"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.

Wednesday, March 10, 2010

Moly Miners Lead the Pack

Morning Miners!

It is 5:57 AM. Let's look back a year at our favorite miners while we share a Wednesday cup of coffee. As the Report mentioned yesterday, March 9th of 2009 marked the very bottom of the mineshaft for the S&P 500; it fell during that day to a dismal 666.79 before clawing its way back to close at 676.53. Yesterday the S&P 500 closed at 1140.45, an amazing 68.6% rebound in one year. The ole Colonel thought it would be fun to see how our favorite miners did over that same period. First let's look at gold, copper and molybdenum:

Gold (ETF GLD) $90.57 (3/9/09) to $109.72 (3/9/10) up 21.1%
Copper $1.60/lb (3/9/09) to $3.40/lb (3/9/10) up 112.5%
Molybdenum $9.00/lb (3/9/09) to $18.25/lb (3/9/10) up 102.8%

Freeport McMoRan (FCX) is often regarded as a bellwether miner producing mostly copper but also gold and moly. Here's how FCX fared:

FCX $32.32 (3/9/09) to $79.76 (3/9/10) up 146.8%

Not too bad, pardner. Freeport bounced better than the broader markets and its primary metal (copper) product. The "lever arm" between the mining stock share price and its metal price change is calculated as the following ratio.

FCX/Copper = 146.8%/112.5% = 1.31

Anything greater than 1.00 is "good" - the miner has leverage over its product.

Here's how the gold miners did:

Barrick (ABX) $27.96 (3/9/09) to $39.54 (3/9/10) up 41.4%
Newmont (NEM) $37.79 (3/9/09) to $51.17 (3/9/10) up 35.4%
US Gold (UXG) $1.91 (3/9/09) to $2.94 (3/9/10) up 53.9%

Hmm...all the gold miners lagged the S&P in performance from the bottom. In fairness, some may see this as a strength; gold prices (unlike copper and moly) held up during the bad times keeping the gold miners from plunging to the depths. Using Barrick as the benchmark gold stock let's calculate its lever arm:

ABX/Gold = 41.4%/21.1% = 1.96

Hey that's pretty good compared to copper. Now for the leaders of the pack, moly miners:

Thompson Creek (TC) $2.84 (3/9/09) to $13.87 (3/9/10) up 388.3%
General Moly $0.71 (3/9/09) to $3.37 (3/9/10) up 374.6%

Taking Thompson Creek as the benchmark moly miner, the lever arm is nearly four-to-one:

TC/Moly = 388.3%/102.8% = 3.78

That's pretty awesome buckaroos. Don't you wish you'd tucked a little of that 71-cent General Moly stock under your mattress last March? Shucks, maybe you did!

I got a postcard from Miss Moly yesterday. She said her feet were tired from all that dancing and carousing in London town. The 3-month seller contracts have fallen back to where they started at the molybdenum launch on the London Metal Exchange (LME) - $38,550/metric ton or $17.46/lb. Is the Colonel discouraged? Naw, she'll be back on the floor cutting the rug after at little well deserved rest.

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 are headed for smoother roads 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 $0.17 in early trading to $81.69 (April contract, most active); Gold is up $0.2 to $1122.5 (April contract, most active); Silver is up $0.047 to $17.385 (May contract); Copper is down $0.0095 to $3.4020 (May contract); Western Molybdenum Oxide is steady at $18.25

The DOW is up 30.16 points to 10594.54; the S&P 500 is up 6.52 to 1146.97. The miners are mixed today:

Barrick (ABX) $39.36 down 0.46%
Newmont (NEM) $51.06 down 0.02%
US Gold UXG) $2.94 unchanged
General Moly (Eureka Moly, LLC) (GMO) $3.51 up 4.21%
Thompson Creek (TC) $13.85 down 0.14%
Freeport-McMoRan (FCX) $80.62 up 1.08% (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $42.72 up 1.21% - global steel producer
POSCO (PKX) $124.44 up 0.35% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.81% to $1,372,063.75 (what is this?).


Colonel Possum

Headline photograph by Mariana Titus

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