"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.

Friday, April 30, 2010

General Moly, Hanlong & US Gold On the Move


Morning Miners!

It is 5:59 AM. Have a cup of well-deserved Raine's TGIF coffee. What a month it has been; if the early morning action is any indication, it should end well. Gold and silver took a nice bounce on the London spot exchange coming within a whisper of $1180/oz and $18.75/oz respectively. Yesterday was the best day yet for General Moly (GMO) since their Hanlong announcement in early March (A Game Changer for General Moly & Eureka County). GMO stock rocketed 10.1% to close at $3.93 on the highest daily up-volume (1,824,201 shares) since the Hanlong deal (see note 1).


In the wee hours this morning, DOW Jones Newswires reported that Hanlong is on the move declaring their intention to invest $5 billion in Australian miners. This Report has been following their investment in Moly Mines Ltd. (Hanlong Invests in Another Moly Miner). It seems their sights have expanded to include iron ore assets as well as molybdenum down under:

SYDNEY (Dow Jones)--Hanlong Mining said Friday it expects to invest $5 billion in Australian miners as part of its plans to become a "fourth force" in the country's iron ore sector to rival BHP Billiton Ltd. (BHP) , Rio Tinto Ltd. (RTNTF) ( RIO.AU), and Fortescue Metals Group Ltd. (FSUMF)...

Last week, the company completed the acquisition of a 57% stake in Moly Mines Ltd. (MYMNF), a molybdenum miner in Western Australia's Pilbara region. Sichuan Hanlong has also acquired a controlling interest in General Moly Inc. (GMO), a U.S. molybdenum miner. Taken together, the interests in both miners are likely to make Sichuan Hanlong a major player in the global market for molybdenum, which is commonly used in steel alloys and to remove sulfur impurities from petroleum products. (DOW Jones Newswires, 5:36 AM, 4/30/2010)

It is important to clarify "controlling interest in General Moly Inc." in the above news-wire with a General Moly statement provided to this Report shortly after the Hanlong announcement:

"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."

The markets are now open and there is a surprise for the other junior miner in the Eureka Miner's Grubstake Portfolio (what's this?). US Gold (UXG), owner of the old Atlas Gold Bar Mine property (Eureka God News: US Gold, General Moly & POSCO), has just hit a 5-month high of $3.48 (9:42 AM EDT). GMO has pulled back a bit from yesterday's high but I think we're going to close with a decent Friday. The ole Colonel is taking the day off before something goes bad!

One note of caution before I leave, the COMEX October contract for oil just broke $90. We haven't heard the last of the tragic oil spill in the Gulf. Stay tuned.

Enough talk, let's walk the walk:

4-WD is ON - rough roads in the marketplace; the VIX or "fear index" remains in the 18-20s still too close to 25 for my comfort; metals & miners are OK but benchmark FCX is only 1-buck and change above $75 (our new warning level), 10-year Treasurys are safely below 4% preserving a low-interest rate environment (what's this?)

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

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions &
General Moly Mt. Hope Water Rights


Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)

NYMEX/COMEX: Oil is up $0.83 in early trading to $86.00 (June contract, most active); Gold is up $10.1 to $1178.9 (June contract, most active); Silver is up $0.176 to $18.755 (July contract); Copper is up $0.0170 to $3.3675 (July contract); Western Molybdenum Oxide sits at $17.75, LME moly 3-month seller's contract remains at $18.14

The DOW is down 13.68 points to 11153.64; the S&P 500 is down 4.13 to 1202.65. The miners are mixed:

Barrick (ABX) $43.84 up 2.26%
Newmont (NEM) $56.49 up 1.24%
US Gold (UXG) $3.47 up 2.97%
General Moly (Eureka Moly, LLC) (GMO) $3.87 down 1.53%
Thompson Creek (TC) $12.88 down 1.53%
Freeport-McMoRan (FCX) $76.23 down 1.92% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $39.26 down 2.19% - global steel producer
POSCO (PKX) $113.15 down 2.35% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.24% to $1,443,084.85 (what's this?).

Cheers,

Colonel Possum

Note 1: GMO traded an amazing 12,227,850 shares on the day of the announcement. Their present 10-day average volume is 1,011,735 shares.

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Headline photograph by Mariana Titus

Thursday, April 29, 2010

Rhenium - Will the Sun Shine on One of Earth's Rarest Elements?



Morning Miners!

It is 6:16 AM. Grab a cup of Thor's java - I vote we take a break from the woes of Greece and Goldman Sachs; let's look down the road and see what may be shinning in our future instead. Yesterday a reader of the Report urged us look at what's happening with moly in Utah. Rio Tinto's Kennecott Utah Copper Corp plans to invest $340 million to build a molybdenum autoclave process (MAP) facility near their open pit Bingham Canyon mine southwest of Salt Lake City:

Kennecott to boost moly output with $340m autoclave facility (AMM, Tom Jennemann, 4/15/2010)

The Report carried an article on the molybdenum potential of this mine last September (Massive Moly Deposit Found in Utah, 9/30/2010). Molybdenum is a typical byproduct in the refining process of porphyry copper deposits such as Bingham. According to this article, Kennecott expects to produce moly at a rate of 60 million lbs a year by 2015. The MAP facility will process lower-grade molybdenum concentrate more efficiently than through a conventional roaster, leading to improved recovery rates. Kennecott project manager Doug Stauffer explains the process to AMM and Kelly Sanders, Kennecott president and chief executive officer, provided his view on the future of moly, "The outlook for molybdenum demand is very strong, driven by the rapid urbanization and industrialization of China and India. The production of molybdenum and gold make Kennecott one of the world's lowest cost producers of copper."

What caught the Colonel's eye was the expected recovery of rhenium - one of the rarest elements on earth. Rhenium is typically an ingredient in nickel-based superalloys used in the components for jet engines. By the 2015 time frame, Kennecott predicts a 9,000 lb annual production. Stauffer explains, "The rhenium market is a growing high-margin market and we're looking to become a stable and secure producer of that material."


A consistent theme of this Report is the importance of strategic metals to the future of Northern Nevada and more generally, as demonstrated by this case, the Great Basin. I don't yet know the rhenium potential in our county or state but I plan to do a little digging. Why? There may be another use for this important transition metal on the horizon, pardner.

A second theme of this Report is how electrified transportation and the emerging alternative energy industry may dramatically increase demand for certain metals like lithium, vanadium and silver (we'll close with a complete list of Eureka Miner articles on this exciting topic). Is there a role for rhenium?

The expansion of solar and wind farms is part of our national strategy to reduce dependence on foreign oil and improve energy security. One challenge in developing giant solar panels are the materials used in the many photovoltaic cells used to convert solar energy to electricity. Conventional solar cells are based on silicon, an inorganic semiconductor. Silicon has, however, the drawback of high production and processing costs and in some applications, the rigidity of the cell construction. An organic photovoltaic cell (OPVC) that uses organic polymers for light absorption and charge transport offers the advantage of low production costs in high volumes and increased structural flexibility. The main disadvantages of OPVCs are low efficiency, low stability and low strength compared to their inorganic cousins.


All this needs to be sorted out for large-scale solar applications, but rhenium may provide a way to improve the efficiency of the organic solar cell - a promising transition metal for improving optical absorption. The Chinese are working on such an approach:

Transition-metal complexes photosensitize organic solar cells (Wai Kin Chan, Department of Chemistry, The University of Hong Kong, 9/1/2009)

In fairness, this research is in the early stages and perhaps better approaches will be found with metals other than rhenium. The quantities of this rare element required for future solar cell production may also be small in comparison to the demand by jet engine manufacture. Today, I can't answer these questions but this Report is dedicated to running down any leads that may influence our mining future and prosperity in a positive way. Stay tuned buckaroos.

Below is a complete list of articles by the Eureka Miner's Market Report on emerging energy technologies technologies and the related mining important to our state and county:

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)

Buffet Wants More POSCO, Both Want Lithium (The Eureka Miner's Market Report, 03/19/2010)

Western Lithium, Gold, Silver, Copper & Oil (The Eureka Miner's Market Report, 03/12/2010)

A Third Tank on Our Hill? Lithium & Vanadium Update (The Eureka Miner's Market Report, 03/22/2010)

The Future Comes to Big Smoky - More Lithium in Northern Nevada (The Eureka Miner's Market Report, 04/14/2010)

Enough techno-talk, let's walk the walk:

4-WD is ON - rough roads in the marketplace; the VIX or "fear index" is in the 18-20s still too close to 25 for my comfort; metals & miners are better with benchmark FCX two-bucks and change above $75 (our new warning level), 10-year Treasurys are safely below 4% preserving a low-interest rate environment (what's this?)

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

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions &
General Moly Mt. Hope Water Rights


Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)

NYMEX/COMEX: Oil is up $1.47 in early trading to $84.69 (June contract, most active); Gold is down $7.2 to $1164.2 (June contract, most active); Silver is up $0.015 to $18.150 (July contract); Copper is down $0.0320 to $3.3345 (July contract); Western Molybdenum Oxide sits at $17.75, LME moly 3-month seller's contract remains at $18.14

The DOW is up 134.60 points to 11179.87; the S&P 500 is up 16.08 to 1207.44. The miners are mixed:

Barrick (ABX) $43.05 up 2.09%
Newmont (NEM) $55.90 up 2.06%
US Gold (UXG) $3.32 up 1.22%
General Moly (Eureka Moly, LLC) (GMO) $3.50 down 1.96%
Thompson Creek (TC) $13.21 up 1.45%
Freeport-McMoRan (FCX) $77.35 up 1.12% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $40.51 down 1.07% - global steel producer
POSCO (PKX) $116.71 up 0.93% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.71% to $1,423,485.62 (what's this?).

Cheers,

Colonel Possum

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Headline photograph by Mariana Titus

Wednesday, April 28, 2010

Euro Gold Hits New High - The Good, The Bad & The Ugly



*** BREAKING NEWS **** Thanks to a faithful reader's timely input, here's what's cooking in Utah: (AMM) Kennecott to boost moly output with $340m autoclave facility


Morning Miners!

It is 6:06 AM. Pour yourself you a cup of joe and let's do a little post-game on yesterday - the Good, the Bad and the Ugly. We got disgusted with the markets early in the morning and things only got worse as the day rolled on (Stiff Britches Day for Metals & Miners). The Goldman kids were publicly spanked in Washington and the euro hit a 12-month low against our dollar as doubts about the Greece bailout intensified and some eyes fell on Portugal as the next in line for a trip to the sovereign-debt woodshed. The market "fear index" or VIX (what's this?) exploded to 23.14 at the close, up more than 30% from Monday. A VIX level above 25 and the Colonel heads for a cave south of town. Yikes.

Is the world really coming to an end (again)? Probably not, the London Metal Exchange opened with metals coming off yesterday's lows, most commodities are up and we'll see in a minute how the broader markets fare. Not everything went bad Tuesday and there are actually some encouraging signs in the wreckage.

The big winner was gold hitting a new high in euros. The Eureka Miner's Grubstake Portfolio (what's this?) dumped more than $43,000 in value but of the twelve companies that (directly or indirectly) affect Eureka, two registered gains - Barrick (ABX) and Newmont (NEM).

It is no mystery that gold is a safe haven for investors on scary market days but it hasn't played this role in some time. For most of the latter part of last year and this year, gold has been associated with the so-called "risk-trade". This includes commodities like copper and miners like Freeport McMoRan (FCX) that benefit form from easy money when the world looks rosy and become unloved orphans when things go bad.

Yesterday morning gold dropped with copper but then rallied as the fear index blew out. The big gold miners ran with their glitter out the escape hatch and FCX plunged to just a buck and change above our danger level of $75. As a bellwether mining stock, this Report regards this level as a harbinger for bad times in the mining sector. Here's a quick list of some yesterday's winners and losers:

THE GOOD

The U.S. dollar, "Dixie" (U.S. dollar index) 82.36 intraday high
Gold €890 a troy ounce, up from its old high of around €868 earlier in the week
COMEX Gold (June contract) $1173.4/oz intraday high
10-year U.S. Treasury, German Bund
Barrick (ABX) up 0.52%
Newmont (NEM) up 0.13%

THE BAD

The euro fell below the key $1.32 level, down more than 1.5% against the dollar and over 2.3% against the yen
The Canadian loonie lost nearly 1.5% against the dollar
The Australian aussie slipped more than 1.2%

S&P 500 1183.71 down 2.34%
DOW Jones (DJIA) 10991.99 down 1.90%

COMEX Oil (June contract) $81.79 intraday low
COMEX Copper (May contract) $3.3485/lb intraday low
COMEX Silver (May contract) $18.060/oz intraday low

Freeport-McMoran (FCX) down 5.29%
Thompson Creek (TC) down 5.07%
General Moly (GMO) down 6.63%
US Gold (UXG) down 0.31%

AcerlorMittal (MT) down 4.50%
POSCO (PKX) down 5.10%

Caterpillar (CAT) down 4.35%

OK Colonel, what's the takeaway? The loonie and aussie, closely tied to global growth, dropped sharply against our dollar. Just a few days the tables were turned as the loonie broke parity with the greenback. Gold re-emerged as a safe haven play together with U.S. Treasurys and the German Bund and our larger gold miners followed.

Just about everything else went down the mineshaft - the broader markets, commodities, metal miners, steel producers and industrial stocks with international exposure like Caterpillar. The Good? When times get tough, the U.S. remains the shelter for the world in currency and Treasurys and gold has not lost its luster. The Bad? Just about anything associated with the global growth story. The Ugly? It ain't over til' its over buckaroos. The sovereign debt story will be with us for a long, long time. Who wins in the end? I'm still an optimist; S&P 1252 here we come but it might be rough and tough as we trod back to the range gate of the bull pasture (S&P 1252 is 20% down from the October high of 2007, a level considered by some to be the beginning of the Great Recession Bear Market).

OK, the broader markets are open and all of our favorite miners are in the green. I guess global growth still has some legs, pardner.

Enough talk, let's walk the walk:

4-WD is ON - rough roads in the marketplace; the VIX or "fear index" is in 21 country too close to 25 for my comfort; metals & miners are feeling pressure with benchmark FCX still less than two-bucks above $75 (our new warning level), 10-year Treasurys are safely below 4% preserving a low-interest rate environment (what's this?)

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

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions &
General Moly Mt. Hope Water Rights


Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)

NYMEX/COMEX: Oil is up $0.35 in early trading to $82.79 (June contract, most active); Gold is up $2.2 to $1164.4 (June contract, most active); Silver is down $0.124 to $17.995 (May contract); Copper is down $0.0500 to $3.3630 (May contract); Western Molybdenum Oxide sits at $17.75, LME moly 3-month seller's contract remains at $18.14

The DOW is up 55.92 points to 11047.91; the S&P 500 is up 7.66 to 1191.37. The miners are up:

Barrick (ABX) $42.53 up 4.57%%
Newmont (NEM) $43.78 up 3.85%
US Gold (UXG) $3.18 unchanged
General Moly (Eureka Moly, LLC) (GMO) $3.45 up 2.07%
Thompson Creek (TC) $12.23 up 1.07%
Freeport-McMoRan (FCX) $76.98 up 1.08% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $41.02 up 0.10% - global steel producer
POSCO (PKX) $115.97 up 0.64% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 1.20% to $1,412,149.36 (what's this?).

Cheers,

Colonel Possum

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Headline photograph by Mariana Titus

Tuesday, April 27, 2010

Stiff Britches Day for Metals & Miners



Morning Miners!

It is 6:08 AM. Let's pour the coffee in the thermos, hop in the F-250 and go for a ride in God's country. No use hanging around the break room, it's a stiff britches day for the metals and miners. Life has got so simple in the markets lately, just checkout the spot price for gold and copper. Like your grandma's thermometer and barometer, they will tell you what's in the weather without looking for clouds in the sky. If gold is heading south from $1150/oz and copper from $3.50/lb, you can bet Greece or Goldman Sachs or both are back in the news. Today its a double-header with more jitters coming from Europe on the Greek debt problem and Goldman Sach's luminaries preparing for today's Senate hearing. At least the volcano is behaving and folks are flying airplanes again. (Gold, Goldman, Greece & Eyjafjallajökull) Who said commodities trade on fundamentals anymore?

Here goes the euro down the mineshaft:


Here follows gold and copper...



And here is your standard article on days like this:

METALS-Copper at 1-wk low as Greek debt issues weigh (Michael Taylor, REUTERS London, 4/27/2010)

If you still think fundamentals matter, you may take some comfort from this Steel Business Briefing morning report:

"Steel consumption in the European Union is recovering and should continue rising in 2011, according to the latest forecast from the steel producers’ group Eurofer. Output of steel-consuming industries fell 19% last year, but should rise by 1.1% in 2010 and by 4.1% in 2011..." (Steel Business Briefing, 4/26/2010)

Or you might point out that molybdenum, a key alloy in the manufacture of steel, has been rock-steady for weeks in a tight $17-18/lb range close to the London Metal Exchange (LME) 15-month contract of $18.14/lb.

Or you might remind me that Newmont (NEM) just reported a crackerjack first quarter:

Newmont Generates First Quarter 2010 Operating Cash Flow of $728 million; Adjusted Net Income(1) of $408 million, up 105% from First Quarter 2009 (Press Release, 4/27/2010)

Or you and I might just go over to Spring Valley and see if we can get this pickup high-centered. Digging out in God's country is no fun but sure beats watching these markets bucakroo!


Let's walk the walk before we head out. Don't forget to pack the Handyman:

4-WD is OFF - cautious markets; the VIX or "fear index" is back in the 18s but well below 25; metals & miners are down with benchmark FCX back in the high seventies but above $75 (our new warning level), 10-year Treasurys are safely below 4% preserving a low-interest rate environment (what's this?)

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

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions &
General Moly Mt. Hope Water Rights


Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)

NYMEX/COMEX: Oil is down $0.75 in early trading to $83.45 (June contract, most active); Gold is down $5.2 to $1148.8 (June contract, most active); Silver is down $0.167 to $18.700 (May contract); Copper is down $0.0645 to $3.4635 (May contract); Western Molybdenum Oxide sits at $17.75, LME moly 3-month seller's contract remains at $18.14

The DOW is up 7.26 points to 11212.29; the S&P 500 is down 1.23 to 1210.82. The miners are down:

Barrick (ABX) $40.30 down 0.40%
Newmont (NEM) $53.09 down 0.19%
US Gold (UXG) $3.19 unchanged
General Moly (Eureka Moly, LLC) (GMO) $3.69 down 6.11%
Thompson Creek (TC) $13.73 down 0.51%
Freeport-McMoRan (FCX) $78.04 down 2.94% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $42.47 down 1.03% - global steel producer
POSCO (PKX) $118.61 down 2.31% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.91% to $1,423,956.43 (what's this?).

Cheers,

Colonel Possum

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Headline photograph by Mariana Titus

Monday, April 26, 2010

General Moly Water Rights Decision, Bridge Loan


Morning Miners!

It is 6:11 AM. Grab a cup and let's get to work, pardner. It is a mixed news day for General Moly (GMO). Let's get right to it - here are two press releases that just reached my mail box:

General Moly Announces Nevada District Court Remands Mt. Hope Water Rights Decision Back to State Engineer
(6:04 AM)

General Moly Receives $10 Million Under Hanlong Bridge Loan Agreement (6:10 AM)

Starting with the good news first; General Moly got a $10 million check in the mail as one of the first funding steps from the recent Hanlong transaction (A Game Changer for General Moly & Eureka County). It's always good to receive money as GMO re-starts engineering and begins procurement of mining equipment for our Mt. Hope project.

Now a more thorny issue. We've been waiting since January for the Judge Papez decision on water rights in the Kobeh valley. On 4/16, this Report asked General Moly if they had any news on the pending decision. Seth Foreman, Director of Investor Relations, replied they had not and gave us this concise summary of events:

"As background, we had a series of public hearings on our applications for the two water permits back in October of 2008. Following those hearings, the State Engineer issued his ruling in late March 2009, granting our applications for change of water use from Agricultural to Mining and change of point of diversion to our proposed well field closer to the Mt. Hope mine. Following that ruling, the County’s and grower’s appeal was filed. Briefs were filed with the district court in September of last year, and oral arguments were heard in January of this year." (Seth Foreman, General Moly, 4/16/2010))

The other shoe has finally dropped with Judge Papez ruling in favor of the County and farmers:

"...on Friday, April 23, 2010, the Company [General Moly] received a ruling from a Nevada District Court overturning the Nevada State Engineer's decision to grant water applications for the Mt. Hope project. The Court's decision remands the water rights applications back to the State Engineer to reconsider in a new hearing, a date for which has not been set.

The Court ruled that the Petitioners' (Eureka County and certain farmers in the Diamond Valley) due process rights to a full and fair hearing were violated when the State Engineer considered and relied upon an updated version of the Company's hydrology model that had not been presented to the Petitioners." (GMO Press Release, 6:04 AM, 4/26/2010)

The ole Colonel reads this as a bump in the road for General Moly and not a roadblock because the objection is more procedural than material. In the words of Bruce D. Hansen, Chief Executive Officer:

"...this procedural flaw is disappointing given the strong legal and technical findings by the State Engineer to determine that the Company's water applications should be granted for the Mt. Hope project. The updated model referenced in the State Engineer's decision had substantially the same conclusions as the model the petitioners had reviewed. With our final hydrology models being completed this week, all parties involved will now be reviewing a single, final model, so this procedural issue can be avoided moving forward." (GMO Press Release, 6:04 AM, 4/26/2010)

Tim Arnold, Mt. Hope General Manager, added:

"We are clearly disappointed that the State Engineer's original ruling was not upheld. We will continue to work with the Commissioners of Eureka County and the farmers in Diamond Valley to find a solution to their opposition to our water applications. Our scientific studies continue to indicate that our water pumping in Kobeh Valley, 15 miles to the west of Diamond Valley, will have virtually no impact to their water table and we will continue to engage and educate all stakeholders on that issue. Additionally, we will continue to develop a comprehensive long-term monitoring and mitigation plan.

The overwhelming support by the citizens of Eureka County is a real positive for our project and we hope they will more fully engage to vocally support our project and help us move Mt. Hope forward in an environmentally sound manner and help us create badly needed jobs and tax revenue in their community and Nevada." (GMO Press Release, 6:04 AM, 4/26/2010)

In these hard times, I hope all parties involved can reach an agreement that is mutually beneficial and does not delay the mining of strategic metals like molybdenum from becoming an important and integral part of Eureka County's future. The best of luck to all.

Let's see how the markets are voting on the news. On Friday, GMO touched $4.00 briefly (3:15 PM EDT) to close at $3.93. As the markets opened this morning, GMO got whacked down to $3.44 in early trading on fairly heavy volume (143,131 shares). Since then the stock has rebounded to $3.69, down 6.1% from Friday's close.


Am I worried? Nay. Last week the Report created a price model of GMO share price noticing an unusually high correlation with the S&P 500 (General Moly - $3.15 or $4.25? Ask Helen of Troy). We identified the fair value of GMO to be $3.71 in a range of $3.15 to $4.25. At the present $3.69 we are just a whisker below fair value and even the intraday low of $3.44 is well above the bottom range of $3.15. At the time of this analysis, we identified $3.20 as a buying opportunity if you believe the global growth story.

Say, guess what? This morning there are two chunks of good news on that front from our friends at Caterpillar (CAT) and the London Metals Exchange (LME). As reported by the Wall street Journal this morning:

"U.S. stock futures were generally firmer as Caterpillar raised its full-year profit outlook and said the economy is definitely improving...Caterpillar swung to a sharply higher-than-expected profit in the first quarter following prior-year restructuring charges, though sales fell and taxes rose. The heavy machinery maker also raised its 2010 forecast." (WSJ, 4/26/2010)

And at the LME,

"Metals added to gains on Monday on optimism the world's top economy is slowly but surely picking up..." (Fastmarkets, 4/26/2010)

That's not all bad, buckaroos. Speaking of the LME, this is how Miss Moly fared last week:

Western Moly Oxide (FeMo65) $17.75/lb (the price reported by Infomine and tracked by Base Metals on the General Moly Website)

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

LME Futures Contracts

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

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

Here is a chart of the LME 3-month contract (seller) from the February launch to the present:



Looks pretty steady-eddy to me.

Enough talk, let's walk the walk:

4-WD is OFF - optimistic but cautious markets; the VIX or "fear index" is back in the 17s comfortably below 25; metals & miners are looking better with benchmark FCX back in the low eighties and comfortably above $75 (our new warning level), 10-year Treasurys are safely below 4% preserving a low-interest rate environment (what's this?)

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

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions &
General Moly Mt. Hope Water Rights


Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)

NYMEX/COMEX: Oil is down $0.23 in early trading to $84.89 (June contract, most active); Gold is down $1.0 to $1152.7 (June contract, most active); Silver is up $0.058 to $18.250 (May contract); Copper is up $0.0155 to $3.5285 (May contract); Western Molybdenum Oxide up at $17.75, LME moly 3-month seller's contract remains at $18.14

The DOW is up 33.55 points to 11237.83; the S&P 500 is down 0.64 to 1216.64. The miners are mixed:

Barrick (ABX) $40.39 down 0.17%
Newmont (NEM) $53.01 down 0.17%
US Gold (UXG) $3.23 up 0.94%
General Moly (Eureka Moly, LLC) (GMO) $3.69 down 6.11%
Thompson Creek (TC) $13.70 up 2.70%
Freeport-McMoRan (FCX) $80.74 up 1.48% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $42.97 up 1.18% - global steel producer
POSCO (PKX) $121.36 up 1.93% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.39% to $1,444,303.75 (what's this?).

Cheers,

Colonel Possum

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Headline photograph by Mariana Titus

Friday, April 23, 2010

Greece Cries Uncle - GMO, Hanlong & POSCO Updates


Καστελλόριζο

Morning Miners!

It is 6:04 AM. Scott Raines resupplied the break room last night with a fresh can of his very best TGIF coffee, Premium Red Label. Grab a cup and let's see what's crossing the wires. Greece finally cried "uncle" this morning which will hopefully bring some stability to global markets. As reported in the Wall Street Journal:

Greek Prime Minister George Papandreou said Friday that 'the time has come' for Greece to request aid from the euro zone and IMF, following months of turmoil. Speaking from the island of Kastellorizo, Papandreou described the bailout package as 'a necessity. It is an extreme necessity, it is a national necessity.' (WSJ, 4/22/2010)


Yesterday we learned that Greece's debt crisis was even worse than anyone believed (well, except the Greeks). This no doubt sets in motion a combined IMF and euro-zone bailout package. The tipping point was the increase of the budget deficit estimate to 13.6% of gross domestic product for 2009. The old estimate was 12.7%. To give this some perspective, European countries that use the euro for their currency are supposed to maintain deficits below 3%. If that's not bad enough, Ireland is in worse shape than Greece by this measure. Here is the roundup of the deficit desperadoes across the pond (see note 1):

Ireland 14.3%
Greece 13.6%
Spain 11.2%
Portugal 9.4%

And why do we care in Eureka? If more bailouts are on the way, the euro is weakened which strengthens the U.S. dollar. A strong dollar puts pressure on commodities and the metals & miners suffer. A strong dollar is fine if our economy is robust but it's not (yet). Presently the dollar is less ugly than the two other reserve currencies of the world, the euro and yen, but has shown considerable weakness against the Canadian dollar. So it goes, I hope Papandreou has a nice sail back to the mainland in his yacht.

Let's see what else is in the news. Even with all the ups and downs General Moly (GMO) stock has suffered from European news, it remains in great shape fundamentally. Let's compare GMO to our bellwether Freeport-McMoRan (FCX) and benchmark moly miner Thompson Creek (TC), both miners who have had tougher sailing in the Mediterranean lately. Here are all three with this morning's share price compared to their 50-day and 200-day averages:

General Moly (GMO) $3.79 (today) $3.22 (50-day) $2.75 (200-day)
Freeport McMoRan (FCX) $79.78 (today) $80.20 (50-day) $75.00 (200-day)
Thompson Creek (TC) $13.09 (today) $13.59 (50-day) $12.80 (200-day)

The rule-of-thumb is that an attractive stock for investors maintains its share price above it's 50-day average which should lie above its 200-day. GMO meets this criterion with healthy margins. Both FCX and TC have fallen below their 50-day averages and should be watched in relation to the longer 200-day level. If FCX approaches $75 (the old warning level was $74) the entire mining space may be in trouble.

The relative strength of GMO versus FCX & TC may say that investors are more willing to put new money in a company preparing for future production than two producers facing a wobbly near-term marketplace for their metals (although copper and molybdenum have stood up fairly well to date, further pressure on commodities may cause a slump in metal prices in the coming months).

These three charts may give you a visual idea of what has been going on. The GMO spike-up coincides with their landmark Hanlong announcement (A Game Changer for General Moly & Eureka County) and the green line indicates the moving 200-day average for each stock.




Speaking of Hanlong, they have completed their deal to acquire Moly Mines Ltd. as flagged by the Report in March (Hanlong Invests in Another Moly Miner, 3/25/2010). Here's the latest:

Chinese group confirmed as Moly Mines big brother (Mineweb, Ross Louthean, 4/23/2010)

Finally two items on South Korean steelmaker POSCO and 20% owner of our Mt. Hope Project:

POSCO hikes steel prices; 1st rise in nearly 1 yr (China Mining, 4/23/2010)

And a tidbit from the Wall Street Journal...

"Posco (PKX) has decided to join the final bidding for a stake in a South Korean trading and resources development company [Daewoo International Stake] that was previously an affiliate of the now-defunct Daewoo Group, the company said Friday." (WSJ, 4/23/2010)

A busy steelmaker that has the ability to raise the prices of its product and bid for other interests sounds good to me. Ironically, an analyst on CNBC Business News today cited POSCO's price increase as an early warning sign of inflation.

Enough talk, let's walk the walk:

4-WD is OFF - cautious markets; the VIX or "fear index" is back in the 16s comfortably below 25; metals & miners are looking a little better with benchmark FCX in the high seventies but still above $75 (our new warning level), 10-year Treasurys are safely below 4% preserving a low-interest rate environment (what's this?)

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

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, 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 $0.34 in early trading to $83.36 (June contract, most active); Gold is down $4.4 to $1138.5 (June contract, most active); Silver is down $0.074 to $17.935 (May contract); Copper is down $0.0045 to $3.4820 (May contract); Western Molybdenum Oxide sits at $17.00, LME moly 3-month seller's contract remains at $18.14

The DOW is up 8.32 points to 11142.61; the S&P 500 is up 0.63 to 1209.30. The miners are all down:

Barrick (ABX) $40.07 down 0.25%
Newmont (NEM) $52.47 up 0.06%
US Gold (UXG) $3.11 down 0.32%
General Moly (Eureka Moly, LLC) (GMO) $3.79 down 0.26%
Thompson Creek (TC) $13.09 up 3.23%
Freeport-McMoRan (FCX) $79.78 down 0.89% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $42.21 down 0.12% - global steel producer
POSCO (PKX) $118.61 down 0.23% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.21% to $1,420,335.14 (what's this?).

Cheers,

Colonel Possum

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Note 1: In fairness the total national debt to GDP ratio is also important. The ratio for Greece exceeds 100% whereas Spain has a ratio below the euro-zone average of roughly 80%. In this example Greece presents a much more difficult deficit and debt problem than Spain.

Headline photograph by Mariana Titus

Thursday, April 22, 2010

General Moly - $3.15 or $4.25? Ask Helen of Troy


Ἑλένη

Morning Miners!

It is 6:18 AM. I'm on my second cup of Thor's thunderous java. Although Thursday derives its name from that Scandinavian god, my thoughts are on Greek gods this morning. Grab a cup and let's see what's going on in the market heavens. Not since the abduction of Helen has Greece so dominated world events. The world was smaller when the daughter of a god could launch a thousand ships with her lovely smile but the news of her attempted rescue from Troy survives today. Hopefully the news of Greece's modern day profligacy and national debt won't be as enduring as their mythology of yore.


This morning another headline of Greek financial woes cratered the euro, surged the U.S. dollar and produced the usual casualties in the commodity space. Gold dropped $14, oil is down $1.71 and copper stumbled below its key $3.50/lb level (again). We'll check to see what impact this has on our miners when the markets open in a few minutes - any guesses?

While we're waiting, the ole Colonel has some interesting numbers to show you on General Moly (GMO). I compared the share price of GMO to the S&P 500 for the last 12 months. The S&P is a great benchmark for the broader markets since it represents the performance of 500 of America's best companies. This first thing I looked at was the correlation of GMO with the S&P - positive correlation means our moly miner moves with the broader markets in price; negative indicates that GMO moves in opposition. As you might guess, most of the time GMO and other miners follow the S&P in direction if not in degree. A correlation of 1.0 implies a lockstep tracking of individual stock price with the S&P. GMO has only had one negative correlation period in 12-months, from early November to mid-January (see note 1).

Lately GMO has a very high positive correlation with the broader market. The 3-month correlation yesterday was 0.9274 and it's been greater than 0.8 for all of April. This is important because it implies that the headlines that take down the S&P, take down GMO. The affairs of Greece presently have more to do with this miner's day-to-day market capitalization than the price of molybdenum (which has been fairly constant for the month) or orders of equipment to begin the mining of Mt. Hope. Nuts.

On the positive side, the broader markets have been mostly in rally mode since early April and all the miners have enjoyed a lift from improving investor sentiment. The Hanlong announcement also caused a jaw-dropping spike in GMO share price in early March (A Game Changer for General Moly & Eureka County) so there is much to be happy about. Headlines, however, do push around the day-to-day price action. Here's an example. I modeled the price of GMO stock for the last 3-months to derive its fair value and range with respect to the S&P 500. For an S&P level of 1200 these are the numbers:

The fair value of GMO stock is $3.706 in a range of $3.153 to $4.259

Yesterday, the S&P closed at 1205.94 and GMO at $3.66 indicating that General Moly is slightly undervalued with respect to the broader market. Whether we get north of $4 has a lot to do with where the markets head next since our correlation is nearly unity.

Let's see where we are this morning. Yup, the S&P is down nearly a percent and all of our favorite miners are in the red. Greece and jitters about the fate of our own financial reform legislation have done their job to poop the party. GMO presently is trading at $3.58 after touching $4 in intraday trading just one-week ago. I'd say anything below $3.20 represents a buying opportunity. Will we break $4.25? Ask Helen of Troy, pardner!

Here's something to look forward to if you're interested in what's going on in the molybdenum biz besides headlines:

Thompson Creek schedules first-quarter 2010 financial results conference call/webcast at 8:00 a.m. and webcast of Annual Meeting of Shareholders at 10:00 am Eastern on May 6

Enough talk, let's walk the walk:

4-WD is OFF - cautious markets; the VIX or "fear index" has moved up to the 17-18s closer to 25; metals & miners are looking a little shaky with benchmark FCX in the high seventies but still comfortably above $74, 10-year Treasurys are safely below 4% preserving a low-interest rate environment (what's this?)

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

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, 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 $1.72 in early trading to $81.96 (June contract, most active); Gold is down $14.6 to $1134.2 (June contract, most active); Silver is down $0.273 to $17.805 (May contract); Copper is down $0.0615 to $3.4735 (May contract); Western Molybdenum Oxide drops to $17.00, LME moly 3-month seller's contract remains at $18.14

The DOW is down 83.73 points to 11041.19; the S&P 500 is down 9.98 to 1195.96. The miners are all down:

Barrick (ABX) $39.23 up 0.68%
Newmont (NEM) $51.68 down 0.44%
US Gold (UXG) $3.08 up 0.96%
General Moly (Eureka Moly, LLC) (GMO) $3.58 down 2.17%
Thompson Creek (TC) $12.69 down 1.91%
Freeport-McMoRan (FCX) $78.17 down 0.31% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $41.67 down 3.41% - global steel producer
POSCO (PKX) $117.35 down 1.31% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 1.31% to $1,390,179.67 (what's this?).

Cheers,

Colonel Possum

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Note 1: three-month sliding correlation taken over a 12-month record

Headline photograph by Mariana Titus

Wednesday, April 21, 2010

GMO Makes Top Mining Stock, Loonie Boots Greenback


Morning Miners!

It is 5:56 AM. The coffee pot is hot - let's start hump day with some good news! Kitco Metals flagged General Moly (GMO) as the top performing mining equity in yesterday's trading from their tracking group of 37 metal miners. The list includes our other favorites Freeport McMoRan (FCX) and Thompson Creek Metals (TC). Although Kitco excludes gold miners in this compilation, GMO also easily beat Barrick (ABX) and Newmont (NEM) rising 4.19% to close at $3.77. Never a bad day to be the lead dog in this pack. We'll check on how they're doing today when the markets open in a few minutes.


If you offered to sell me one thousand Canadian dollars this morning I'd have to pay you $1004.92 in U.S. dough. If you work for Barrick it might be a good idea to ask your boss to start paying you in Loonies. The irony is that the U.S. dollar is showing strength against the two other great reserve currencies of the world, the euro and the yen. As reported yesterday by the Wall Street Journal:

"...the Bank of Canada held its benchmark overnight rate steady at 0.25% but dropped a year-long pledge to hold it at that level through the second quarter, saying it was 'appropriate' to lessen the degree of stimulus. The decision is seen paving the way for a June rate hike. The Canadian dollar jumped." (WSJ, 4/20/2010)

I'll have to give it to our friends up north. It doesn't hurt to be a resource-rich country with sensible banking policies as we roll down the bumpy global recovery highway. Maybe there's a lesson here for other big developed nations.

OK, the markets are open and General Moly comes out punching touching $3.82 in early trading. The champ has had a good run since the March 5 Hanlong agreement to fully fund the Mt. Hope project (A Game Changer for General Moly & Eureka County). Apparently the investment community agrees. There is further good news on the latest agreement between GMO and the world's largest steel producer, ArcelorMital (MT). Here's this week's press release:

GENERAL MOLY ANNOUNCES ARCELORMITTAL TO WAIVE ANTI-DILUTION RIGHTS FOR HANLONG TRANSACTION (4/19/2010 Press Release)

General Moly's Annual Meeting of Stockholders will be held on May 13, 2010 at 9:00am Mountain time, at the Marriott Denver West in Golden, Colorado. The ole Colonel just received his stockholder package in the mail which includes their 2009 Annual Report. It's a dandy, pardner.

Enough talk, let's walk the walk:

4-WD is OFF - smoother markets return; the VIX or "fear index" has moved back down to the 15-16s far below 25; metals & miners are looking good with benchmark FCX comfortably above $74, 10-year Treasurys are safely below 4% preserving a low-interest rate environment (what's this?)

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

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, 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 $0.20 in early trading to $84.05 (June contract, most active); Gold is up $3.0 to $1142.2 (June contract, most active); Silver is up $0.049 to $17.870 (May contract); Copper is down $0.0175 to $3.4960 (May contract); Western Molybdenum Oxide sits at $17.25, LME moly 3-month seller's contract remains at $18.14

The DOW is up 31.14 points to 11148.20; the S&P 500 is up 2.65 to 1209.82. The miners are mixed:

Barrick (ABX) $39.52 up 0.98%
Newmont (NEM) $51.55 down 0.04%
US Gold (UXG) $3.09 up 0.65%
General Moly (Eureka Moly, LLC) (GMO) $3.80 up 1.88%
Thompson Creek (TC) $13.15 up 0.08%
Freeport-McMoRan (FCX) $79.11 down 0.40% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $43.22 down 1.44% - global steel producer
POSCO (PKX) $118.78 down 0.17% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.08% to $1,414,957.11 (what's this?).

Cheers,

Colonel Possum

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Headline photograph by Mariana Titus

Tuesday, April 20, 2010

There's an Exogenous Deer in My Headlights!


Morning Miners!

It is 6:01 AM, sit down and have a cup with the ole Colonel. There are few things in life more abundant than words to explain the unexpected. When something comes out of left field to interrupt our daily lives - news reporters, politicians, theologians and scientists waste no time showering us with words to explain the unpredictable and sometimes, the unexplainable. Economists are particularly adept at this since there are few things harder to predict than the outcomes of a global economy. They have two great words in their semantic toolbox: "exogenous" and "endogenous".

If you encounter a deer on your moonless trip to Ely, an economist would declare that misfortune an "exogenous event". If you run out of gas on the same trip, they'd call that fup-dup an "endogenous event". In the first case something out of your control occurs to influence the outcome of your activity. You may know that deer crossing the highway in these parts is a common danger but it is doubtful that you included that possibility in your trip preparation. Did your really plan to drive slower than 75 mph as a precaution? No.

For the latter case, having a full tank of gas should be in everyone's plan when leaving in any direction from Eureka. Our Highway 50 didn't get the name "Loneliest Road in America" for nothing. If you run out of gas that's your damn fault, pardner.

OK, so what's your point with all these 50-cent words Colonel? I'm sneaking up on what sets the price for metals, precious metals in particular buckaroos. Let's tweak one of our new words for starters. Our economist friend would say that gold has "endogeneity" if the demand and supply are known and price is set as the two forces reach equilibrium. If a gold producer sells all his bars to a gold consumer manufacturing jewelry in India; supply meets demand and after a little dickering, the price is set. Endogenous bliss.

Ah, if life were so simple. Nowadays, the price of gold has as much to do with exogenous events as any simple law of supply and demand. This past week a vilified Goldman Sachs, a debt-ridden Greece and a volcano in Iceland (Gold, Goldman, Greece & Eyjafjallajökull) had more to do with a slump in gold prices than hard-nosed gold buyers in Mumbai. Exogenous terror.

So how about some good news? Goldman Sachs just reported eye-popping profits for the last quarter, Greece had a successful debt auction to raise €1.95 billion and limited flights are now leaving Europe to brave the Eyjafjallajökull ash cloud. And guess what? The price of gold is recovering, a return to endogeneity my friends. Here is spot gold on the London Exchange this morning on the the news:


The markets are now open over here and it looks like a good day for the metals and miners. Enjoy it while it lasts, I doubt Goldman and Greece have left the headlines for long. What did we learn today? Not much really unless economist-talk helps you fall to sleep at night. The next time you want to take a longer lunch you might want to tell your boss that an "exogenous event" prevented your prompt return.

By the by, there is a new twist on mercury emission in our state - something to read on that long lunch:

Proposed EPA rule aims to reduce U.S. gold mine mercury emissions by 73% (Mineweb, Dorothy Kosich - RENO, 4/19/2010)

I've updated the mercury emission link below for the "adverse regulation/legislation" warning light which remains ORANGE.

Enough talk, let's walk the walk:

4-WD is OFF - smoother markets return; the VIX or "fear index" has moved back down to the 16s far below 25; metals & miners are recovering with benchmark FCX comfortably above $74, 10-year Treasurys are safely below 4% preserving a low-interest rate environment (what's this?)

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

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, 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 $1.20 in early trading to $84.33 (June contract, most active); Gold is up $4.9 to $1140.7 (June contract, most active); Silver is up $0.204 to $17.935 (May contract); Copper is up $0.0375 to $3.5345 (May contract); Western Molybdenum Oxide sits at $17.25, LME moly 3-month seller's contract remains at $18.14

The DOW is up 22.07 points to 11114.12; the S&P 500 is up 7.02 to 1204.54. The miners are happy except for Newmont:

Barrick (ABX) $39.51 up 0.95%
Newmont (NEM) $52.10 down 0.23%
US Gold (UXG) $3.11 up 2.98%
General Moly (Eureka Moly, LLC) (GMO) $3.63 up 1.40%
Thompson Creek (TC) $13.44 up 3.07%
Freeport-McMoRan (FCX) $81.62 up 1.01% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $44.14 up 1.80% - global steel producer
POSCO (PKX) $119.50 up 1.65% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 1.53% to $1,420,271.61 (what's this?).

Cheers,

Colonel Possum

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Headline photograph by Mariana Titus

Monday, April 19, 2010

Gold, Goldman, Greece & Eyjafjallajökull


Morning Miners!

It is 5:55 AM. Have a cup of coffee to start your week, pardner. Don't spill any, burn yourself or cause the the Bunn to explode off the workbench. It seems the markets are proving all of Murphy's Laws and we might be next here in the break room. When I left you last Friday, Greece had popped back in the headlines and later in the day we discovered that the America's premier investment bank, Goldman Sachs, may not have the brightest kids in the room (Equo ne credite, Teucri - Trust the Metals & Miners) . All the while Iceland's stubborn volcano caused the cancellation of 63,000 flights, created untold economic devastation and tied the tongues of reporters trying to pronounce Eyjafjallajökull.

And what happened to the markets? The DOW and S&P 500 blew off more than 1% of their rally steam, the metals & miners fell down the mineshaft and the poor Eureka Miner's Grubstake Portfolio (what's this?) dropped nearly $50,000 in a single day, a record loss of 3.22%. COMEX Gold was one of the worst hit falling from a Monday intraday high of $1170 to an early morning low of $1124 today. Mineweb carries a good article on the impact of the SEC's fraud charges on Goldman Sachs had on the price of glitter:

Gold's upward momentum thwarted by Goldman Sachs news (Mineweb, David Levenstein, 4/19/2010)

So what's a poor miner to do? Here's what the Colonel did to feel better:

1) Learned to pronounce Eyjafjallajökull - "Aye-ya fyah-dla jow-kudl"
Now I'm smarter than most talking heads on T.V.

2) Gave thanks that another volcano hasn't exploded in Indonesia. That might be enough to shut down air traffic for the entire world, fill the atmosphere with ash and precipitate a new ice age. So much for global warming, good time to buy stock in railroads and North Face arctic wear.

3) Shouted Yee-ha when oil prices dropped another 2-bucks on the COMEX.

4) Bought a little gold this morning to throw in the buckboard.

Now I'm smiling. The DOW, S&P and our two junior miners, General Moly and US Gold, are all up by a thin flat washer. Gold is climbing back too, $1134 on the COMEX. Our other favorite miners are down but not by much. The Eureka Miner's Grubstake Portfolio is still more than $400,000 north of where we started last May and I bet the metals & miners will all be seeing light before long. Let's check on Miss Moly and see how she's faring in this economic Murphy storm. I understand she's been stuck at Gatwik all weekend trying to fly back to Ely (Miss Moly Flies to London)

Here is a complete summary of last week's molybdenum price action:

Western Moly Oxide (FeMo65) $17.25/lb (the price reported by Infomine and tracked by Base Metals on the General Moly Website)

Moly Oxide, Europe (Mo Drummed Molydbic Oxide EU) $17.50/lb (the price reported in the Metals Bulletin)

LME Futures Contracts

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

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

Here is a chart of the LME 3-month contract (seller) from the February launch to the present:



Enough Murphy-talk, let's walk the walk:

4-WD is OFF - smoother markets return; the VIX or "fear index" has moved back into the 18-19s still below 25 but something to monitor; metals & miners are recovering some there with benchmark FCX comfortably above $74, 10-year Treasurys are safely below 4% preserving a low-interest rate environment (what's this?)

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

A YELLOW light is ON for possible adverse regulation/legislation: Mine Safety Violations, 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 $2.21 in early trading to $82.46 (June contract, most active); Gold is down $2.5 to $1134.4 (June contract, most active); Silver is down $0.005 to $17.670 (May contract); Copper is down $0.0375 to $3.4770 (May contract); Western Molybdenum Oxide sits at $17.25, LME moly 3-month seller's contract rests at $18.14

The DOW is up 7.71 points to 11026.37; the S&P 500 is up 0.08 to 1192.21. The miners are mixed:

Barrick (ABX) $38.63 down 1.23%
Newmont (NEM) $51.93 down 0.42%
US Gold (UXG) $3.11 up 0.97%
General Moly (Eureka Moly, LLC) (GMO) $3.64 up 0.28%
Thompson Creek (TC) $12.95 down 1.82%
Freeport-McMoRan (FCX) $80.74 down 0.54% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $43.29 down 1.43% - global steel producer
POSCO (PKX) $117.81 down 0.44% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.34% to $1,400,231.45 (what's this?).

Cheers,

Colonel Possum

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Headline photograph by Mariana Titus

Friday, April 16, 2010

Equo ne credite, Teucri - Trust the Metals & Miners


*** BREAKING NEWS *** The financial sector led U.S. stocks in a broad and sharp sell-off Friday after the Securities & Exchange Commission charged Goldman Sachs Group with civil fraud. The selloff commenced at 12:38 PM EDT putting additional pressure on the metals & miners who already were suffering an early morning retreat in the commodity space.

Equo ne credite, Teucri. Quidquid id est, timeo Danaos et dona ferentes.
Do not trust the horse, Trojans! Whatever it is, I fear the Greeks, even bringing gifts. (Book II of Virgil's Aeneid, the siege of Troy)

Morning Miners!

It is 5:52 AM and my cup of Raine's Red Label TGIF coffee never tasted so good! Let's take a little quiz. What if the ole Colonel were to tell you the U.S. dollar is as strong as a chain binder in early trading - what's your market outlook for the day? If you've been reading the Report since last December you may provide the following forecast for Friday:

Gold is down
Copper is down
Mining stocks are under pressure
Greece is back in the headlines

We'll check on mining stocks when the exchanges open in a few minutes but you're spot on with three of your answers already. COMEX gold is trading down more than $12, copper has dipped from recent highs to $3.56/lb and the Greeks have again rolled out their debt-filled Trojan Horse. Unlike the days of yore, they aren't bearing gifts but are apparently taking gifts as reported by the Wall Street Journal this Morning:

"A study to be published in coming weeks by the Washington-based Brookings Institution finds that bribery, patronage and other public corruption are major contributors to the country's ballooning debt, depriving the Greek state each year of the equivalent of at least 8% of its gross domestic product, or more than €20 billion (about $27 billion). " (WSJ, 4/16/2010)

Nuts. I wouldn't care what these guys did across the pond if it didn't have such a direct impact on the metals & miners. Once again, investors are questioning the details of the European bailout plan for Greece and wondering what other debt-strapped euro-member countries will be next in line for aid. This ripples into worries about the true health of global recovery and down we go again.

Oh-oh, the NYSE just opened and yup, all our miners are down in early trading. So it goes, some European finance minister will utter a new reassurance over the weekend and we will be back in rally mode Monday. How do you stay sane with all this buckaroos? I wrote a similar story about the fiscal status of Greece in early December (Timeo Donaos et Dona Ferentes, 12/9/2009)and we've been tracking the ups-and-downs of the sovereign debt crisis ever since. Let's see how some of our favorite metals & miners have done. Here is a comparison of prices on the morning of 12/9 and early trading today:

gold 1139.1 (12/9) 1148.5 (today) up 8.2%
copper 3.1640 (12/9) 3.5625 (today) up 12.6%
Western moly oxide 11.15 (12/9) 17.25 (today) up 54.7%

Barrick (ABX) 41.19 (12/9) 39.83 (today) down 3.3%
Newmont (NEM) 51.33 (12/9) 52.59 (today) up 2.4%
Freeport-McMoRan (FCX) 76.86 (12/9) 83.18 (today) up 8.2%
General Moly (GMO) 2.18 (12/9) 3.73 (today) up 71.1%

With the exception of a slight trim on Barrick, I'd say we're not doing too badly. I'll trust the metals & miners before the horse, pardner! I'll stick by what I said in December:

"[The] European Union will no doubt rescue Greece and other errant members. Sovereign debt remains a global issue but isn't going to return us to the level of financial crisis we experienced just one year ago." (The Eureka Miner's Market Report, 12/9/2009)

On another front, there may be some storm clouds coming our way on mining safety. Here's the latest posted on Mineweb:

Obama Orders U.S. Crackdown on Mine Safety Violations (Mineweb, 4/16/2010)

After the Big Branch tragedy there are political winds blowing with a list of the 48 most dangerous U.S. mines at the center of the vortex. Unfortunately of the 32 coal mines and 16 metal and nonmetal mines, two are in Eureka County. Barrick's Meikle Mine and Newmont's Deep Post may be in some politician's cross-hairs soon. The Report will track this development and is unfortunately changing the "Adverse Regulation/Legislation" warning light from YELLOW back to ORANGE on the Eureka Outlook Dashboard (upper right, what's this?).

Enough talk, let's walk the walk:

4-WD is OFF - smoother markets return; the VIX or "fear index" has moved back into the 19s still below 25 but something to monitor; metals & miners are hanging in there with benchmark FCX comfortably above $74, 10-year Treasurys are below 4% preserving a low-interest rate environment (what's this?)

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

A YELLOW light is ON for possible adverse regulation/legislation: Mine Safety Violations, 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 $1.26 in early trading to $85.49 (June contract, most active); Gold is down $12.4 to $1147.9 (June contract, most active); Silver is down $0.263 to $18.170 (May contract); Copper is down $0.0380 to $3.5625 (May contract); Western Molybdenum Oxide moves down to $17.25, LME moly 3-month seller's contract is up at $18.14

The DOW is up 3.25 points to 11147.82; the S&P 500 is down 2.87 to 1208.80. The miners don't like Uzo:

Barrick (ABX) $39.83 down 0.43%
Newmont (NEM) $52.59 down 0.83%
US Gold (UXG) $3.16 down 1.56%
General Moly (Eureka Moly, LLC) (GMO) $3.73 up 2.36%
Thompson Creek (TC) $13.71 down 1.22%
Freeport-McMoRan (FCX) $83.18 down 1.23% (a bellwether mining stock spanning copper, gols & molybdenum)

The Steels don't like Uzo either, (a "tell" for General Moly & Thompson Creek):

ArcelorMittal (MT) $44.92 down 1.69% - global steel producer
POSCO (PKX) $119.63 down 0.80% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 1.07% to $1,436,261.52 (what's this?).

Cheers,

Colonel Possum

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Headline photograph by Mariana Titus