"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.

Wednesday, March 31, 2010

How Are We Really Doing? Let's Ask the Class


Morning Miners!

It is 6:04 AM. Grab a cup and let's figure out if we're any smarter than a month ago. It is the end of the month and the end of the first quarter - how are we really doing? Let's ask our favorite students:

Gold


Gold is seeing a nice rally on the London spot exchange this morning. Normally I get all excited about such things but this bounce takes us pretty near to where we started. On March 2, the Report noted:

"I think I can count as many reasons for gold to rise as fall so the Report will maintain $1120/oz as a nominal price for March. This is close to its 1-year, 3-year and 5-year trend lines. Gold really needs to sort out what its role will be in the coming months - a fellow traveler with the metals and oil or safe haven play for investors fleeing the commodity space." (The Colonel's Outlook for March)

Ho-hum. COMEX gold is trading at $1116.9/oz, up $11.2 but pretty durn close to our nominal value of $1120/oz. After a month of going nowhere gold is now below its 1-year trend line. If it is trying to keep pace with the metals, it needs some vitamins. Investors aren't fleeing the commodity space either since there hasn't been anything super-scary in the headlines. Let's checkout something a little more exciting...

Copper

While gold has remained range-bound, our proud little canary in the global recovery mineshaft is soaring like an eagle again. Copper broke the key $3.50/lb resistance level and is still showing some mojo this morning. COMEX copper is presently trading at $3.5555/lb. On 3/2 the Report gave a range for copper of $2.9363/lb to $3.4977/lb, a breakout is indeed a bullish sign for this metal and perhaps broader global economic trends. The wires are awash with articles on copper's recent flight tempered with some cautions for the near-term. Here are two examples from downunder:

Copper outlook bright (Herald Sun, 4/01/2010 - it's tomorrow in Australia already!)

And an earlier report,

Copper prices soar to near two-year high (Dow Jones Newswires, 3/31/2010)

The common theme is a more stable outlook for Greece and optimism about growth prospects in China. The caution, of course, is a misread on China and a return of sovereign debt jitters. Have you learned the words to this song yet?

Silver

Gold's constant companion Silver has been a little wishy-washy too. COMEX silver at $17.585/oz is sitting above the Report's fair value for March of $17.184/oz but well below an upper range of $18.423. If gold breaks out, silver could still mount a charge at $20/oz this year. I'm sticking to my 3/4 prediction that silver will break $19 before Memorial Day but my palms are a little sweaty, pardner.

Oil

Nuts. The fuel light on our Eureka Outlook Dashboard has been yellow for most of this month with oil stubbornly trading above $80. NYMEX Oil is $83.55 this morning breaking out of our March upper range of $82.77. This is terrific for oil "bulls" but not so hot for miners and other folks that are getting renewed sticker shock at Marge's Chevron. Some of the same reasons that copper is headed higher apply to black gold. A big new sovereign debt bugaboo could fix this but that's not so hot either. Let's see what the treasury yields say...

10-Year Treasury Note


There has been much concern this month on whether a sharp increase in the yields of Treasurys may upset the ore cart for the Federal Reserve's low-interest strategy and the pace of the nascent domestic recovery (Debt Concerns Move from Europe to U.S.). A worse than expected ADP labor report today may have changed the mood as reported by the Wall Street Journal:

NEW YORK—Prices of Treasury notes and bonds rallied [i.e. yields declined] after an unexpected decline in the latest private-sector jobs data spurred many investors to sell stocks and return to the comfort of safe-haven U.S. government securities. The report dented optimism about the March nonfarm payrolls data scheduled for release Friday and raised concern about the labor market, still grappling with an elevated unemployment rate of 9.7%. The weak data support the Federal Reserve's stance of keeping interest rates at a record low near zero to sustain an economic recovery. (WSJ, 3/31/2010)

The 10-year Treasury yield has notched down to 3.833% this morning on the ADP headline which is good news for Ben Bernanke on interest rates; a lousy precursor (perhaps) to the upcoming Labor Department employment report. Stay tuned.

Molybdenum

Miss Moly has been pretty unconcerned about weakening dollars, rising yields and Uncle Ben. She still sings a happy song about a recovering global steel industry and increasing demand for her metal. Western moly oxide is at $17.11/lb, European moly oxide is $17.50/lb and the LME futures contracts have nicely converged towards spot prices with the 3-month and 15-month seller contracts trading at $17.74/lb. That's a steady-eddy market for now buckaroos.

I'm with Miss Moly, might as well be happy. Not a bad March, not a bad first quarter and a whole lot better than a year ago. Class dismissed!

Enough school, let's walk the walk:

4-WD is OFF - the VIX or "fear index" is below 25, smoother broader markets are still in the cards; metals & miners are good with FCX remaining comfortably above $74; the benchmark 10-year T-Note remains below 4% (what is this?)

The YELLOW light is switched back on our fuel gauge with oil above $80

An ORANGE light is ON for possible adverse regulation/legislation: Miner's claim fee, 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 $1.18 in early trading to $83.55 (May contract, most active); Gold is up $11.2 to $1116.9 (June contract, most active); Silver is up $0.255 to $17.585 (May contract); Copper is down $0.080 to $3.5555 (May contract); Western Molybdenum Oxide remains at $17.11

The DOW is down 12.77 points to 10894.65; the S&P 500 is up 0.30 to 1173.57. The miners are mixed:

Barrick (ABX) $38.28 up 1.38%
Newmont (NEM) $51.36 up 1.22%
US Gold UXG) $2.70 down 0.74%
General Moly (Eureka Moly, LLC) (GMO) $3.39 up 0.30%
Thompson Creek (TC) $13.65 down 0.22%
Freeport-McMoRan (FCX) $83.62 down 0.05% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $43.91 up 0.09% - global steel producer
POSCO (PKX) $117.75 down 0.54% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.29% to $1,357,400.76 (what's this?).

Cheers,

Colonel Possum

Headline photograph by Mariana Titus

Tuesday, March 30, 2010

Copper, Freeport & the Devil's Triple-6


Morning Miners!

It is 5:56 AM. The coffee pot is crying for company, let's give her a visit. I thought we'd look in the rear view mirror today to see what may be up ahead. That's a damn fool way to drive a truck but in the markets it's sometimes a good idea. Before we take a peek, there is some interesting news on the wire about lithium and South Korean steel maker POSCO (20% investor in our Mt. Hope). If you haven't been following the Nevada lithium story checkout Western Lithium, Gold, Silver, Copper & Oil for starters.

Lithium Update

Western Lithium Announces Formation of Advisory Committee and Resignation of Director (Press release WLC, 3/29/2010)

And here's some competition from up north:

Quebec lithium mine could ramp up to 25 000 t/y (Mining Weekly, 3/29/2010)

POSCO Update

I've been wondering why POSCO (PKX) has been in the doldrums lately. Kim Jung-wook at Hana Daetoo Securities observes that concerns over raw material costs may be the culprit, especially rising high iron ore prices. Here are his thoughts:

"It's fine if Posco successfully passes on the increased cost to its customers by raising prices of its steel products. But there are still uncertainties over a timing for hikes in Posco's steel prices ... as the global economy hasn't recovered fully to levels before the financial crisis."

Nothing to lose sleep over, just another pebble in the road. This is a problem facing all steelmakers not just POSCO in 2010. Billionaire investor Warren Buffet loves POSCO and that's good enough for the ole Colonel.

Rear View Mirror

Yesterday we recalled that scary time when the economy, stocks and commodities all fell down the mineshaft with the collapse of Lehman Brothers in September 2008 (Copper Breaks $3.50, Moly Pops, Miners Rock). The metals & miners have had a good run ever since and the question becomes "how much longer can they rally." In the Report we slice and dice this question daily with the ebb and flow of domestic and global recovery; today let's checkout a little market history. Below is a 3-year chart of the S&P 500 (GSPC) and copper price. I prefer to look at the S&P instead of the DOW to understand the broader markets because it is an index of 500 companies instead of 30.


The very center of this chart is two days after Lehman Brothers declared Chapter 11 bankruptcy and the beginning of a long descent for the S&P and copper. A "bull" becomes a "bear" market when there is a more than 20% drop from the market high. On October, 9, 2007 the S&P closed at a high of 1,565.15 so the threshold by this definition for a bear market is 1,252 (i.e. 20% down). Before Lehman, the S$P dipped below this threshold and recovered several times; after Lehman, the S&P remained underwater dropping to a death-defying 666.79 on March 9, 2009. This so-called "Devil's Triple-6" marked an all time low for this bear market (on an intraday basis) and we've been struggling to swim to the surface ever since.

Yesterday the S&P closed at 1173.22, now only 7% from bull country. Can we pass through the range gate into the bull's pasture? Pessimists will point out that we've already come up a jaw-dropping 76% from the March bottom, that the market's overheated and a major correction awaits. They support their argument by reminding us that the rally from "Black Tuesday" of the 1929 crash was only 40% or so up before plummeting again to an 89% drop from the high of 9/3/1929. It took 25 years to reach that lofty benchmark again in November 1954.

Nuts to that! I think copper tells a far more optimistic tale for our future; the Colonel will believe the metals any day over the talking head naysayers. Copper hit a low of roughly $1.30/lb in December of 2008 following the Lehman collapse falling from something near today's price range of $3.00-$3.50/lb. Benchmark miner Freeport-McMoRan (FCX) followed copper to a record low of $15.7/share although its average price for December was $22.5. Both copper and FCX started climbing out of the mineshaft helped by China's demand for metals and their effective stimulus program. Importantly, both kept trending higher during the darkest days of March 2009. By the "Triple-6", Freeport closed at $32.32, 105% above its December low! Copper was trading around $1.70 (up 31%) and heading higher also.

So what's your point with all this dad-blamed number crunching Colonel? Markets notoriously over-shoot and under-shoot fundamentals because humans emotions are involved in their rise and descent. I believe a "rational" (i.e. fundamentally based) low for the S&P may have occurred with copper in December 2008. The average S&P for that month was approximately 880. If we use this as a basis, yesterday's S&P close is only 33% up from the bottom, not 76%. That number is more consistent with the 1929 rally which says we have some more to go before topping out. 40% up from the "Colonel's Low" of 880 is 1232, just shy of the bull pasture.

On March 19, I made two market predictions for the S&P 500 (Still Fearless in 2010, the Colonel's Market Prediction):

The S&P will break 1,193 before Memorial Day 2010
The S&P will break 1,251 before Christmas 2010


Hopefully you now understand some of my logic behind these predictions. If we can break and stay above 1,251 this year we may be running with the bulls again my friend!

Enough talk, let's walk the walk:

4-WD is OFF - the VIX or "fear index" is below 25, smoother broader markets are still in the cards; metals & miners are good with FCX remaining comfortably above $74; the benchmark 10-year T-Note remains below 4% (what is this?)

The YELLOW light is switched back on our fuel gauge with oil above $80

An ORANGE light is ON for possible adverse regulation/legislation: Miner's claim fee, 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 $0.12 in early trading to $82.29 (May contract, most active); Gold is up $2.4 to $1107.2 (April contract, most active); Silver is up $0.022 to $17.365 (May contract); Copper is up $0.0200 to $3.5555 (May contract); Western Molybdenum Oxide remains at $17.11

The DOW is up 64.39 points to 10905.60; the S&P 500 is up 6.86 to 1172.59. The miners are mixed:

Barrick (ABX) $37.46 down 0.92%
Newmont (NEM) $50.37 unchanged
US Gold UXG) $2.73 down 0.29%
General Moly (Eureka Moly, LLC) (GMO) $3.43 down 0.87%
Thompson Creek (TC) $13.40 down 1.07%
Freeport-McMoRan (FCX) $83.26 up 0.46% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $43.61 down 2.59% - global steel producer
POSCO (PKX) $117.26 down 2.20% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.86% to $1,350,268.39 (what's this?).

Cheers,

Colonel Possum

Headline photograph by Mariana Titus

Monday, March 29, 2010

Copper Breaks $3.50, Moly Pops, Miners Rock


Morning Miners!

It is 5:57 AM. Grab a cup, this could be a wild and woolly week in the markets. The Report received another good question from the readers which sheds some light on the road ahead (you can ask the Colonel questions too, colonelpossum@gmail.com). Last week we witnessed the bond markets take the wheel as we continue to bump our way down the domestic recovery cow trail. You'll remember how a poor showing at three U.S. Treasury auctions sent the key 10-year interest rate soaring (Debt Concerns Move from Europe to U.S.). This is important because low and stable Treasury yields have been a key factor in the Fed's plan to revive our economy. A continued rise in yields means higher mortgage rates, higher corporate borrowing costs and higher interest on rising government debt, all of which burden economic performance.

At the end of last May saw a similar bounce in Treasury yields (Gold Breaks $973 - Beer, Colonel!, 5/29/2010). Stock markets stumbled, the Fed held their ground and eventually Treasury rates drifted back down to more comfortable levels. Stock markets responded by continuing their rally from the 2009 March bottom and everything has been hunky dory (more or less) ever since...until last week.

The reader's question asked whether markets could force the government in a new direction. Darn tootin' is the answer. The more difficult question is whether this is good or bad at this stage of our recovery. I don't know the answer to that one but the equity and bond markets will be voting all week. An interesting twist is that the bond market will be open for a rare Good Friday session so traders can react to the upcoming monthly employment number. Stock markets will be closed and equity traders don't get a chance to be heard until Monday. Employment recovery is key to understanding any battle between the Fed and the markets.

Colonel, can you boil all this market mess down to something that fits in my coffee cup? I'll try but it may not taste too good. Our economy, equity and commodity markets got a big flat tire after the collapse of Lehman Brothers in September 2008. The Treasury rode to the rescue to save banks from failing and the Federal Reserve hooked up an air hose to our tire. Their compressor ran on printed money, government borrowing and lowered interest rates. Our tire "reflated" (as economists call it) and things started to slowly roll again. In the past, interest rates held down too long have led to excessive tire pressure (i.e. "reflation" becomes "inflation") and in the extreme the tire blows off the rim (think Greenspan and the housing bubble).

For our case today, a big hole in our sidewall called "unemployment" keeps the pressure down but the Fed can't stop pumping air in the tire. Until unemployment improves, the Fed has promised to keep rates low for "an extended period" and we'll have enough air in the tire to continue down the trail. This is all fine unless the bond markets start sawing on the government's air hose. If the benchmark 10-year Treasury yields break 4% with more lackluster auctions ahead we may end up with a leaky tire, leaky air hose and, eventually, another flat. Nuts.

On the other hand, last week may have been a blip and interest rates may drift down again as they did last June. If something scary happens on the global stage, foreign investors will return to buying U.S. Treasurys like umbrellas in a rain storm. The ole Colonel will be watching Treasury yields like a hawk buckaroos. This morning the 10-year T-Note is 3.851% already down from last week's flirtation with 3.9%.

Now for a happy note, COMEX copper just broke the key $3.50/lb level in early trading. We haven't been here since early January. Miss Moly and Uncle Nickel are back on the dance floor too. Here is our weekly molybdenum wrap up of last week's price action at the close, Friday (3/26/2010):

Western Moly Oxide (FeMo65) $17.11/lb up 5.3% (the price reported by Infomine and tracked by Base Metals on the General Moly Website)

This is above the Report's "magic number" for moly of $16.50/lb (Molybdenum Bounces Back to Magic Number).

Moly Oxide, Europe (Mo Drummed Molydbic Oxide EU) $17.25/lb (the price reported in the Metals Bulletin)

Here's a 1-month chart of molybdenum and nickel:



London Metal Exchange (LME) Futures Contracts

3-Month (Buyer) $37,000/metric ton $17.01/lb
3-Month (Seller)$38,000/metric ton $17.92/lb

15-Month (Buyer) $37,000/metric ton $17.01/lb
15-Month (Seller)$38,000/metric ton $17.92/lb

Here's a chart of the LME 3-month contract (seller) from the 2/22 launch price to Friday's close:



The difference between Western moly oxide, European moly oxide and the LME 3-month seller's contract is now less than $1, a sign of price stability.

Enough talk, let's walk the walk:

4-WD is OFF - the VIX or "fear index" is below 25, smoother broader markets are still in the cards; metals & miners are good with FCX remaining comfortably above $74; the benchmark 10-year T-Note remains below 4% (what is this?)

The YELLOW light is switched back on our fuel gauge with oil above $80

An ORANGE light is ON for possible adverse regulation/legislation: Miner's claim fee, 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 $2.04 in early trading to $82.04 (May contract, most active); Gold is up $4.1 to $1108.4 (April contract, most active); Silver is up $0.379 to $17.285 (May contract); Copper is up $0.0980 to $3.5010 (May contract); Western Molybdenum Oxide is moves up to $17.11

The DOW is up 64.39 points to 10905.60; the S&P 500 is up 6.86 to 1172.59. The miners rock:

Barrick (ABX) $37.59 up 0.48%
Newmont (NEM) $49.61 up 0.47%
US Gold UXG) $2.69 up 1.93%
General Moly (Eureka Moly, LLC) (GMO) $3.41 up 4.28%
Thompson Creek (TC) $13.05 up 0.46%
Freeport-McMoRan (FCX) $79.18 up 1.36% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $43.98 up 1.81% - global steel producer
POSCO (PKX) $116.24 up 0.94% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 1.39% to $1,324,225.54 (what's this?).

Cheers,

Colonel Possum

Headline photograph by Mariana Titus

Friday, March 26, 2010

Debt Concerns Move from Europe to U.S.


Morning Miners!

It is 5:57 AM. The ole Colonel has the Raine's TGIF Red Label brewing at double-strength, grab a cup and let's see what's going on. This week we chatted a bit about the recent dollar rally and how it has affected gold, base metals and our miners. (Whistling Dixie...What is a Strong Dollar?). I heard someone on CNBC Business News refer to the U.S. dollar as the the "least ugly" of the major currencies. Wednesday, this Report noted, "Even though we're in bad shape, if we remain better off than other developed countries, the U.S. dollar becomes 'strong' relative to their currencies."

The focus for most of this year has been on sovereign debt issues in Europe; most notably Greece, but also concerns of a contagion that could spread to other countries on shaky fiscal ground such as Portugal and Spain. Yesterday there was a key meeting of the European Union that appears to have created a safety net for Greece. As reported today in the Wall Street Journal:

"The rescue plan, which will involve assistance from the International Monetary Fund and provides Greece with a system of standby credits to guard against threatened insolvency, also brought down the cost of insuring Greek debt against default." (WSJ, 3/26/2010)

Terrific, for now at least. In the meantime things have not fared so well in our Treasury markets. We expect foreigners to participate in U.S. Treasury auctions like wide-eyed kids at the State Fair buying newly issued notes and bonds like cotton candy. This has worked for a long, long time until this week when many foreign investors poo-pooed three big U.S. Treasury offerings. The weak demand lifted the yield on the 10-year note to 3.9%, the highest level since last June.

Why should we care Colonel? Selling Treasurys is how our government finances its budget deficit. As concerns mount abroad about our ability to borrow, interest rates may trend even higher which increases the government's borrowing costs and spells trouble for the fragile housing market. Yikes.

The Wall Street Journal sums up the popular sentiment prior to the outcome of the EU meeting on Greece:

"The dollar has rallied [putting pressure on metals & miners], even as Treasurys have sold off. Usually, concerns about budget deficits send a currency lower. But investors appear to be betting on better prospects for a recovery in the U.S. than in Europe." (WSJ, 3/26/2010)

If Europe is perceived to be on the mend, investors may quickly cover this bet and our equity markets could suffer. Some believe a 4% 10-year Treasury is the trip point for when bond markets blunt the rally in stock markets.

It is too early to tell if the winds are shifting. At least for now, gold and commodities are recovering some of their losses in early morning trading. For $1095/oz gold, here are my latest ranges for silver, copper and oil:

The fair value of silver is $16.508 in a range of $15.268 to $17.748

The fair value of copper is $3.1833 in a range of $2.9026 to $3.4641

The fair value of oil is $75.869 in a range of $69.65 to $82.09

All three are presently in an "overvalued" state with respect to gold trading comfortably above fair value. This may be a bullish sign for gold prices going into next week. Here's this morning's bounce for copper:



LME copper inventories continue to decline, another bullish sign for our canary in the global mineshaft:


Stay tuned buckaroos!

Enough talk, let's walk the walk:

4-WD is OFF - the VIX or "fear index" is below 25, smoother broader markets are still in the cards; metals & miners are recovering today with FCX remsaining comfortably above $74 (what is this?)

The YELLOW light is switched back on our fuel gauge with oil above $80

An ORANGE light is ON for possible adverse regulation/legislation: Miner's claim fee, 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 $0.09 in early trading to $80.62 (May contract, most active); Gold is up $1.1 to $1094.0 (April contract, most active); Silver is up $0.069 to $16.810 (May contract); Copper is up $0.0305 to $3.4110 (May contract); Western Molybdenum Oxide remains at $16.25, LME 3-month seller's contract is $18.10, the 15-month seller's contract is also $18.10

The DOW is up 64.39 points to 10905.60; the S&P 500 is up 6.86 to 1172.59. The miners are happy today:

Barrick (ABX) $37.14 up 1.01%
Newmont (NEM) $49.00 up 1.34%
US Gold UXG) $2.64 up 1.93%
General Moly (Eureka Moly, LLC) (GMO) $3.41 up 4.28%
Thompson Creek (TC) $13.05 up 0.46%
Freeport-McMoRan (FCX) $79.18 up 1.36% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $43.98 up 1.81% - global steel producer
POSCO (PKX) $116.24 up 0.94% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 1.39% to $1,324,225.54 (what's this?).

Cheers,

Colonel Possum

Headline photograph by Mariana Titus

Thursday, March 25, 2010

Hanlong Invests in Another Moly Miner



Morning Miners!

It is 5:58 AM. Grab a cup of Thor's java and let's see what's up down under. Reuters reports today that China's Hanlong Mining Investment plans to invest $200 million in
Australian base-minerals explorer Moly Mines Ltd (MOL.AX, MOL.TO) this April. Hanlong is working with Chinese banks to secure a $500 million loan for Moly Mine's Spinifex Ridge Molybdenum project. The equity-and-debt investment will make Hanlong a major shareholder in Moly Mines. Here's the link to the Reuters article:

Hanlong Mining to invest $200m in Moly Mines in April (Mineweb - Reuters, 3/25/2010)

Is this the same Hanlong that plans to fund our Mt. Hope project as announced earlier this month? (General Moly Announces Significant Investment from Hanlong, Stock Surges) We need to look at the Hanlong corporate structure to understand a "yes" answer to this question:

Sichuan Hanlong Group Ltd. (established in 1997) is based in Sichuan Province, China. The investment group is engaged in minerals, properties, tourism and media.

Hanlong (USA) Mining Investment Inc, who now has an interest in General Moly's Mt. Hope, is a unit of the privately held Sichuan Hanlong Group Ltd.

Hanlong Mining Investment Pty Limited, who will soon have an interest in Moly Mines, is an Australian subsidiary of the same Sichuan Hanlong Group Ltd.

I can't help but think this is a another bullish sign for molybdenum miners. As Scotia Capital analyst Lawrence Smith told Mining Weekly after the General Moly transaction:

"China, the world's largest molybdenum producer, has seen a surge in demand for the stainless steel material in last five years, mainly due to its infrastructure development program. The country now is the biggest molybdenum consumer...In my view, demand is going to grow relatively high in the next decade and I am sure Hanlong is looking at this as a very long term investment." (to view the full Mining Weekly article, click here)

Mr. Smith also had some kind words to say about the General Moly deal:

"It appears to be very high quality project in terms of the reserve base and cost structure, and will be significant in the molybdenum market going forward."


So there, pardner, Miss Moly has a bright future and we'll share part of it right here in Eureka County. You can check out some more about Moly Mines on their website. They have some cool photographs of mining in the "Outback":

Moly Mines Ltd.


Pour Miss Moly a cup of joe and let's walk the walk:

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

The YELLOW light is switched back on our fuel gauge with oil above $80

An ORANGE light is ON for possible adverse regulation/legislation: Miner's claim fee, 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 $0.18 in early trading to $80.79 (May contract, most active); Gold is up $1.2 to $1090.0 (April contract, most active); Silver is up $0.094 to $16.735 (May contract); Copper is up $0.0135 to $3.3590 (May contract); Western Molybdenum Oxide sits at $16.25, LME 3-month seller's contract is $18.14, the 15-month seller's contract is also $18.14

The DOW is up 64.39 points to 10900.54; the S&P 500 is up 7.46 to 1175.18. The miners are happy today:

Barrick (ABX) $37.38 up 0.38%
Newmont (NEM) $49.72 up 0.01%
US Gold UXG) $2.74 up 0.74%
General Moly (Eureka Moly, LLC) (GMO) $3.47 up 2.97%
Thompson Creek (TC) $13.52 unchanged
Freeport-McMoRan (FCX) $80.o8 up 0.36% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $44.09 up 4.13% - global steel producer
POSCO (PKX) $116.25 down 0.47% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.97% to $1,342,050.59 (what's this?).

Cheers,

Colonel Possum

Headline photograph by Mariana Titus

Wednesday, March 24, 2010

Whistling Dixie...What is a Strong Dollar?


Morning Miners!

It is 6:01 AM. The coffee pot is hot and we've got a great question from one of our faithful readers, "Are we really going to a slightly strong dollar for a short while?" The answer to this is a good follow-up to the Report's concern yesterday that the stocks of steel-makers, metals and miners may be signaling something troubling down the road (Are the Steels, Metals & Miners Sounding an Alarm?).

The U.S. dollar is a so-called "fiat" currency; money declared by our government to be legal tender but not legally convertible to any other thing such as gold. Most national currencies are fiat currencies, including the U.S. dollar, the euro, and all other reserve currencies. It's true value becomes a relative question. Fundamentally the U.S. dollar is worth what folks around the world believe its worth relative to a basket of other currencies or in relation to the status of our national deficit/debt.

Lately there has been much discussion about the high deficits and accumulated debt of developed nations after they tried to contain the "Great Recession" with generous inputs of government stimulus. Eventually high levels of deficit/debt can lower the credit rating of a country. This happened today with a downgrade of Portugal's credit rating sparking another bad day for the metals & miners. Similar downgrades have occurred to Greece which has been in the headlines since December of last year. Could this happen to the United States? The reader who asked today's question sent the Report this link:

Bond Buyers: Buffett a Better Risk Than U.S. Treasuries (Money News, 3/23/2010)

U.S. Treasuries, our national debt obligations, are often considered "zero risk" by investors. This is because the U.S. enjoys the highest credit rating possible and our debt has been a "safe haven" for countries such as China as well as the global investment community. The above article observes:

"Two-year notes issued by Berkshire reportedly yield 3.5 basis points less than two-year Treasuries. The Treasuries yield 0.925 percent, compared to 0.89 percent for Berkshire paper." (Money News, 3/23/2010)

This is a rare and troubling sign when a Treasury yield is more than a corporate one (yields are inversely proportional to the value of the debt instrument). No one is expecting an imminent downgrade of our national credit rating but rising yields (falling value) are not a good sign. Greece has recently issued bonds to raise money that have high yields and therefore a high "borrowing cost". If the yields of U.S. Treasuries takeoff, our national debt becomes even more a burden and the worth of the U.S. dollar will suffer (see note 1).

Of course, that's the flip side to all this. Even though we're in bad shape, if we remain better off than other developed countries, the U.S. dollar becomes "strong" relative to their currencies. This was not the case last Fall when the dollar fell to new lows and the Report wrote the article Whistling Dixie...What is a Weak Dollar? Today it is fitting to write the companion piece because the U.S. dollar has enjoyed considerable strength since mid-March pushing the metals and miners down the mineshaft. A little review from the October article:

"Dollar strength or weakness refers to its relative performance with respect to a basket of currencies. The standard of comparison is the U.S. Dollar Index (USDX or .DXY) or in currency trader slang ,"Dixie". The USDX was created March 1973 and is comprised of the following currencies and base weights:

Euro 57.60%
Japanese Yen 13.60%
British Pound 11.90%
Canadian Dollar 9.10%
Swedish Krona 4.20%
Swiss Franc 3.60%

At inception, the Dixie had a level of 100.00. As we have exported great wealth over the years the index has declined...During the Bear Stearn meltdown in March of last year, the Dixie hit bottom at 70.931 while gold soared to $1,033...the index soared to 89.292 while the markets tanked in March of this year [2009]" (The Eureka Miner's Report, 10/14/2009)

OK, get the picture? The euro and the pound have been hammered lately given the sovereign debt crisis unfolding in that part of the world. Together they comprise nearly 70% of the "Dixie" so the U.S dollar rises with their decline. Most commodities are expressed in dollars so the metals and miners get whacked too.

Let's check the numbers:

Dixie (.DXY) low 3/17 79.51*; Dixie (this morning) 81.80 up 2.9%
S&P 500 3/17 1168.8*; S&P 500 (this morning) 1170.25 up 0.1%
Gold ETF (GLD) 3/17 110.2*; GLD (this morning) 106.99 down 2.8%

(* at the 1:45 PM EST intraday low for the .DXY on 3/17/2010)

What's all this gibberish mean Colonel? Yesterday we noted the steels, metals and miners have suffered since mid-March as the S&P 500 has continued to rally. The above numbers show that the U.S. dollar has beat the S&P 500 over the same time period as gold has fallen.

So what's the answer to the reader's question?

"Are we really going to a slightly strong dollar for a short while?"

Yes. As long as the European debt problems linger the dollar will no doubt trend higher with respect to the euro and the pound. If our deficit/debt problems are not faced with a good fiscal plan for recovery, this trend could reverse. In the worst case scenario, the U.S. credit rating may someday receive a downgrade too. How "short" is a "short while"? Stay tuned buckaroos.

Enough dollar talk, let's walk the walk:

4-WD is OFF - the VIX or "fear index" is below 25 but trending up, unsettled broader markets are expected; metals & miners are nervous but hanging in there with FCX above $74 (what is this?)

The YELLOW light is switched back on our fuel gauge with oil above $80

An ORANGE light is ON for possible adverse regulation/legislation: Miner's claim fee, 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 $1.65 in early trading to $80.22 (April contract, most active); Gold is down $12.2 to $1091.5 (April contract, most active); Silver is down $0.387 to $16.640 (May contract); Copper is down $0.0440 to $3.3350 (May contract); Western Molybdenum Oxide sits at $16.25, LME 3-month contract is $17.28, the 15-month seller's contract is $17.46

The DOW is up 21.92 points to 10807.81; the S&P 500 is down 0.20 to 1165.61. The miners are getting beat up today (except for UXG):

Barrick (ABX) $37.65 down 3.01%
Newmont (NEM) $50.21 down 2.41%
US Gold UXG) $2.77 up 0.36%
General Moly (Eureka Moly, LLC) (GMO) $3.50 down 1.41%
Thompson Creek (TC) $13.35 down 1.98%
Freeport-McMoRan (FCX) $80.23 down 1.06% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $42.20 down 2.50% - global steel producer
POSCO (PKX) $117.17 down 0.81% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 1.48% to $1,339,632.29 (what's this?).

Cheers,

Colonel Possum

Note 1: A vibrant growing economy, rising treasury yields and a strong dollar are not necessarily incompatible. Unfortunately we don't find ourselves in this state today with high unemployment, a heavy debt load and a tepid economic recovery.

Tuesday, March 23, 2010

Are the Steels, Metals & Miners Sounding an Alarm?


Morning Miners!

It is 6:09 AM. Grab a cup of coffee and let's see if we can figure out what the heck is going on with our favorite stocks. The Eureka Miner's Grubstake Portfolio (what's this?) tracks six miners and two steel-makers that have a direct or indirect impact on Eureka County. It also holds gold and silver Exchange Traded Funds (ETF) that track the price performance of these two precious metals. Lately all ten of these stocks have trended down as the broader markets trend higher setting new 52-wk highs. This is not a happy, pardner.

A good example is the S&P 500 which has been moving up rather dramatically since February 8 with a gain of 10.3%. Our stocks followed this move up then one by one started trending down while the S&P continued up. Here is a comparison of gold and silver's recent highs to their closing price yesterday:

Gold (GLD) 3/16 closing high $110.4, 3/22 $107.75 down 2.4%
Silver (SLV) 3/18 closing high $17.08, 3/22 $16.6 down 2.8%

Freeport-McMoRan (FCX), a bellwether mining stock, is often considered a "copper ETF" by investors. It started to de-correlate from the S&P about the same time as the precious metals:

Freeport-McMoRan (FCX) 3/16 closing high $82.19, 3/22 $79.8 down 2.9%

The gold miners are mixed with respect to when they started their descent but all are down from their most recent high:

Barrick (ABX) 3/17 closing high $40.16, 3/22 $39.41 down 1.9%
Newmont (NEM) 3/3 closing high $51.94, 3/22 $51.40 down 1.0%
US Gold (UXG) 3/9 closing high $2.94, 3/22 $2.78 down 5.0%

Our moly miners got a memorable bounce with the announcement that General Moly (GMO) is expected to receive full funding for the Mt. Hope project on March 5th. They too have drifted down ever since:

Thompson Creek (TC) 3/5 closing high $14.41, 3/22 $13.38 down 7.1%
General Moly (GMo) 3/5 closing high $3.99, 3/22 $3.35 down 16.0%

By comparison the S&P 500 is up 2.3% (by yesterday's close) from the 3/5 reversal for the moly miners.

Finally our favorite steelmakers have fared no better:

ArcelorMittal (MT) 3/17 closing high $43.61, 3/22 $42.23 down 3.2%
POSCO (PKX) 3/10 closing high $124.96, 3/22 $117.5 down 6.0%

So what Colonel? What's a few percent in this topsy-turvy marketplace? It's not the percentage change (which is fairly modest in most cases) that worries me; it is when our whole pack starts to run in the opposite direction from the broader markets that I become cautious. There are at least three possibilities:

1) This reversal is a typical "rotation" by investors from so-called "high beta risky assets" into better performing sectors (e.g., finance and technology)

2) Our favorites are just taking a pause for a new catalyst, a new reason to bounce higher and catch up with the herd. Some good news about China's growth or better news about the European sovereign debt issues might do the trick.

3) The steel-makers, metals & miners are warning us about something up ahead. Have the broader markets gone too far? Is there an overdue correction ahead?

What does the Colonel think? I'll take #1 or #2 over #3 any day, buckaroos. The only scary thing is #3 may be the correct answer. Dennis Gartman, the Commodity King, said on CNBC Business News yesterday that he believed the Greece debt situation was much more serious than most folks are treating it. Gartman has also said in the past that base metals (taken collectively) have a PhD in economics. Is their recent lackluster March performance together with the miners and steel-maker's stumble sounding an alarm? Stay tuned. Fortunately, the Eureka Miner's Grubstake is beating the S&P this morning.

Enough "what-if" 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 are on a smoother road (for now) with FCX above $74 (what is this?)

The YELLOW light is switched back on our fuel gauge with oil above $80

An ORANGE light is ON for possible adverse regulation/legislation: Miner's claim fee, 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 $0.25 in early trading to $81.03 (April contract, most active); Gold is down $1.9 to $1097.6 (April contract, most active); Silver is down $0.095 to $16.840 (May contract); Copper is up $0.0015 to $3.3820 (May contract); Western Molybdenum Oxide sits at $16.25, LME 3-month & 15-month seller's contracts are up at $17.69

The DOW is up 21.92 points to 10807.81; the S&P 500 is down 0.20 to 1165.61. The miners are mixed today:

Barrick (ABX) $39.13 down 0.71%
Newmont (NEM) $51.3 down 0.07%
US Gold UXG) $2.75 down 1.08%
General Moly (Eureka Moly, LLC) (GMO) $3.42 up 2.09%
Thompson Creek (TC) $13.56 down 1.35%
Freeport-McMoRan (FCX) $79.71 down 0.11% (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $42.48 down 0.59% - global steel producer
POSCO (PKX) $116.39 down 0.94% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.59% to $1,342,145.04(what's this?).

Cheers,

Colonel Possum

Headline photograph by Mariana Titus

Monday, March 22, 2010

A Third Tank On Our Hill? Lithium & Vanadium Update


Morning Miners!

It is 5:21 AM. Why is the Colonel up a little earlier than usual? I get excited anytime I read something new on the strategic metals that could have a major impact on the future prosperity of Northern Nevada and Eureka County. The truth is I can't wait to pass this news along to you. Grab a cup and let's get to work.

Suppose I were to tell you that someday there may be a new tank by our water tanks on the hill; that this tank stores not water but electricity for our town. My story goes on to tell about similar tanks near wind and solar farms throughout the Western states supplementing more conventional sources of energy derived from clean coal, natural gas and nuclear power stations. Our tank is a power leveling substation in this vast grid and also serves as a reliable source of emergency power if outages occur.

You might reasonably ask, "How can you store electricity like water, Colonel?" and I would reply, "Vanadium redox batteries, pardner! 'VRB' for short." I'd also remind you that we have a pretty healthy supply of vanadium (V) right here in the southeast corner of Eureka County. Vanadium is key to making the redox battery technology work and some day the world will need a lot more of it.


Presently vanadium is used as a steel alloying agent like molybdenum for strengthening steel. It is also being seriously considered as a safe alternative to cobalt in the chemistries for lithium ion batteries. The demand for such batteries will grow from laptop and cellphone applications to use in electric and electric hybrid cars of the future.

As we have reported before, a low cost source of lithium is available in Kings Valley of nearby Humboldt County. Western Lithium (TSX-V:WLC) is currently developing that site for open pit mining of lithium carbonate. This "clay" extraction approach should offer a real cost advantage to the more common "brine" technique where lithium is produced by pumping salty water out of dry salt lakes in South America (The Foote Mineral deposits, currently operated by Chemetall in the Clayton Valley just west of Goldfield, are another example of brine extraction).

Mineweb carried a terrific Gold Report interview with Jon Hykawy, lithium analyst for Byron Capital Markets, on this subject Saturday:

The future's hot for lithium - and getting hotter (Mineweb posted 3/20/2010, interview by the Gold Report)

This article covers both the future of lithium and vandium together with explanations of automotive applications and VRBs. Expert Jon Hykawy also did an excellent industry report which is posted on the Rocky Mountain Resources (TSX-V:RKY) website. Rocky Mountain owns the Gibellini vanadium deposits in Eureka County. Here is the link to the Hykawy report:

Vanadium: the Supercharger (Byron Capital Markets)

These two are great reading and will bring you up to speed on the latest developments. Below are some additional articles by this Report on how emerging battery technologies may become very important to our State and County through the mining of lithium, vanadium and silver:

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)

More News on US Gold & Western Lithium (The Eureka Miner's Market Report, 01/12/2010)

What's up with molybdenum, the other important strategic metal in our county? Here's a wrap up of last week's price action at the close, Friday (3/19/2010):

Western Moly Oxide (FeMo65) $16.25/lb (the price reported by Infomine and tracked by Base Metals on the General Moly Website)

This is just below the Report's "magic number" for moly of $16.50/lb (Molybdenum Bounces Back to Magic Number). Here's a 1-month chart of Miss Moly and Uncle Nickel:



London Metal Exchange (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) $37,000/metric ton $16.78/lb
15-Month (Seller)$38,000/metric ton $17.24/lb

The LME 3-month contract (seller) is slightly below the the 2/22 launch price, here's a chart from then to Friday's close:



I'd say for a very new market, molybdenum futures are showing a lot of stability with only a $1 difference between the spot price for Western moly oxide and the 3-month seller contract.

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 above $74 (what is this?)

The GREEN light is switched back on our fuel gauge with oil below $80

An ORANGE light is ON for possible adverse regulation/legislation: Miner's claim fee, 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 $1.94 in early trading to $79.03 (April contract, most active); Gold is down $12.4 to $1095.2 (April contract, most active); Silver is down $0.377 to $16.655 (May contract); Copper is down $0.0605 to $3.3120 (May contract); Western Molybdenum Oxide sits at $16.25

The DOW is down 44.89 points to 10697.09; the S&P 500 is down 6.80 to 1153.10. The miners are down today:

Barrick (ABX) $38.52 down 2.28%
Newmont (NEM) $50.08 down 1.34%
US Gold UXG) $2.65 down 2.93%
General Moly (Eureka Moly, LLC) (GMO) $3.16 down 2.77%
Thompson Creek (TC) $12.82 down 2.14%
Freeport-McMoRan (FCX) $77.465 down 1.33% (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $41.07 down 2.72% - global steel producer
POSCO (PKX) $115.93 down 2.16% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.79% to $1,350,174.51 (what is this?).

Cheers,

Colonel Possum

Headline photograph by Mariana Titus

Photograph of Gibellini vanadium oxide samples, Rocky Mountain Resources

Friday, March 19, 2010

Still Fearless in 2010? The Colonel's Market Prediction


Morning Miners!

It is 6:05 AM. Have a cup of that delicious Raine's Red Label TGIF and let's return to a puzzle we started at the end of last year. On 12/29/09 I stated, "Like Alice in Wonderland, the ole Colonel is becoming 'curiouser and curiouser' about the markets lately (Fearless in 2010?). We had a terrorist attack on an airline recently that now appears tied to Al Qaeda and the markets hardly took notice."

Pardner, we're facing the backdoor of March and I'm not any less "curiouser." We've had some ups and downs with sovereign debt issues and China worries but all in all the broader markets have pushed ever higher. Some experts have recently called the market's rally a "melt-up"; others observe it has nothing to do with "fundamentals" or a company's "value." It seems like for many the only fear in the marketplace is a concern that they may miss the rally. Maybe that should be scary.

This Report uses the S&P 500 Volatility Index or "VIX" to gauge fear and we've talked about it quite a bit since last Fall. Here's a link to the original article if you need to brush up on the so-called "fear index":

Viva Las VIXas! Don't Worry Be Happy (The Eureka Miner's Market Report, 9/11/2009)

Simply stated, the VIX above a level of 25 can be a pretty scary place, lately we've been in the sixteens. In fact, yesterday we were at levels close to the market peak just before the now familiar "Great Recession". Look at these numbers:

10/9/2007
S&P closing high 1565.15
VIX close 16.12

3/18/2010
S&P closing high 1165.83
VIX close 16.62

The markets just opened up and the VIX is starting out of the gates at 16.24. This is the Friday before a possible weekend vote on the highly controversial Health Care Bill and renewed confusion about the Greek bailout plan. Fearless on Friday is pretty "curiouser" for my way of thinking. Now, there will probably be a sell-off later today and Monday could be a bad one but I'm willing to bet that there is more room to run in this goofy "melt-up". How about a Colonel prediction? I'd day an S&P 1193 is a reasonable near term top and better-than S&P 1251 is in the cards for 2010. Let's throw some dates on these - two new bets for the Colonel's Beer Derby (lower right column of this blog):

The S&P will break 1193 before Memorial Day 2010
The S&P will break 1251 before Christmas 2010


How low can we go? Now that's a real scary thought buckaroos...stay tuned!


Enough prognostication, let's walk the walk:

4-WD is OFF - the VIX or "fear index" is below 25, an improving broader market trend is expected to continue; metals & miners have a smoother road too with FCX comfortably above $74 (what is this?)

The YELLOW light is switched on our fuel gauge with oil above $80

An ORANGE light is ON for possible adverse regulation/legislation: Miner's claim fee, 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 $0.32 in early trading to $82.22 (May contract, most active); Gold is down $3.0 to $1124.5 (April contract, most active); Silver is down $0.097 to $17.325 (May contract); Copper is up $$0.0010 to $3.4055 (May contract); Western Molybdenum Oxide sits at $16.25, the LME 3-month and 15-month contracts (seller) both rest at $17.24

The DOW is down 40.59 points to 10738.58; the S&P 500 is down 5.55 to 1160.28. The miners are down:

Barrick (ABX) $39.16 down 1.56%
Newmont (NEM) $50.80 down 0.92%
US Gold UXG) $2.77 down 2.12%
General Moly (Eureka Moly, LLC) (GMO) $3.19 down 2.45%
Thompson Creek (TC) $13.29 down 2.92%
Freeport-McMoRan (FCX) $79.19 down 1.35% (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $42.39 down 2.21% - global steel producer
POSCO (PKX) $120.32 down 0.75% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 1.68% to $1,328,669.12 (what is this?).

Cheers,

Colonel Possum

Headline photograph by Mariana Titus

Wednesday, March 17, 2010

Commodities Wear The Green for Saint Patrick's Day



Morning Miners!

It is 6:02 AM, grab a green mug and let's toast the Irish! It looks like even commodities are wearing the green for Saint Patrick's Day. The Report will take the morning off tomorrow and be back online Friday.

I don't know if Ben Bernanke has any Irish in him but his comments yesterday sparked a rally in commodities and put a bit of clover on the metals & miners. The U.S. Federal Reserve will continue to hold benchmark rates near zero and renewed a promise to keep them exceptionally low for an "extended period." This report's theme for 2010 is that money will flow to commodities as long as interest rates and the "fear index" (as measured by the .VIX, what's this?) are low. We may be bumped around by sovereign debt issues and China worries but the commodity uptrend should remain intact lacking any major negative developments for either (or some new global bugaboo).

The broader markets just opened on the upside with the .VIX in the sixteens, far below our trip level for concern of 25. To put this in perspective, exactly two years ago Bear Sterns collapsed causing the .VIX to break 35. This set off a financial crisis that peaked with fears of a run on the banks that October and a .VIX nearly hitting 100. Today's "fear levels" are indeed modest by comparison.

Copper, our faithful canary in the global recovery mineshaft, should remain a good test for the low interest rate/fear hypothesis. This morning COMEX copper is near the $3.40/lb level recovering almost all of its losses for March. Mineweb carries a good article on the connection between copper and the Fed's statement this morning:

US Fed statement boosts copper prices (Mineweb, 3/17/2010)

So don't worry, be happy and let's share a pint of Guinness on Lá Fhéile Pádraig!

Enough rolling in the clover, it's time to 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 comfortably above $74 (what is this?)

The YELLOW light is switched on our fuel gauge with oil above $80

An ORANGE light is ON for possible adverse regulation/legislation: Miner's claim fee, 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 $$0.77 in early trading to $82.47 (April contract, most active); Gold is up $1.7 to $1124.2 (April contract, most active); Silver is up $0.036 to $17.390 (May contract); Copper is up $$0.0343 to $3.3995 (May contract); Western Molybdenum Oxide sits at $16.25, the LME 3-month and 15-month contracts (seller) remain at $18.14

The DOW is down 29.02 points to 10715.00; the S&P 500 is up 4.58 to 1164.04. The miners are heading to the pub:

Barrick (ABX) $40.26 up 0.42%
Newmont (NEM) $51.34 unchanged
US Gold UXG) $2.89 unchanged
General Moly (Eureka Moly, LLC) (GMO) $3.39 down 0.59%
Thompson Creek (TC) $13.61 unchanged
Freeport-McMoRan (FCX) $82.48 up 0.35% (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $43.84 up 0.57% - global steel producer
POSCO (PKX) $123.25 up 1.49% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.20% to $1,369,545.77 (what is this?).

Cheers,

Colonel Possum

Headline photograph by Mariana Titus

Tuesday, March 16, 2010

Miss Moly & Gold Pass the Test


Morning Miners!

It is 5:57 AM. Grab a cup of mid-March coffee and let's check on Miss Moly and her metallic compadres. You'll remember yesterday we saw the metals get pounded starting with Friday's sharp decline in Western moly oxide price and a pullback in the base metals (Hang On, Another Pothole - Moly, Copper Dings). COMEX copper closed the session losing all its gains for March. The culprit? Good ole sovereign debt and China jitters; typical headline-driven volatility for so called "risky assets."

There were at least two new and positive things to note. For molybdenum, the 15% decline in spot price did not crater the London Metal Exchange (LME) futures on Monday. Secondly, gold and silver showed some new found resilience breaking their lock-step march with the base metals.

For moly, the 3-month and 15-month contracts both moved up to $18.14/lb and the Western moly oxide price recovered from its $15.50/lb low to close at $16.25/lb. The ole Colonel believes this is an important test of a very young financial market for molybdenum. I read this latest price action as investor confidence in future moly prices, unshaken by a scary wobble in the spot market. That gets a Colonel Yee-ha!

Yesterday, the Report stated:

"In the recent past, precious metals have jumped down the mineshaft with base metals on any murmur of bad news coming from the global front. Gold returning to 'safe haven' status is somewhat encouraging as we hit another pothole." (The Eureka Miner's Market Report, 3/15/2010)

I got some backup this morning from Jim Wyckoff of Kitco Metals who made a similar observation about Monday's gold price and the follow through today:

"Spot gold in Europe was also higher Tuesday. London traders were impressed with gold's ability to post gains Monday despite a weaker Euro currency and stronger U.S. dollar." (Kitco Metals, 3/16/2010)

By the by, Jim writes a terrific daily roundup especially on the precious metals. You can read his full piece with this link:

A.M. Kitco Metals Roundup: Gold Higher as U.S. Dollar Weakens (Kitco Metals, 3/16/2010)

Here's London spot gold today:


Not a bad bounce and the S&P 500 has just posted a new intraday high of 1153.85 (7:33 AM PDT). The Federal Reserve's statement this afternoon after their Federal Open Market Committee meeting is not expected to upset the ore cart, we'll see. Stay tuned buckaroos!

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 comfortably above $74 (what is this?)

The YELLOW light is switched on our fuel gauge with oil above $80

An ORANGE light is ON for possible adverse regulation/legislation: Miner's claim fee, 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 $$0.95 in early trading to $80.75 (April contract, most active); Gold is up $17.8 to $1123.1 (April contract, most active); Silver is up $0.332 to $17.440 (May contract); Copper is up $$0.0490 to $3.3640 (May contract); Western Molybdenum Oxide sits at $16.25

The DOW is down 3.78 points to 10620.91; the S&P 500 is down 2.21 1147.78. The miners are mostly up today:

Barrick (ABX) $40.12 up 2.85%
Newmont (NEM) $51.17 up 2.90%%
US Gold UXG) $2.92 up 2.10%
General Moly (Eureka Moly, LLC) (GMO) $3.41 down 1.45%
Thompson Creek (TC) $13.77 up 1.17%
Freeport-McMoRan (FCX) $81.87 up 1.5% (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $42.59 up 1.19% - global steel producer
POSCO (PKX) $120.26 down 1.02% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.85% to $1,363,759.71 (what is this?).

Cheers,

Colonel Possum

Headline photograph by Mariana Titus

Monday, March 15, 2010

Hang On, Another Pothole - Moly, Copper Dings


Morning Miners!

It is 5:53 AM. Have a cup of my "leap-ahead" coffee and see if we can catch up with the time change. Looks like we've hit another pothole on the global recovery trail putting a 15% dent in molybdenum Friday and a sage scratch on copper and other base metals this morning. You guessed it, more hand wringing on sovereign debt issues and China. The Wall Street Journal reports this morning:

"LONDON - A warning by Moody's of the risk to the top credit ratings of the U.S., U.K., France and Germany depressed market sentiment Monday, boosting the dollar and yen as investors turned to safe havens." (WSJ, 3/15/2010)

And,

"China also contributed to the negative mood in financial markets, with Chinese Premier Wen Jiabao indicating that he has little intention of changing China's foreign exchange policy of keeping the yuan pegged to the dollar. He noted that international pressure on China to let the yuan appreciate is counterproductive." (WSJ, 3/15/2010)

Also Base Metals reports:

"Base metals were sullied by rising risk aversion on Monday on the LME, as investor caution grew over China's monetary tightening timetable, while markets ignored falling inventories across most major contracts." (Base Metals, 3/15/2010)

Investors are running (again) from the so-called "risk trade" (metals & miners in our case) to safer investments. Interestingly, gold and silver are showing some resilience trading slightly above Friday's close on the COMEX. In the recent past, precious metals have jumped down the mineshaft with base metals on any murmur of bad news coming from the global front. Gold returning to "safe haven" status is somewhat encouraging as we hit another pothole. As a consequence it looks like our favorite gold miners (ABX, NEM, UXG) are faring better than the other guys with hard hats (FCX, GMO, TC).

What's up with molybdenum? Here's a wrap up of last week's price action at the close, Friday (3/05/2010):

Western Moly Oxide (FeMo65) $15.00/lb (the price reported by Infomine and tracked by Base Metals on the General Moly Website)

This takes us below the Report's "magic number" for moly of $16.50/lb (Molybdenum Bounces Back to Magic Number). Here's a 1-month chart of Miss Moly and Uncle Nickel:


Moly Oxide, Europe (Mo Drummed Molydbic Oxide EU) $17.00/lb (the price reported in the Metals Bulletin)

London Metal Exchange (LME) Futures Contracts

3-Month (Buyer) $37,000/metric ton $16.78/lb
3-Month (Seller)$38,000/metric ton $17.23/lb

15-Month (Buyer) $36,750/metric ton $16.67/lb
15-Month (Seller)$37,750/metric ton $17.12/lb

The LME 3-month contract (seller) is down from the 2/22 launch price, here's a chart from then to Friday's close:



It will be interesting to see how a sudden drop in Western moly oxide will ripple through the LME futures market. This is the first time there has been a greater-than $1.50 difference between the two. On the brighter side Steel Business Briefing reports today that "LME moly trading is picking up" and "moly growth is seen accelerating in 2010."

Enough global hand wringing, 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 above $74 (what is this?)

The YELLOW light is switched on our fuel gauge with oil above $80

An ORANGE light is ON for possible adverse regulation/legislation: Miner's claim fee, 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 $0.86 in early trading to $80.38 (April contract, most active); Gold is up $2.4 to $1104.1 (April contract, most active); Silver is up $0.002 to $17.050 (May contract); Copper is down $$0.0540 to $3.33260 (May contract); Western Molybdenum Oxide drops to $15.00

The DOW is down 3.78 points to 10620.91; the S&P 500 is down 2.21 1147.78. The miners are mixed today:

Barrick (ABX) $39.02 down 0.10%
Newmont (NEM) $49.82 down 0.44%
US Gold UXG) $2.93 up 1.73%
General Moly (Eureka Moly, LLC) (GMO) $3.42 down 2.28%
Thompson Creek (TC) $13.54 down 1.02%
Freeport-McMoRan (FCX) $80.07 down 0.58% (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $42.06 down 0.99% - global steel producer
POSCO (PKX) $120.71 down 2.04% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.79% to $1,350,174.51 (what is this?).

Cheers,

Colonel Possum

Headline photograph by Mariana Titus