"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.

Friday, May 14, 2010

Green Light for General Moly Hanlong Deal

Morning Miners!

It is 6:01 AM. Have a brimming cup of Raine's Vintage TGIF coffee. Scott says it is freshly ground but he's been aging the beans in the old cellar beneath the floor boards. We might need some of this brew given how the European and Asian markets are behaving this morning. Before the U.S. opens, let's check out some good news. General Moly held their annual meeting yesterday and the shareholders gave the green light to the recent Hanlong deal (A Game Changer for General Moly & Eureka County):


Bruce D. Hansen, Chief Executive Officer, said:

"I am pleased our shareholders approved the Hanlong transaction. This paves the way for Hanlong to begin the process of seeking necessary Chinese government approvals to invest in General Moly. We expect that Hanlong will receive these approvals within three months, about the same time our Draft Environmental Impact Statement is published, and anticipate closing the first $40 million tranche of equity funding in the second half of this year."

The deal, announced March 5th, gives Hanlong more than 20% of General Moly's shares in exchange for a $745 million debt and equity investment anticipated to fully fund the Mt. Hope project.

Now back to the world of fear and loathing as the father of Gonzo journalism, Hunter S. Thompson, might say if he were still with us on this planet. A sample from this morning's news wires:

LME MORNING - Metals fall to session lows as sentiment sours on EU concerns (FastMarkets, 5/14/2010)

LONDON—The euro fell to a new 17-month low on fears of public unrest in the euro zone and on growing concern over the credibility of the European Central Bank. (WSJ, 5/14/2010)

SINGAPORE—Most Asian markets declined Friday, with Japanese shares pulling back as Sony Corp.'s poor earnings outlook and the euro's weakness against the yen damped sentiment toward exporters. (WSJ, 5/14/2010)

Our broader markets nave now been open for a few minutes and it looks pretty ugly. The DOW is down 100 and change and the VIX or "fear index" has is above the 30-level prompting me to turn the Stable Markets YELLOW light back on Eureka's Outlook Dashboard (upper right column of this blog). COMEX gold has bounced back up over $1245/oz and copper is headed downhill below $3.20/lb mark so the ole Colonel is going to turn on another YELLOW for Investor Confidence. Last year the news was China; this year, debt-ridden Europe. The former put some air in the global commodity tire, the latter is a big leaky valve stem. Nuts.

But are things all that bad? Here are some contrary morning headlines:

"European automotive production could reach pre-economic crisis levels by 2014, according to a report commissioned by the UK’s Society of Motor Manufacturers and Traders." (Steel Business Briefing, 5/14/2010)

Hmm...that doesn't sound like the end to Western Civilization, and...

"Chinese FeSi, Mn alloy export prices hold up..." (Steel Business Briefing, 5/14/2010)

"Expectations are that Aluminium prices could increase if Chinese electricity price rises lower metal supply..." (Base Metals, 5/14/2010)

And that doesn't ring too deflationary in Metalsville. What about moly? Yesterday I said, "The Colonel is also happy to see molybdenum prices haven't budged two-bits during the recent fall of the euro, copper belly flops and choppy global markets." When you say such things you're asking for trouble and Western moly oxide just notched down four-bits to $17.25/lb. Before we get all weepy-eyed, we're still well above the key $16.50/lb level, the LME futures prices are holding and Miss Moly's Uncle Nickel is on the rise. Here's a chart of both over the last 7-days:

Hang in there buckaroos, have a good weekend.

Enough boo-hooing on a Friday, let's walk the walk:

4-WD is ON - rough roads in the marketplace; The VIX or "fear index" is in the low 30s, well above our 25 level threshold; metals & miners are back on shaky timber with benchmark FCX trading in the high $60s well below its 200-day average of $75 (our new warning level), 10-year Treasurys are safely below 4% preserving a low-interest rate environment

The YELLOW light returns for Stable Markets with the VIX above the 30 level (what's this?)

The YELLOW light returns for Investor Confidence with the possibility of a 10% correction in the broader markets possible and more likely

The GREEN light remains turned on our Fuel Gauge with oil below $80 (although this may only be a brief respite)

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 $0.91 in early trading to $73.49 (June contract, most active); Gold is up $17.7 to $1246.9 (June contract, most active); Silver is up $0.171 to $19.670 (July contract); Copper is down $0.0535 to $3.1780 (July contract)

Western Molybdenum Oxide moves down to $17.25, LME moly 3-month seller's contract remains at $18.14

The DOW is down 111.63 points to 10671.32; the S&P 500 is down 16.93 to 1140.51. The miners are mixed:

Barrick (ABX) $45.35 up 1.21%
Newmont (NEM) $57.76 up 1.10%
US Gold (UXG) $4.00 up 0.76%
General Moly (Eureka Moly, LLC) (GMO) $3.99 down 5.45%
Thompson Creek (TC) $10.52 down 3.84%
Freeport-McMoRan (FCX) $69.40 down 3.22% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $32.77 down 6.29% - global steel producer
POSCO (PKX) $100.02 down 1.46% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 1.93% to $1,404,452.91 (what's this?).


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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