"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 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)


"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?).


Colonel Possum

Headline photograph by Mariana Titus

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