Thursday, June 24, 2010
General Moly on Track - Is the Global Economy?
It is 5:49AM. Have a cup of Thor's Thunderous java and let's scratch our heads on what's changed since I hit the road earlier this week. We looked like we were in pretty good shape Monday with copper over $3/lb and the Eureka Miner's Index (EMI - what's this?) comfortably over 100 at 122.5. Yesterday, copper was sub-$3/lb again and the EMI had slumped to a below-par 88.0. Maybe the ole Colonel should be happy he was shoving highway under the floorboard instead of worrying about these goofy markets.
The Wall Street Journal has a pretty good summary this morning of what has been spooking investors:
NEW YORK—Stocks fell as worries about the global economy persisted, despite better-than-expected reports on jobs and durable-goods orders in the U.S....However, investors continued to worry about the economy a day after the Federal Reserve's policy-making body kept its key interest rate near zero, as expected, but cast its policy statement with more downbeat language. "Financial conditions have become less supportive of economic growth on balance, largely reflecting developments abroad," namely in Europe, the central bank said in its Wednesday statement. (WSJ, 6/24/2010)
Nuts. The same old culprits - Europe and our own sputtering recovery. Interestingly, the 10-year Treasury is plumbing new lows in yield near the border of 3% (3.081%) as more investors seek safe haven in U.S. bonds over gold (remember, lower bond yields mean higher price driven by demand). Gold has fallen from its lofty $1,260/oz altitude to a more sane flight path (COMEX gold 1,233/oz) with the U.S. dollar on the rise. The Report has been cautioning that the gold and the dollar are heading back to their more typical inverse relation signaling a sea change since early this month. This chart of gold (orange) and the dollar (blue) shows that the dollar trending higher with gold falling in recent weeks:
A mixed story, pardner. For the metals and miners to have a sustainable rally we need two things - low interest rates and less marketplace fear. The former is looking good with some folks forecasting that the Fed will maintain its low interest rate stance until the end of 2011. The recent 10-year Treasury yields support this outlook. The VIX (what's this?) is less than 30 but greater than 25; somewhere between mild panic and sort-of-scary. We need to get below 25 (like this Monday) before there can be much hope for improvement in our sector. In the meantime expect to see more warning lights coming on the the Eureka Outlook Dashboard (upper right, what's this?) and a sub-par EMI.
Let's end with some good news - General Moly (GMO) announced yesterday that things are on track with a Preliminary Draft Environmental Impact Statement (PDEIS) completion anticipated next month and an update on the water rights issue:
GENERAL MOLY ANNOUNCES SIGNIFICANT MILESTONE IN MT. HOPE PERMITTING EFFORT (6/23/2010)
Here are the portions of this press release that relate to schedule:
The Company anticipates that the PDEIS will be completed next month and provided to Cooperating Agencies (County of Eureka, Nevada Department of Wild Life, and National Park Service). Following a 25 business-day review period, the BLM will revise the document to accommodate comments from the Cooperating Agencies and develop the public DEIS, which the Company anticipates being published later this year. Following publication of the DEIS, the public will be allowed to review and comment on the DEIS and a Final EIS will be drafted prior to the issuance of the Record of Decision (ROD), which the Company anticipates by mid-2011. Initial production is anticipated to occur in the first half of 2013.
and with respect to water rights...
A necessary publication and protest period will likely push the State Engineer's water hearing to the later part of this year; however, the Company remains confident that it has every right to be granted access to water for the Mt. Hope project and that such action will be completed prior to initiation of construction activities at the project.
Enough talk, let's walk the walk:
Our newly minted Eureka Miner's Index (EMI - what's this?) is sub-par at 93.03; up from yesterday's 87.96 and the 6/7/10 low of 50.7. Remember an EMI greater than 100 is good times for metals & miners.
4-WD is ON - rough roads in the marketplace; The VIX or "fear index" is above 25; metals & miners remain on shaky timber with benchmark FCX returning to 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 back on for Commodity Reflation with copper trading below $3/lb
The GREEN light is turned on for Stable Markets the VIX staying below the 30 level (what's this?)
The YELLOW light is turned back on for Investor Confidence as the specter of further market corrections returns
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 $2.01 in early trading to $75.84 (August contract, most active); Gold is down $7.4 to $1259.1 (August contract, most active); Silver is down $0.442 to $18.460 (July contract); Copper is up $0.0590 to $2.9330 (July contract)
Western Molybdenum Oxide is at $16.00; European Molybdenum Oxide is at $15.00; LME moly 3-month seller's contract is $15.20, LME cash seller is $14.97
The DOW is down 74.67 points to 10,223.77; the S&P 500 is down 8.76 to 1083.28. The miners are mixed:
Barrick (ABX) $45.09 up 0.78%
Newmont (NEM) $59.71 up 1.07%
US Gold (UXG) $4.93 up 1.65%
General Moly (Eureka Moly, LLC) (GMO) $3.44 down 0.55%
Thompson Creek (TC) $9.94 down 0.70%
Freeport-McMoRan (FCX) $64.37 down 1.06% (a bellwether mining stock spanning copper, gold & molybdenum)
The Steels are down, (a "tell" for General Moly & Thompson Creek):
ArcelorMittal (MT) $30.51 down 1.68% - global steel producer
POSCO (PKX) $104.58 down 0.53% - South Korean integrated steel producer
The Eureka Miner's Grubstake Portfolio is is up 0.02% to $1,396,878.89 (what's this?).
Write Colonel Possum at firstname.lastname@example.org for answers to your questions or to request e-mail updates on the market
Headline photograph by Mariana Titus