"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, June 11, 2010

The Colonel Visits Eureka Moly LLC (GMO)

Morning Miners!

It is 5:46 AM. Let me pour you a welcome cup of Raine's Red Label TGIF coffee. Yesterday, I shared a cup with Tim Arnold, General Manager of our Mt. Hope project, and got the latest updates on Eureka Moly LLC (subsidiary of General Moly NYSE:GMO). After the Hanlong announcement in early March things have been really moving out for Tim and his crew. The Hanlong Investment Group provides the important financial bridge to full funding for the Mt. Hope molybdenum mine (A Game Changer for General Moly & Eureka County). If all goes as planned, mine construction should begin next summer then it's 20 months to first production. There are some remaining challenges which we will touch on in a few moments.

Tim continues to work with the community to ensure that this mining project is "done right". I shared a few laughs with him about the Atlas Mine days in Eureka during the late 1980s and early 1990s. As a young feller then, I enjoyed the "wild west" atmosphere of those days but in hindsight it was a trying time for the Eureka community. Poor mine planning and inadequate infrastructure to support the influx of new folks left mixed memories of new mine operations in our county. Tim is determined not to repeat the Atlas Gold Bar Mine mistakes. There was a luncheon this May to explain General Moly's approach (Local Thumbs Up for General Moly) which I unfortunately missed because I was on the road.

One of the most exciting aspects of the planning process is bringing in consultant Elaine Barkdull Spencer to do a business readiness assessment. Barkdull Spencer comes with terrific credentials for this job being the former executive director of the Elko County Economic Diversification Authority (ECEDA). She has the experience to understand the proper integration of mining and communities and will work closely with our own Economic Development folks, Wally Cuchine and Trish Reynolds. This Report first became aware of her talents last August when we covered a Fortune Magazine article on Elko surviving the recession (Elko Makes Fortune!). The Christopher LaMarca photograph below from that article shows Barkdull Spencer standing with Elko Mayor Mike Franzoia (see note 1).

One of Barkdull Spencer's first tasks will be a face-to-face survey with local business owners. According to Tim, this will include her explanation of the "mining cycle" and an open ear to the special needs of our community. I attended the latest Commissioner's meeting on June 7th and heard a debrief on some of the planning that is already underway from the Eureka EIS Coodinator, Abby Johnson. I am sure that Bardull Spencer and Johnson will be working together soon to prepare for the housing and infrastructure challenges ahead.

Tim reminded me that although there will be peaks in the mining employment it will not all happen at once. In her presentation for the Commissioners, Johnson estimated that there may be times when Mt. Hope will employ 800-1,000 workers but only about 30% are expected to reside in the Eureka town-site and nearby Diamond Valley. Tim's example was a mine construction contractor who may work 12-hour shifts for 2-weeks the go home to Elko. The important takeaway is there will be varying levels of employment based on the mining cycle. The Commissioner's were very appreciative of Johnson's initial report and demonstrated an understanding and willingness to plan and prepare for the Mt. Hope development.

One of the remaining challenges for Eureka Moly is the water rights issue which has diminished as an obstacle to the current Mt. Hope plan. As we reported in April (General Moly Water Rights Decision, Bridge Loan) the water rights issue has left the courtroom and is now solely in the hands of the Sate Engineer. Tim believes the only remaining concern is the water model and is confident that a new updated model will pass the muster. The State Engineer is in charge of both schedule and hearings and Eureka Moly is expecting those to move expeditiously in their favor.

The Colonel wishes Tim, his crew and Elaine Barkdull Spencer the best of luck on their journey to bring molybdenum mining to Eureka County in a manner that benefits not only General Moly but the local community. In these trying economic times it is important to remember that Mt. Hope will bring jobs and revenue to the county and state through sales and use tax, property taxes and Nevada Net Proceeds.

Enough talk, let's walk the walk:

Our newly minted Eureka Miner's Index (EMI - what's this?) stepped up to 72.99 this morning, marching from Monday's low of 50.7. Remember an EMI greater than 100 is good times for metals & miners - we're still moving in the right direction.

4-WD is ON - rough roads in the marketplace; The VIX or "fear index" moves to just below 30, still above our 25 level threshold; metals & miners remain remain on shaky timber with benchmark FCX in the mid-$60s well below its 200-day average of $76 (our new warning level), 10-year Treasurys are safely below 4% preserving a low-interest rate environment

The YELLOW light is turned on for Commodity Reflation with copper trading below $3/lb

The YELLOW light remains on for Stable Markets with the VIX too close to 30 level for my comfort (what's this?)

The ORANGE light remains on for Investor Confidence the possibility of a 20% correction in the broader markets

The GREEN light remains turned on our Fuel Gauge with oil below $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 $1.58 in early trading to $73.90 (July contract, most active); Gold is dup $4.6 to $1225.8 (August contract, most active); Silver is down $0.026 to $18.325 (July contract); Copper is up $0.0350 to $2.8975 (July contract)

Western Molybdenum Oxide drops to $14.00; LME moly 3-month seller's contract is at $14.29, LME cash seller moves to $14.15, Euro moly oxide sits at $14.00.

The DOW is down 40.21 points to 10,132,32; the S&P 500 is down 4.52 to 1082.32. The miners are mostly happy:

Barrick (ABX) $43.09 up 0.40%
Newmont (NEM) $55.96 down 0.09%
US Gold (UXG) $4.13 up 2.99%
General Moly (Eureka Moly, LLC) (GMO) $3.49 up 0.29%
Thompson Creek (TC) $9.05 up 1.66%
Freeport-McMoRan (FCX) $65.01 up 1.01% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $28.61 down 0.66% - global steel producer
POSCO (PKX) $94.08 up 0.59% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0,53% to $1,326,613.01 (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

Note 1: Photograph of Barkdull Spencer standing with Elko Mayor Mike Franzoia by Christopher LaMarca (Redux Pictures)

As I wrote last August "A second enjoyable aspect of the Fortune article are the images by San Fransisco photographer, Christopher LaMarca (Redux Pictures). There is a photo gallery of 14 terrific pictures of Elko's folks and environs including today's headline image of White King. In addition to Curtis Calder some of those photographed you may know: Mayor Mike Franzoia, Elaine Spencer (Economic Diversification Authority), rancher Jimmy Elison with his sons Josh and Jared, local bikers 'Biggin' and 'ZZ', and Madame 'Victoria'."

Headline photograph by Mariana Titus

1 comment:

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