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


The author/editor of the Eureka Miner owns common shares of local mining stocks, General Moly (GMO) and Newmont Mining (NEM); together with benchmark miner Freeport-McMoRan (FCX). Please do your own research, markets can turn on you faster than a feral cat.

Monday, March 8, 2010

A Game Changer for General Moly & Eureka County

Morning Miners!

It is 6:03 AM, grab a cup and let's get to work. Starting this week knowing that our Mt. Hope project is now anticipated to be fully funded is certainly a game changer. Molybdenum production in Eureka County may very well influence our future for the next forty years. It will bring jobs and revenue to the county and state through sales and use tax, property taxes and Nevada Net Proceeds. If you missed General Moly's announcement, we covered the bases Friday in the Report:

General Moly Announces Significant Investment from Hanlong, Stock Surges
(Eureka Miner's Market Report, 3/05/10)

Since the press release, the Report received additional detail on the transaction from General Moly. Key to the deal is a $665 million bank loan from a prime Chinese bank sourced and guaranteed by Hanlong Group for the life of the loan. Hanlong is General Moly's new major investor and partner, a private group with both Chinese and international mining interests. General Moly made this important clarification to the Report:

"GMI will continue to operate with its current management team and its largely independent Board of Directors. Our shareholders (post transaction) will be 65% public and based in the USA."

Furthermore it was encouraging to learn that South Korean steelmaker POSCO will retain their 20% Mt. Hope equity interest and was "extremely supportive to General Moly through process." The Report reminds the reader that billionaire investor Warren Buffet, is an enthusiastic shareholder of POSCO and seeks to increase his holdings in the firm. By my calculation, Buffet owns at least 1% of Mt. Hope via his interest in POSCO. If it is good for the "Sage of Omaha", it should be good for Eureka! (Buffet Wants More POSCO, Both Want Lithium, The Eureka Miner's Market Report, 1/19/2010 )

The ole Colonel will continue to keep you updated as this important story develops. What's up with molybdenum?

Latest Molybdenum News

General Moly provided the Report with their most recent view on moly and new partner's unique position in the marketplace,

"...at the end of the day, with half of global steel production currently coming from China, they need natural resources. They are already the largest buyers of Iron Ore and Coal (the two main steel ingredients) and Hanlong sees the Chinese becoming dependent on moly imports to the country."

Last year the Chinese imported roughly 55 metric tons of molybdenum compared to exporting 25 tons in 2008. General Moly explains the change as a "...massive flip that we saw from China being a net exporter of moly to a net importer of moly in 2009. Their steel industry vastly surpassed their moly production capacity. Hanlong has taken note and wants to be a major steel supplier into China."

Another important factor is the percentage "...of steel that China currently alloys; it’s only about 20% [of crude steel production] and will grow as they develop more sophisticated steel mills." Growing alloy and stainless steel production means less alloy containing scrap which in turn equals more primary moly consumption. Things are looking good for Miss Moly, pardner.

As we have seen lately, molybdenum prices are on the rise in both the physical and futures markets. Here is an interesting article on European moly:

EU molybdenum prices likely to increase further

Below is a wrap up of molybdenum prices at the close Friday (3/05):

Western Moly Oxide (FeMo65) $18.25/lb (the price reported by Infomine and tracked by Base Metals on the General Moly Website)

Moly Oxide, Europe (Mo Drummed Molydbic Oxide EU) $18.25/lb (the price reported in the Metals Bulletin)

London Metal Exchange (LME) Futures Contracts

3-Month (Buyer) $39,000/metric ton $17.69/lb
3-Month (Seller)$41,000/metric ton $18.60/lb

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

Here is the price action of the LME 3-month contract (seller) from their 2/22 launch to the present:

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 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 $0.60 in early trading to $82.10 (April contract, most active); Gold is down $1.2 to $1134.0 (April contract, most active); Silver is up $0.103 to $17.485 (May contract); Copper is up $$0.0385 to $3.4560 (May contract); Western Molybdenum Oxide is steady at $18.25

The DOW is up 3.25 points to 10569.45; the S&P 500 is up 1.09 1139.79. The miners are mixed today:

Barrick (ABX) $39.84 down 1.04%
Newmont (NEM) $51.17 down 0.74%
US Gold UXG) $2.73 down 1.09%
General Moly (Eureka Moly, LLC) (GMO) $3.91 down 1.95%
Thompson Creek (TC) $14.48 up 0.49%
Freeport-McMoRan (FCX) $80.94 up 0.29% (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $42,52 up 0.50% - global steel producer
POSCO (PKX) $123.70 up 1.95% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down0.30% to $1,383,901.67 (what is this?).


Colonel Possum

Headline photograph by Mariana Titus

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