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