Wednesday, June 30, 2010
Metals & Miners on Shaky Timber, Western Lithium Update
It is 9:23AM. A little late for the ole Colonel but things got busy in the shop - how about a mid-morning market report? We got a second pot going, pour yourself a hot one and let's see what's going on. The metals & miners are doing a little better today after being taken to the woodshed yesterday. It was disconcerting to see large pullbacks in our bellwether mining stock, Freeport-McMoran (FCX), and benchmark moly producer, Thompson Creek (TC). Thompson is in the green this morning but Freeport is continuing its slide just barely staying above $60 as copper continues to fall below the critical $3/lb level. As we witnessed in early April, both FCX & TC signaled trouble ahead for the sector before copper and the other miners rolled over for the May-June commodity tail spin.
Things are not looking too great for the broader markets either. The S&P 500 hit an intraday low yesterday of 1035.18 which is 15% below the 4/26 S&P 500 intraday high of 1219.8. Another 5% down and we are back in bear country (S&P 500 is down 20% at 975.8, a drop considered by many to signal a new bear market). With the current market sentiment, I think it is likely that we will see the S&P drop below 1,000 in the next several days or weeks; the DOW is already trading south of the psychologically important 10,000 mark.
Concerns about the health of the global recovery are at the source of these declines with new China growth worries and a Europe promising to enforce drastic fiscal tightening before their recovery has got any real legs. At home, the Labor Department's monthly jobs report on Friday is the most important upcoming market event. This morning's Automatic Data Processing Inc. (ADP) report indicated that private-sector jobs in the U.S. increased by only 13,000 last month; economists had expected the ADP to show a gain of 60,000 for June. The ADP survey tallies only private-sector jobs, while the Friday nonfarm payroll data released by the Bureau of Labor Statistics includes government workers.
On a more positive note, a better-than-expected report of Chicago-area business activity boosted industrial stocks and fears over the European banking system ebbed some. This has kept most stocks above water today even with the lousy ADP data. Stay tuned buckaroos.
Here is an interesting update from Western Lithium for those of you that have been following the lithium story in nearby Humboldt County:
Western Lithium Commences Continuous Pilot Test Production of Lithium Carbonate and Infill Drilling Campaign (Press release, 6/29/2010)
Western Lithium (TSX-V:WLC) plans to conduct several pilot tests in the U.S. and Europe to prove the economic feasibility of producing battery grade lithium carbonate from their large deposits in Kings Canyon. Their open pit mining of lithium carbonate should ultimately offer cost advantages over the brine-extraction-from-dry-lakes process used by most of today's lithium producers.
Western Lithium’s President, Jay Chmelauskas, sates, "We are focusing our attention on process optimization and cost reduction to include in our pre-feasibility study, planned to commence this Fall. We are going to continue to make lithium carbonate at various facilities, large and small, to further refine and define our process."
"With the race to roll out electric vehicles by a multitude of manufacturers in 2010 and 2011, we believe that the market is coming close to realizing the value of a new large scale source of domestic lithium from our Nevada project..."
The Report has been covering the Nevada lithium story since last September. If you want to get caught up on what's happening with lithium, vandium and other strategic metals important to our state and county you might want to start with this article which includes links to earlier blogs:
A Third Tank on Our Hill? Lithium & Vanadium Update (The Eureka Miner's Market Report, 3/22/2010)
Enough talk, let's walk the walk:
Our newly minted Eureka Miner's Index (EMI - what's this?) is sub-par at 73.71; up slightly from yesterday's 72.87 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 trading in the the low-$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 YELLOW light is turned on for Stable Markets the VIX above the 30 level (what's this?)
The YELLOW light is turned back on for Investor Confidence as further market corrections are likely
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 $0.15 in early trading to $75.79 (August contract, most active); Gold is down $4.4 to $1238.0 (August contract, most active); Silver is down $0.110 to $18.525 (July contract, most active); Copper is down $0.0470 to $2.8835 (September contract, most active)
Western Molybdenum Oxide is at $16.00; European Molybdenum Oxide is at $14.50; LME moly 3-month seller's contract is $15.64, LME cash seller is $15.42
The DOW is up 25.62 points to 9,895.92; the S&P 500 is up 5.76 to 1047.00. The miners are mostly up except Freeport:
Barrick (ABX) $45.68 up 1.51%
Newmont (NEM) $61.97 up 1.34%
US Gold (UXG) $5.12 up 3.23%
General Moly (Eureka Moly, LLC) (GMO) $3.19 up 0.63%
Thompson Creek (TC) $9.01 up 1.01%
Freeport-McMoRan (FCX) $60.81 down 0.43% (a bellwether mining stock spanning copper, gold & molybdenum)
The Steels are mixed, (a "tell" for General Moly & Thompson Creek):
ArcelorMittal (MT) $27.55 down 0.18% - global steel producer
POSCO (PKX) $96.10 up 1.33% - South Korean integrated steel producer
The Eureka Miner's Grubstake Portfolio is is up 0.95% to $1,356,393.55 (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