Tuesday, April 6, 2010
The Colonel's Miners Roundup for April
It is 5:59 AM. Have a cup and let's see how our favorite miners are doing for April. Before we start, some words of caution. Yesterday the broader markets hit 18-month highs but the 10-year Treasury broke 4%. On 3/26 the Report said, "Some believe a 4% 10-year Treasury is the trip point for when bond markets blunt the rally in stock markets" (Debt Concerns Move From Europe to U.S.).
The Colonel has put us in 4-WD as a precaution for rougher roads ahead but the rise in interest rates could also be a good sign. Rising markets, rising Treasury yields and a strengthening dollar can all live happily together if folks really believe we're starting to roll in the U.S., especially when our recovery appears stronger than others in the developed world.
The flip-side is a rise in yields due to investors shying away from upcoming Treasury auctions. This is a "supply-side" problem when the massive issuance of new debt doesn't attract new buyers, especially foreign buyers, as it has in the past. When supply then exceeds demand, prices fall and yields rise in the bond world. At 4% we are at an inflection point; too early to tell which way we're headed but there is a key 10-year auction tomorrow.
Here are 3-month charts of the U.S. dollar index (.DXY or "Dixie") and 10-year Treasury yields:
Nobody has told the miners that things aren't turning up. As we mentioned yesterday, gold has got some giddy-up, copper has been on fire and molybdenum prices are holding their recent gains. The miners have responded with a bounce in their stride. Dennis Gartman, the "Commodity King", wryly reminds us how to pick winners, "Look for charts that go from the lower left to the upper right." Here is a one-year chart of General Moly's stock performance:
The solid line is a 200-day average which is trending from lower left to upper right. The expectation of full funding for the Mt. Hope Project caused a March 5th jump in share price, a leap above the 200-day line that deserves a Gartman Yee-ha! Let's look at our two benchmark miners; Freeport-McMoRan (FCX) as an overall bellwether and Thompson Creek (TC) as a major moly producer:
Looks like up-up and away to me. Here is how all three fared from the more gloomy early days of February (intraday low on 2/5/10 compared to yesterday's close, 4/5/10):
General Moly (GMO) 2/5 $2.11, 4/5 $3.49 up 65.4%
Freeport-McMoRan (FCX) 2/5 $66.03, 4/5 $87.33 up 32.2%
Thompson Creek (TC) 2/5 $11.06, 4/5 $14.17 up 28.1%
This is a remarkable surge in their collective performance from troubling signs earlier this year (Freeport "Broken", Miners in Correction). Things may be looking up pardner.
How about our gold miners? Here are charts of benchmark Barrick together with Newmont and U.S. Gold:
Looks like the gold miners are whistling while they work too. Performance compared to their 200-day average is not as dramatic as the first group (with the possible exception of Newmont) but all are still very respectable. Here is a comparison from the February lows to the present for the golds:
Barrick (ABX) 2/5 $33.65, 4/5 $39.65 up 17.8%
Newmont (NEM) 2/5 $43.11, 4/5 $53.81 up 24.8%
U.S. Gold (UXG) 2/5 $2.02, 4/5 $2.90 up 43.6%
If we can keep this whole herd moving from the "lower left to the upper right" 2010 could be a great year for both metals and miners. Stay tuned.
Enough talk, let's walk the walk:
4-WD is ON - The benchmark 10-year T-Note broke 4% yesterday and there is an air of caution in the winds, rougher markets possible; the VIX or "fear index" is below 25 which is good; metals & miners remain solid with benchmark FCX comfortably above $74 (what's this?)
The YELLOW light is switched back 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 $0.26 in early trading to $86.88 (May contract, most active); Gold is up $2.1 to $1135.9 (June contract, most active); Silver is down $0.038 to $18.080(May contract); Copper is down $0.0030 to $3.6285 (May contract); Western Molybdenum Oxide remains at $17.12
The DOW is down 6.73 points to 10966.82; the S&P 500 is up 0.58 to 1188.02. The miners are mixed:
Barrick (ABX) $39.63 down 0.05%
Newmont (NEM) $53.96 up 0.58%
US Gold UXG) $2.89 down 0.34%
General Moly (Eureka Moly, LLC) (GMO) $3.47 down 0.57%
Thompson Creek (TC) $14.40 down 0.41%
Freeport-McMoRan (FCX) $87.83 up 0.57% (a bellwether mining stock spanning copper, gols & molybdenum)
The Steels are up, (a "tell" for General Moly & Thompson Creek):
ArcelorMittal (MT) $46.79 up 1.17% - global steel producer
POSCO (PKX) $124.84 up 0.01% - South Korean integrated steel producer
The Eureka Miner's Grubstake Portfolio is is up 0.11% to $1,417,837.44 (what's this?).
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Headline photograph by Mariana Titus