stock declines came after the People's Bank of China announced it will raise the ratio of reserves banks must set aside by 0.5 percentage points, marking the second such action this year. The central bank has been tightening monetary policy in an attempt to restrain bank lending." (WSJ, 2/12/2010)

And on the European stage:

"The euro sank to near a nine-month low against the dollar during overnight trading, on the back of poor economic data and renewed worries over sovereign debt problems. The euro's broad-based slide prompted the Swiss National Bank to intervene for a third time this year, according to traders, to stem the sharp appreciation of the Swiss franc." (WSJ, 2/12/2010)

Predictably the dollar is stronger on this news as metals and miners head back to the mineshaft. Is everything as bad as it seems, is there lasting substance to all this drama? Pessimists point to rising base metal inventories at the London Metal Exchange (LME). With the exception of aluminum most inventory builds look like copper:


The rise in LME stocks, they say, indicates weak demand outside of China and if China demand falters...yikes! Maybe so but copper did make it above $3 yesterday and, although down some today, is still north of this important benchmark. Is a 0.5% wiggle in Chinese monetary policy really going to cause demand destruction in a country that is expected to see reduced GDP growth but still do better than 8%? Will slower than expected growth in Europe and the fuzzy fiscal fate of Greece, Portugal, Spain and Italy destroy the voracious commodity appetite of the emerging world? Maybe, this ole Colonel thinks not.

Let's see what two big boys are doing behind the theater curtains. Barrick is in the news today, as reported by Mining Technology:

"Chilean environmental authorities have approved Barrick Gold's $38m proposal to expand the production capacity of its Zaldivar copper mine in the northern Antofagasta region." (Mining Technology, 2/12/2010)

Now you may say a $38 million expansion is not even a speck of sand in their gold pan but I will ask why does gold miner even have a copper mine? Would Barrick be digging in Chile at all if they didn't think copper prices will rise and offer a promising diversification to their massive gold interests?

Here's a second bit of news from South Korean steelmaker POSCO (who owns a 20% share in our Mt. Hope). As reported by Steel Business Briefing today:

"POSCO plans new galvanising line for Gwangyang works - POSCO is planning to add a new hot-dip galvanizing line at its Gwangyang works west of Busan. The new line, the No.7 continuous galvanizing line (CGL), will have a capacity of 500,000 tonnes/year and will mostly target the automotive sheet market...Behind POSCO’s strategy seems to be a keenness to create a new outlet for upstream products such as hot rolled coil." (Steel Business Briefing, 2/12/2010)

Who cares? Maybe Eurekans should. If POSCO expects an imminent collapse in Chinese demand why are they building new plants? I think they, like Barrick, see a clearer and more promising picture of the future buckaroos. Remember that billionaire investor Warren Buffet likes POSCO and is willing to buy their stock at relatively elevated levels. The Colonel doesn't believe this decision is the onset of early stage Alzeimers (Buffet Wants More POSCO, Both Want Lithium, 1/19/2010).

We may have another rough Friday for metals and miners but I'm holding on to my General Moly, POSCO and Barrick stocks with both hands.

Enough tough talk, let's walk the walk:

4-WD is ON - the VIX or "fear index" remains above 25, rougher markets are expected to continue (what is this?)

Yellow light is ON with concerns about commodity reflation given a stronger dollar and falling prices (U.S. Dollar Index DXY remains above 80).

Yellow light is ON for diminished 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 down $1.37 in early trading to $73.91 (March contract, most active); Gold is down $7.1 to $1078.3 (April contract, most active); Silver is down $0.205 to $15.385 (March contract); Copper is down $0.0715 to $3.0620 (March contract); Molybdenum jumps to $16.00

The DOW is down 124.78 points to 10019.41; the S&P 500 is down 11.58 points to 1066.89. The miners are grumpy today:

Barrick (ABX) $36.29 down 2.10%
Newmont (NEM) $45.88 down 1.88%
US Gold UXG) $2.44 down 0.2%
General Moly (Eureka Moly, LLC) (GMO) $2.35 down 2.49%
Thompson Creek (TC) $12.43 down 2.74%
Freeport-McMoRan (FCX) $71.77 down 3.24% (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $36.54 down 2.56% - global steel producer
POSCO (PKX) $113.51 down 3.55% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 2.05% to $1,196,731.66 (what is this?).

Cheers,

Colonel Possum

Thursday, February 11, 2010

Slower Than an Earthquake, Copper Breaks $3


***BREAKING NEWS*** Western Lithium Receives Plan of Operation Permit for Nevada Lithium Project; Work Program Underway

Morning Miners!

It is 6:11 AM. Did you see the moon this morning? A yellow sliver, a fading wink from the Old Man before a new moon child is born and Lunar New Year begins. I say we restart 2010 and get the metals and miners back to shining and singing. There is some hope today that may occur. The pause in Asian demand to celebrate their New Year will end after next week and traders there should return with renewed vigor. Copper finally returned to $3 territory this morning with a bit of positive news coming from Europe.

In terms of disasters earthquakes are the fastest; credit crises, the slowest. Why should we care in Eureka about the sovereign debt woes of a few countries in Europe? The Wall Street Journal puts it in a small ore bucket this morning:

"In recent months, gold has been trading as a risk play, so the debt concerns of the 16-nation euro bloc have emerged as a driver for gold prices as developments cause appetite for perceived riskier assets like commodities, equities and high-yielding currencies to alternately wane or increase." (WSJ, 2/11/2010)

If your community doesn't have a gold mine or two and isn't sensitive to the whims of commodity markets, maybe you can change the channel when the talking heads worry about a Greek belly flop in the global finance pool. A chart of the GFMS 30-Day Base Metal Index illustrates why we need to keep our hands off the remote:


The Index has lost some 12% of value from the highs in January as the European debt problems unfolded before the world. Gold has had a similar decline over the same period:


So how about some good news, Colonel? The Financial Times reports this morning that the European Union is finally on the move:

"Leaders of countries in the eurozone on Thursday promised to help Greece if it slashed its budget deficit, saying they would provide 'determined and co-ordinated action if needed to safeguard stability' in the bloc."

"Under an agreement hammered out in last minute negotiations in Brussels, the 16-country eurozone stopped short of providing immediate financial support for Greece, but gave an implicit assurance to help Athens if it encountered problems in refinancing its sovereign debt later this year." (Financial Times, 2/11/2010)

There are concerns about the effectiveness of their plan and the fate of other troubled countries (Portugal, Spain an Italy) but this news has lifted our miners in early trading and pulled copper across the $3 line. If we can maintain a little momentum into the Lunar New Year a healthy commodity reflation may return and some of our yellow lights on the Eureka Outlook Dashboard will be switched to "green" status. Time will tell, hang in there buckaroos.

Enough Euro-talk, let's walk the walk:

4-WD is ON - the VIX or "fear index" remains above 25, rougher markets are expected to continue (what is this?)

Yellow light is ON with concerns about commodity reflation given a stronger dollar and falling prices (U.S. Dollar Index DXY remains above 80).

Yellow light is ON for diminished 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 $0.05 in early trading to $74.57 (March contract, most active); Gold is up $2.0 to $1078.3 (April contract, most active); Silver is down $0.010 to $15.290 (March contract); Copper is up $0.0390 to $3.0280 (March contract); Molybdenum is steady at $15.00

The DOW is down 21.54 points to 10016.84; the S&P 500 is down 3.79 points to 1064.34. The miners are singing today:

Barrick (ABX) $36.11 up 1.21%
Newmont (NEM) $45.93 up 1.32%
US Gold UXG) $2.31 up 3.49%
General Moly (Eureka Moly, LLC) (GMO) $2.31 up 3.59%
Thompson Creek (TC) $12.46 up 1.22%
Freeport-McMoRan (FCX) $71.90 up 1.22% (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $36.30 down 0.97% - global steel producer
POSCO (PKX) $115.42 up 1.30% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 1.26% to $1,189,888.09 (what is this?).

Cheers,

Colonel Possum

Wednesday, February 10, 2010

Texas, The Chevrolet 409 & Korean Rebar


Morning Miners!

It is 6:01 AM and time for an old timer story, grab a cup. I don't know about you but this global recovery is starting to feel like a long drive across Texas. I've made that trip on Interstate 10 more times than I care to admit to carry my sweetheart of 32 years back to her beloved Louisiana. By the way, Go Saints!


Traveling east, it is 857 miles from El Paso to Orange, Texas; 880 miles border-to-border until you cross the Sabine River into bayou country. Somewhere in the middle of that grand state my mind wanders and the ole Colonel plays a little game to keep alert. When the mileage markers hit the high 200s, I start thinking of car engines with a displacement equal to the highway "yardsticks" as the truckers call them. Now if you're not a car buff, this probably sounds like a lot of gibberish (hold that thought, we'll apply it to markets in a moment). Whatever your automotive background, allow me to continue. Just east of Ft.Stockton is mile marker '265', Chevrolet's first small block V-8 first introduced in their highly popular 1955 Bel-Air. After that we have the Chevy '283', the Ford '312' and the Chevy '327' just before you cross the Pecos River; get the picture, pretty bored driver. Between Sonora and Junction I pass my all time favorite engine, the big block Chevy '409' which propelled America into the "muscle car" era under the hood of a 1962 Impala. Life was never so fine then, but you still have 471 more miles to drive in Texas.

OK Colonel, where are we going with all this? Well pardner as far as our trip down global recovery road we are somewhere past '409' and coming up to the Oldsmobile '442' in Roosevelt, Texas. Maybe we should stop for lunch and try to figure out some stuff. For the first part of the new year, it has been hard as the devil to understand how this trip is going other than it will be a long one. Year-to-date we've watched metals soar and crash and then pickup a little. Miner's fell in a deep shaft and yesterday saw a few rays light from above. We are hearing all sorts of gibberish (see, I promised) about the solvency of the PIGS (euro-zone countries Portugal, Italy, Greece and Spain), the true pace of the Chinese economy and whether the Fed's Uncle Ben is going to drop the hammer on interest rates sooner than later this year. All of this buzz has whipsawed commodities as we still try to figure out true demand from stocking and speculation in a conflicting news environment.

Let's look at three snippets of today's news from the steel industry to illustrate just how confusing everything has become. Steel production is a good example because it creates demand for molybdenum which is important to General Moly (GMO) to maintain investor enthusiasm for the Mt. Hope Project. Here we go:

Korean Domestic Rebar Demand

Steel Business Briefing reports today:

"Local consumers led by distributors increased their purchase volumes to accumulate stocks until last week, but the upcoming [Lunar New Year] holiday and a lack of demand quickly undermined the brief upturn, a local dealer says.

Due to speculative buying from consumers, January’s high rebar stocks held by Korea’s seven major producers plunged by 120-130,000 tonnes early last week from 220-230,000 t a month ago. But stocks have begun to climb again, reaching 300,000 t this week."

Is this good or bad news for South Korean steelmaker POSCO (20% owner of Mt. Hope)? You got me, their stock price is down 1.8% in early trading; yesterday morning it was up an impressive 5.4%.

US Steel Production

A second report from Steel Business Briefing:

"US output continues slow climb - US mills produced an estimated 1.6m short tons last week, up less than 1% from the prior week. Capability utilization was also flat at about 67%...While still low, these levels are substantially above the industry’s performance during the first week of February last year. Output is up 52% from a year ago when the weekly total was just 1.06m s.t from 45% capability utilization."

This sounds like we're stopping for gas in Roosevelt, Texas. The car is running but we still got a lot of highway ahead.


Arcelor Mittal (MT) First Quarter Profit Guidance


Bloomberg News reports today on ArcelorMittal, another investor in General Moly:

ArcelorMittal Falls on First-Quarter Profit Guidance

"Feb. 10 (Bloomberg) -- ArcelorMittal, the world’s biggest steelmaker, dropped the most in six months in Amsterdam trading after saying first-quarter profit will fall short of analyst estimates as prices slump and costs rise."

and,

"In the fourth quarter we had price drops which affected the global steel industry," Chief Financial Officer Aditya Mittal said on a conference call. "Global sentiment was weak and people were a bit concerned that perhaps the recovery is not as strong and therefore prices fell."

Hmmm...maybe we better check the air in our tires while we get some gas. Today MT is down a lousy 7.8%; yesterday morning they were up a respectable 5.0%.

So there you go buckaroos. I believe my job is to help you connect the dots to Eureka County on the Global Recovery Travel Map. This morning, the ole Colonel wanted to give you a sense for how confusing that task can be in this very young 2010.

Say, how about a cheeseburger and fries? Roosevelt has a great little spot. It's a long way to the Economic Promised Land, we better eat now and build up our strength. Say, did I ever tell you about my 1958 Bel Air...

Enough cross-country driving, let's walk the walk:

4-WD is ON - the VIX or "fear index" remains above 25, rougher markets are expected to continue (what is this?)

Yellow light is ON for concerns about commodity reflation given a stronger dollar (U.S. Dollar Index DXY remains above 80).

Yellow light is ON for diminished 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 $0.07 in early trading to $73.82 (March contract, most active); Gold is down $2.3 to $1074.9 (April contract, most active); Silver is down $0.100 to $15.335 (March contract); Copper is down $0.0180 to $2.9690 (March contract); Molybdenum is steady at $15.00

The DOW is down 64.77 points to 9983.87; the S&P 500 is down 8.02 points to 1062.50. The miners are feeling blue today:

Barrick (ABX) $35.13 down 1.51%
Newmont (NEM) $44.42 down 3.06%
US Gold UXG) $2.22 down 2.21%
General Moly (Eureka Moly, LLC) (GMO) $2.16 down 1.82%
Thompson Creek (TC) $12.23 down 0.89%
Freeport-McMoRan (FCX) $69.35 down 3.12% (a bellwether mining stock spanning gold, copper & molybdenum)

The Steels called in sick today, (a "tell" for General Moly & Thompson Creek):

ArcelorMittal (MT) $36.37 down 7.83% - global steel producer
POSCO (PKX) $112.47 down 1.83% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 2.89% to $1,157,707.87 (what is this?).

Cheers,

Colonel Possum

Tuesday, February 9, 2010

Miss Moly Flies to London



Morning Miners!

It is 5:58 AM, grab a cup and warm up. I drove Miss Moly to the Elko airport yesterday and saw her off for her big debut in London tonight. She and her cousin Cobalt will be honored at a cocktail reception held at the London Metal Exchange's historic trading floor called "The Ring." Starting February 22, minor metals molybdenum and cobalt will be traded right along with the traditional base metals. This will expose molybdenum to a larger group of market participants (including speculators) by creating futures contracts that provide transparent and regulated pricing as well as risk management tools for producers. You can read more about this in our January report, Miss Moly and the Platinum Looking Glass.


The Report stated then, "In the current economic environment of low interest rates and continuing global recovery, the expanded [molybdenum] market will most likely be supportive of molybdenum price in the near term." That assumption has certainly been put to a test with most miners falling into bear correction territory amid growing concerns about China's monetary tightening, European sovereign debt and most recently worries about a Federal Reserve making plans to raise interest rates later this year.




We've got a nice two-day rally in copper and gold as some of the European concerns are easing for the time being. There is little doubt that metals and miners are still walking underneath some shaky timbers. Dennis Gartman, "The Commodity King", was very somber on CNBC Business News yesterday suspecting that the worse is yet to come; a greater than 10% correction in the broader markets and possibly rougher going for commodities. He is watching copper prices very carefully for further signs of deterioration in the global recovery story. On January 28th Gartman announced that Freeport McMoRan (FCX) was a technically broken stock and a harbinger of tough times for the mining sector (Freeport "Broken", Miners in Correction, 1/29/2010). The Commodity King called the collapse in commodities in 2008 so he is someone the ole Colonel listens to while standing at attention. Since I am an incurable optimist, I hope the King is wrong this time.

Did I talk to Miss Moly about any of this on our way to the airport? Hell no, I'm not going to spoil her nice party. We'll keep an eagle eye on copper and other metals while she and Cobalt dance the boogaloo in jolly ole England.

Enough partying, let's walk the walk:

4-WD is ON - the VIX or "fear index" remains above 25 again, rougher markets are expected to continue (what is this?)

Yellow light is ON for concerns about commodity reflation given a stronger dollar (U.S. Dollar Index DXY remains above 80).

Yellow light is ON for diminished 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 $0.66 in early trading to $72.55 (March contract, most active); Gold is up $7.2 to $1073.4 (April contract, most active); Silver is up $0.135 to $15.220 (March contract); Copper is up $0.0370 to $2.9500 (March contract); Molybdenum is steady at $15.00

The DOW is up 75.05 points to 9983.44; the S&P 500 is up 4.89 points to 1061.63. The miners are feeling better today:

Barrick (ABX) $35.36 up 2.29%
Newmont (NEM) $45.37 up 2.16%
US Gold UXG) $2.29 up 5.35%
General Moly (Eureka Moly, LLC) (GMO) $2.20 up 3.77%
Thompson Creek (TC) $11.99 up 5.45%
Freeport McMoRan (FCX) $71.75 up 3.68% (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $39.47 up 4.97% - global steel producer
POSCO (PKX) $114.02 up 5.35% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 3.57% to $1,186,011.28 (what is this?).

Cheers,

Colonel Possum

Headline Photograph by Mariana Titus

The inset molybdenum symbol was designed for Metalprices.com by the artist Murray Robertson. The design is influenced by historical symbols used in the ancient science of Alchemy. This creative molybdenum symbol is adapted from lead as these elements being of similar appearance were often mistaken for each other.