"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 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

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