"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 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?).


Colonel Possum

Headline photograph by Mariana Titus

Photograph of Gibellini vanadium oxide samples, Rocky Mountain Resources

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