"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, July 30, 2010

GDP "Less Better" - General Moly (GMO) Reports


Morning Miners!

It is 6:03 AM. Have a cup of Raine's Red Label TGIF and let's pack this week up. I just watched the government's latest gross domestic product (GDP) numbers come in on CNBC Business News. The interesting thing about this release was a revision of all estimates going back three years to a time before the Great Recession. Unlike historians, I guess economists can change the past to their liking. They are also the only professionals I know that enjoy full employment during economic hard times. Not a bad gig - nobody even cares if you've been wrong most of the time.

Last quarter the GDP rose at an annualized rate of 2.4% which doesn't seem too bad if you accept that U.S. growth prospects won't be as rosy as previously thought. In the first quarter, the economy grew by 3.7%, revised up from an originally reported 2.7% increase. In other words we did better then but now we're slowing down faster than the propeller heads figured earlier this year. In fact, the government now says growth estimates all the way back to the start of 2007 should be lower and the economy's exit from the mineshaft was weaker than previously estimated. No free coffee for these jokers in my break room.

Rick Santelli, the "tell it like it is" CNBC reporter from Chicago's CME trading floor, summed up this morning's report. He said last year at this time we were "less worse" than expected and now we are "less better". Rick gets a free cup on the Colonel, thank you Rick.


So how did the metals & miners take all this? As broader markets opened, fear spiked and the miners wobbled except for the gold diggers. COMEX gold ticked up to $1173.9/oz just prior to the open. I decided to wait until mid-morning New York time to see if things might improve. By 11:00 a.m. EDT (8:00 a.m. our time) COMEX copper was hitting $3.3030/lb, a level not seen since May 4th, and gold bounced to $1178.4/oz. By this time all of our favorite miners were in the green. The Eureka Miner's Index(EMI) remains above 120, a level held for five of the last six days. So much for GDP (for now).

The ole Colonel does have one concern. We need to have more days like this with gold and copper moving in the same direction (Will Gold & Copper Ever Make Up?). Copper and gold have been in a wicked inversion for some time and I'm going to have my doubts about the sustainability of this copper rally if gold doesn't return to $1200/oz country soon. As a precaution I pitched a little Freeport-McMoRan (FCX) off the buckboard just in case.

General Moly (GMO) released their quarterly results this morning:

GENERAL MOLY ANNOUNCES SECOND QUARTER RESULTS (Press Release, 7/30/2010)

There are some interesting details on the Hanlong financing progress and delays in Chinese government approvals. As CEO, Bruce Hansen, summarizes:

"Both Hanlong and General Moly remain committed to our long-term significant relationship and closing this transaction. We do not anticipate the delay in receiving Chinese government approval to impact the overall Mt. Hope project development timeline as permitting continues to be on the critical path to Mt. Hope's development."

Seth Foreman's molybdenum market analysis adds some insight into the recent but moderate down trend in moly price:

"Over the second quarter of 2010, according to Platts Metals Week, spot molybdenum prices peaked at $17.92 per pound in mid-April and traded lower toward $15 per pound by the end of June. More recently, prices have continued to trend lower and are currently approximately $14 per pound. Reports from a variety of sources indicate that inventory levels of the metal are low, but both consumers and intermediaries are reluctant to purchase and rebuild inventories given the lack of consensus around global economic growth levels.

China remains a net importer of moly through May, importing approximately 6.25 million net pounds year-to-date. Low levels of raw moly exports from China continue to force Korean and Japanese steel producers to source moly from the West." (Press release, 7/30/2010)

Stay tuned and have a good weekend, pardner.

Enough talk, let's walk the walk:

The Eureka Miner's Index(EMI) remains above par at 122.67, slightly down from yesterday's 124.73 and a big improvement from the 6/7/10 low of 50.7. Remember an EMI greater than 100 is good times for metals & miners (NOTE: at market close Friday, 7/23, the EMI was 112.61)

4-WD is ON - rough but improving roads in the marketplace; The VIX or "fear index" is below 25; metals & miners remain on shaky but much firmer timber with benchmark FCX trading in the low-$70s and closing on its 200-day average of $75.4 (our new warning level, 7/27 update), 10-year Treasurys are safely below 4% preserving a low-interest rate environment

The GREEN light is turned back on for Commodity Reflation with copper trading above $3/lb

The GREEN light is turned on for Stable Markets the VIX below the 30 level (what's this?)

The GREEN light is turned back on for Investor Confidence as investors return to equities.

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, U.S. House committee debates miner workplace safety bill

Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)

NYMEX/COMEX: Oil is down $0.63 in early trading to $77.73 (September contract, most active); Gold is up $2.2 to $1178.4 (December contract, most active); Silver is up $0.363 to $17.980 (September contract, most active); Copper is up $0.0125 to $3.3030 (September contract, most active)

Western Molybdenum Oxide is $14.00; European Molybdenum Oxide is $14.55; LME moly 3-month seller's contract is $15.20, LME cash seller is $14.97

The DOW is up 5.75 points to 10,472.91; the S&P 500 is up 0.66 to 1102.19. The miners are happy:

Barrick (ABX) $40.99 up 1.11%
Newmont (NEM) $56.15 up 0.77%
US Gold (UXG) $4.74 up 0.21%
General Moly (Eureka Moly, LLC) (GMO) $3.41 up 2.10%
Thompson Creek (TC) $9.25 up 2.78%
Freeport-McMoRan (FCX) $71.31 up 0.81% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $30.85 down 0.29% - global steel producer
POSCO (PKX) $104.70 down 1.99% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.68% to $1,374,689.62 (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 of Mariana Titus by Mariana Titus

Thursday, July 29, 2010

Red Metal Rally - Cortez & Goldstrike "Strong Performance"


Morning Miners!

It is 6:07 AM. Have a mug of Thor's Thunderous Joe and let's holler Yee-ha! Some mornings just start out well: COMEX copper is now besting its 12-week high at $3.2820 and although gold is still muddling about at the $1160/oz level, Barrick posted a terrific report this morning. Second quarter profits soared on record gold prices in June (remember $1260/oz) and they're raising their dividend 12 cents - a 20% increase. I know the skeptics are already saying "that was then, this is now...gold prices are in decline, here comes deflation!" Phooey.

As we said yesterday, the Report will not be surprised to see gold jump back in the saddle with the base metals if the copper rally continues to show strength (Will Gold & Copper Ever Make Up?). Another sign of improving times is the Barrick dividend boost. Companies do not raise dividends if they think there is bad news around the corner - no CEO wants to give than take back a dividend because they're outlook proves wrong to the downside. Here's the morning link to their press release:

Barrick Reports Q2 2010 Financial and Operating Results (Press Release, 7/29/2010)

For those of us with a stake in Nevada, there is welcome news about strong performance from both Cortez and Goldstrike mining operations:

"The Cortez property continued to exceed plan, producing 0.29 million ounces at total cash costs of $308 per ounce on higher than expected grades from the Cortez Hills open pit and underground. Cortez Hills continues to operate under the terms of the tailored injunction issued by the District Court while the Bureau of Land Management completes a Supplementary Environmental Impact Study (SEIS) on three aspects identified by the 9th Circuit Court of Appeals. The Company continues to expect completion of the SEIS and a Record of Decision to be issued by year-end.

The Goldstrike operation also performed ahead of plan, producing 0.30 million ounces at total cash costs of $566 per ounce in Q2 primarily due to better than expected grades from the open pit and higher roaster throughput. As planned, Goldstrike is expected to access higher grade material in the second half of the year." (Press Release, 7/29/2010)

Oddly, I didn't find any reference to Ruby Hill Mine performance. Maybe your eyes are better than mine, let me know if you find it.

Now that Barrick has diversified into copper mining, check these numbers out:

"Q2 copper production was 102 million pounds at total cash costs of $1.12 per pound and the Company remains on track with its full year copper production guidance of 340-365 million pounds at total cash costs of $1.10-$1.20 per pound." (Press Release, 7/29/2010)

If copper can stay north of $3/lb, the ole Colonel is confident that we will see handsome Barrick profits from this new venture for some time to come.

And what about that red metal rally? Pictures are worth an ore cart of words. Here are the copper spot prices and London Metal Exchange declining inventories:




I'll close with the observation that the Eureka Miner's Index(EMI) has stayed above the 120 level for four out of the last five days...not too bad, pardner.

Enough hollering Yee-ha, let's walk the walk:

The Eureka Miner's Index(EMI) remains above par at 124.73, recovering nicely from yesterday's dip to 114.76 and a big improvement from the 6/7/10 low of 50.7. Remember an EMI greater than 100 is good times for metals & miners (NOTE: at market close Friday, 7/23, the EMI was 112.61)

4-WD is ON - rough but improving roads in the marketplace; The VIX or "fear index" is below 25; metals & miners remain on shaky but much firmer timber with benchmark FCX trading in the low-$70s and closing on its 200-day average of $75.4 (our new warning level, 7/27 update), 10-year Treasurys are safely below 4% preserving a low-interest rate environment

The GREEN light is turned back on for Commodity Reflation with copper trading above $3/lb

The GREEN light is turned on for Stable Markets the VIX below the 30 level (what's this?)

The GREEN light is turned back on for Investor Confidence as investors return to equities.

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, U.S. House committee debates miner workplace safety bill

Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)

NYMEX/COMEX: Oil is down $0.11 in early trading to $76.88 (September contract, most active); Gold is up $0.8 to $1163.2 (December contract, most active); Silver is up $0.129 to $17.570 (September contract, most active); Copper is up $0.0365 to $3.2820 (September contract, most active)

Western Molybdenum Oxide is $14.00; European Molybdenum Oxide is $14.55; LME moly 3-month seller's contract is $14.74, LME cash seller is $14.54

The DOW is up 67.82 points to 10,565.70; the S&P 500 is up 7.46 to 1113.59. The miners are happy:

Barrick (ABX) $40.82 up 1.97%
Newmont (NEM) $55.71 up 0.56%
US Gold (UXG) $4.62 up 0.43%
General Moly (Eureka Moly, LLC) (GMO) $3.41 up 4.28%
Thompson Creek (TC) $9.26 up 2.09%
Freeport-McMoRan (FCX) $72.22 up 2.61% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $31.69 up 1.86% - global steel producer
POSCO (PKX) $109.22 up 2.29% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 1.49% to $1,376.038.63 (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

Wednesday, July 28, 2010

Will Gold & Copper Ever Make Up? Newmont (NEM) Rocks


Morning Miners!

It is 6:02 AM. Have a brimming cup of hump day java and let's see which side of the camel's hump we are on today. Copper and gold have been in a domestic quarrel since the red metal hit new highs for the year in April. Maybe it was jealousy but gold dumped copper and went on his separate way. Copper melted in her despair - as the old Neil Sedaka song goes, "breaking up is hard to do."

We got used to seeing copper fall and gold rise through the harrowing days of May and June. The double-dip-gloom-doom headlines crushed the metals & miners and gold couldn't have been happier as investors raced to its lustrous safe haven - revenge is sweet. I awoke this morning to 3-month lows for gold and 11-week highs for copper; the tables have turned indeed. Slightly rosier news from the U.S., Europe and China have investors thinking Armageddon may not be Fall's surprise after all. The red metal has regained her confidence, lost a lot of weight in the declining LME inventories and is looking quite chipper north of $3.20/lb. Gold, on the other hand, plumbs new depths hanging out in the seedy neighborhood of $1160/oz. Will these two ever make up again?

The answer may lie in the recent past. Here is 1-year chart of the copper (green) and gold (red):


Notice the happier days of July through November 2009 when gold and copper rode in the same saddle and galloped out of the Canyon of Recession into the sunlight. Things changed in late November beginning with the first sovereign debt crisis that started in Dubai. This was soon followed by Greece's debt woes and gold and copper began their rocky back-and-forth relation. Copper peaked as things looked to improve in the spring followed by their big breakup in late April. Interestingly, the copper and gold curves look like mirror images since then.

I think the answer to today's question is fairly simple. The ole Colonel believes that if global growth is intact but at a slower pace than originally thought, gold and copper will soon be back in the saddle again. They may not be galloping this time but a steady trot would be welcome. Economists will return to murmuring about inflation risks down the road and gold will be plenty happy to oblige that concern. Copper, thrilled to be with her old beau, will stay high in the saddle with moderate increases in demand from China and the U.S. Here's a Bloomberg article today that makes a case for improving Chinese demand:

Copper Rises to 11-Week High in London on Optimism About Demand in China (Anna Stablum in London, Bloomberg, 07/28/10)

On the other hand, if the U.S. economic news continues to sour we could fall into a period of disinflation (i.e. declining rate of inflation) that could eventually bring us to the dreaded doors of deflation. For example, we learned today that demand for U.S. manufactured durable goods fell in June for a second consecutive month. Signs that the manufacturing sector expansion is slowing are not good and the possibility of disinflation is neither good for gold or copper prices. Copper and gold may stay together for this scenario but they'll be squabbling in a much cheaper flat.

If it's so damn simple, what's the answer Colonel? You know me, I'm a born optimist and to prove it I threw a little silver (which is at 7-week lows) in the buckboard this morning. The ole boy wouldn't do that if he didn't think copper and gold weren't getting together again and fixin' to live high in the Canyon of Better Days. What's gold's refrain?

They say that breaking up is hard to do
Now I know, I know that it's true
Don't say that this is the end
Instead of breaking up I wish that we were making up again

I beg of you, don't say goodbye
Can't we give our love another try
Come on baby, let's start a new
'Cause breaking up is hard to do


(Neil Sedaka, 1962)

By the by, Newmont (NEM) reported a good quarter this morning and that ain't all bad either:

Newmont Second Quarter 2010 Adjusted Net Income Increases 79% to $377 million ($0.77 per share); Increases Quarterly Dividend by 50% (Press release, 7/58/2010)

The Nevada part of the report is here if you are in a hurry to get back to work:

"Nevada produced 420,000 equity ounces of gold at costs applicable to sales of $601 per ounce during the second quarter. Second quarter 2010 production was slightly higher than the year ago quarter due to higher underground production at Midas and Leeville, partially offset by lower mill throughput at Carlin and Twin Creeks and lower leach tons placed. Costs applicable to sales per ounce increased 9% in the second quarter of 2010 from 2009 due to additional surface mining costs related to the 2009 geotechnical event at Gold Quarry.

The Company continues to expect 2010 equity gold production from Nevada of approximately 1.6 to 1.725 million ounces at costs applicable to sales of between $590 and $630 per ounce." (Press release, 7/58/2010)

Enough love stories, let's walk the walk:

The Eureka Miner's Index(EMI) remains above par at 114.76, down from yesterday's 129.77 and a big improvement from the 6/7/10 low of 50.7. Remember an EMI greater than 100 is good times for metals & miners (NOTE: at market close Friday, 7/23, the EMI was 112.61)

4-WD is ON - rough but improving roads in the marketplace; The VIX or "fear index" is below 25; metals & miners remain on shaky but firmer timber with benchmark FCX trading in the low-$70s and closing on its 200-day average of $75.4 (our new warning level, 7/27 update), 10-year Treasurys are safely below 4% preserving a low-interest rate environment

The GREEN light is turned back on for Commodity Reflation with copper trading above $3/lb

The GREEN light is turned on for Stable Markets the VIX below the 30 level (what's this?)

The GREEN light is turned back on for Investor Confidence as investors return to equities.

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, U.S. House committee debates miner workplace safety bill

Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)

NYMEX/COMEX: Oil is down $0.38 in early trading to $77.12 (September contract, most active); Gold is up $3.2 to $1161.2 (August contract, most active); Silver is down $0.161 to $17.465 (September contract, most active); Copper is up $0.0290 to $3.2405 (September contract, most active)

Western Molybdenum Oxide is $14.00; European Molybdenum Oxide is $14.55; LME moly 3-month seller's contract is $14.74, LME cash seller is $14.54

The DOW is down 21.72 points to 10,515.97; the S&P 500 is down 4.89 to 1108.95. The miners are mixed:

Barrick (ABX) $40.15 up 0.29%
Newmont (NEM) $55.70 down 0.14%
US Gold (UXG) $4.62 up 0.65%
General Moly (Eureka Moly, LLC) (GMO) $3.31 down 2.93%
Thompson Creek (TC) $9.15 doen 2.35%
Freeport-McMoRan (FCX) $70.72 up 1.27% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $31.37 down 2.03% - global steel producer
POSCO (PKX) $106.90 down 1.24% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.49% to $1,360,642.43 (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

Tuesday, July 27, 2010

Maybe Things Aren't So Bad After All (Part II)


Morning Miners!

It is 5:43 AM. Have a cup of Tuesday Joe and let's feel better about the markets. On July 14 the Report pointed to some signs of improving times (Maybe Things Aren't So Bad After All). I think today is high time to add to our list of happys with the S&P 500 recovering its losses for the year and copper, our favorite canary in the global recovery mineshaft, flying like a proud eagle again.

Mid-July declining copper inventories at the London Metal Exchange (LME) together with strong earnings reports from technology giant Intel and South Korean steelmaker POSCO caused the ole Colonel to smile a little. We were still flying through macro-economic clouds of gloom but our instruments said we may be climbing higher soon. In the last two weeks with more strong earnings reports and the European bank stress tests behind us, the outlook continues to improve.

Doubts about European sovereign debt have weighed on the markets for months and devastated the metals & miners in May and June. There was talk of the euro reaching parity with the dollar and our new Eureka Miner's Index(EMI) hit bottom on June 7th at 50.7. About that same time the falling euro reversed direction and has been gaining on the U.S. dollar ever since (on average). Here is a 3-month plot of the euro (orange) versus the S&P 500 (blue):


Notice that the broader market turnaround happened during the first week in July and now the euro and S&P are trending higher together. In the last 24 hours the euro broke $1.30 although it has retreated slightly to $1.2989 this morning. Another interesting plot is the euro (orange) versus COMEX gold (blue):


Gold, acting as a safe haven play, peaked in late June and has been trending down as the euro trends up for most of this month. COMEX copper has been on a tear hitting $3.232/lb in early trading. It's value with respect to gold (i.e. "how many pounds of copper can I buy for an ounce of gold?") has risen dramatically:

June 7 448.59 lbs/oz (Au:Cu ratio)
July 27 365.10 lbs/oz (Au:Cu ratio)

Another good ratio to look at is gold-to-silver (or "how many ounces of silver can I buy with an ounce of gold?"):

June 7 68.33 (Au:Ag ratio)
July 27 65.01 (Au:Ag ratio)

When economic times are good, this ratio usually falls in the 50-56 range so we're headed in the right direction. Other good signs are the S&P 500 VIX or "fear index" falling below the key 25 level and Freeport-McMoRan (FCX) closing rapidly on its 200-day average (which is now $75.4). The broader markets are open now and FCX continues a 7-day rally to hit $71.76 in early trading. Maybe things aren't so bad after all buckeroos.

Enough bubbly-bubbly talk, let's walk the walk:

The Eureka Miner's Index(EMI) remains above par at 129.77, up from yesterday's 121.24 and a big improvement from the 6/7/10 low of 50.7. Remember an EMI greater than 100 is good times for metals & miners (NOTE: at market close Friday, 7/23, the EMI was 112.61)

4-WD is ON - rough but improving roads in the marketplace; The VIX or "fear index" is below 25; metals & miners remain on shaky but firmer timber with benchmark FCX trading in the low-70s and closing on its 200-day average of $75.4 (our new warning level, 7/27 update), 10-year Treasurys are safely below 4% preserving a low-interest rate environment

The GREEN light is turned back on for Commodity Reflation with copper trading above $3/lb

The GREEN light is turned on for Stable Markets the VIX below the 30 level (what's this?)

The GREEN light is turned back on for Investor Confidence as investors return to equities.

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, U.S. House committee debates miner workplace safety bill

Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)

NYMEX/COMEX: Oil is up $0.57 in early trading to $78.86 (September contract, most active); Gold is down $3.1 to $1180.0 (August contract, most active); Silver is down $0.050 to $18.150 (September contract, most active); Copper is up $0.0090 to $3.2320 (September contract, most active)

Western Molybdenum Oxide is $14.00; European Molybdenum Oxide is $14.50; LME moly 3-month seller's contract is $14.29, LME cash seller is $14.08

The DOW is down 14.46 points to 10,539.89; the S&P 500 is up 2.52 to 1117.52. The miners are mixed:

Barrick (ABX) $41.22 down 1.27%
Newmont (NEM) $56.82 down 2.20%
US Gold (UXG) $4.69 up 0.64%
General Moly (Eureka Moly, LLC) (GMO) $3.48 down 0.17%
Thompson Creek (TC) $9.75 up 2.31%
Freeport-McMoRan (FCX) $71.76 up 0.73% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $32.70 up 0.36% - global steel producer
POSCO (PKX) $110.00 up 0.36% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.45% to $1,395,643.68 (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

Monday, July 26, 2010

Copper Breaks 10-Week High - LME Moly New Low


Morning Miners!

It is 5:59 AM. Put a little ether in the Monday coffee and let's see if we can start your engine. There she goes, let's get to work. The latest headline from the London Metal Exchange (LME) may set the tone for this week, "Base metals pare gains amid directionless broader market." We've had a pretty decent run-up in the base metals since last Tuesday: COMEX copper broke a 10-week high this morning and the Eureka Miner's Index (EMI) is back in above-par territory closing at 122.6 Friday.

We got through the European bank stress tests so-so, the U.S. dollar Libor rates are continuing to come down and fear is receding from the marketplace (i.e. the VIX is below 25) - that's all good. There is, however, a pervasive feeling of what's next? There is buzz about the debt problems of our own states, 40 out of 50 are on shaky timber. Will the next Greece be California? That's certainly a bigger economy but also much more diverse. If so, would there be another government bailout or in the present environment, severe fiscal austerity?

Nuts, all that gives me a headache. Let's stick with basics - the base metals are recovering and that's good enough for me. LME inventories are continuing to fall and that's bullish for copper, lead and nickel although aluminum and zinc are starting to build from lows. Copper dropped to a new low of 416,525 metric tons, 25% down from a February high (see note 1):


Miss Moly fell through a key lower bound ($30,000/metric ton or $13.60/lb) on the LME 3-month buyer contract so we'll need to monitor that closely (see molybdenum weekly roundup below).

Gold appears range bound between $1180-1200/oz on the low side and $1200-1220/oz on the high side. This Report chose $1195/oz for its July nominal earlier this month, COMEX gold is $1190.6/oz this morning. David Levenstein, one of the analysts that we follow in South Africa, wrote a good article on this two-tier trading range this morning:

Gold remains muted, despite bullish signals (David Levenstein, MineWeb, 7/26/2010)

I think for now I'm just going to be happy we're back in 100 territory on the EMI; the markets just opened and according to the Wall Street Journal positive news is lifting the broader markets higher:

NEW YORK—U.S. stocks rose Monday, as FedEx issued a rosy outlook for the rest of the year and new home sales jumped. (WSJ, 7/26/2010)

Stay tuned buckaroos, hopefully this helps sustain a metals rally. Here's now Miss Moly fared last week:


Weekly Molybdenum Roundup

Molybdenum prices remain in a close but stable range with Western moly oxide price now slightly below European moly and LME futures seller contracts. The 3-month & 15-month buyer contracts are showing some weakness at $13.38/lb ($29,500/metric ton). The Report's mid-range price target for 2010 moly prices is $15.71/lb.

Western Moly Oxide (FeMo65) sits at $14.00/lb (the price reported by Infomine and tracked by Base Metals on the General Moly Website)

Moly Oxide, Europe (Mo Drummed Molydbic Oxide EU) moves up slightly to 14.30/lb (the price reported in the Metals Bulletin)

LME Futures Contracts

LME cash seller is at $31,050/metric ton $14.08/lb

3-Month (Buyer) $29,500/metric ton $13.38/lb
3-Month (Seller) $31,500/metric ton $14.28/lb

15-Month (Buyer) $29,500/metric ton $13.38/lb
15-Month (Seller)$31,500/metric ton $14.28/lb/lb

Here is a chart of the LME 3-month contract (seller) from the February launch to the present:



Eureka Miner's Index (EMI)

Below is a chart of the Eureka Miner's Index (EMI) through Friday's close. The EMI gives us the market temperature for the sectors that have the greatest impact on mining in Eureka County.


(a larger, more readable chart is near the bottom of this blog page)

The Eureka Miner's Index is above-par at 121.24, slightly down from Friday's 122.61 and a big improvement from the 6/7/10 low of 50.7. Importantly, the high and low trends (dotted lines) are both positive since the EMI high on 6/25. Remember an EMI greater than 100 is good times for metals & miners.

Enough talk, let's walk the walk:

4-WD is ON - rough but improving roads in the marketplace; The VIX or "fear index" is below 25; metals & miners remain on shaky but firmer timber with benchmark FCX trading in the low-$70s closing in on its 200-day average of $76 (our new warning level), 10-year Treasurys are safely below 4% preserving a low-interest rate environment

The GREEN light is turned back on for Commodity Reflation with copper trading above $3/lb

The GREEN light is turned on for Stable Markets the VIX below the 30 level (what's this?)

The YELLOW light remains on for Investor Confidence as further market corrections are possible but less 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, U.S. House committee debates miner workplace safety bill

Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)

NYMEX/COMEX: Oil is down $0.20 in early trading to $78.78 (September contract, most active); Gold is up $2.8 to $1190.6 (August contract, most active); Silver is up $0.114 to $18.215 (September contract, most active); Copper is up $0.0220 to $3.2070 (September contract, most active)

Western Molybdenum Oxide is $14.00; European Molybdenum Oxide is $14.30; LME moly 3-month seller's contract is $14.28, LME cash seller is $14.08

The DOW is up 60.40 points to 10,485.02; the S&P 500 is down 6.61 to 1109.27. The miners are mixed:

Barrick (ABX) $41.99 down 0.90%
Newmont (NEM) $58.10 down 1.61%
US Gold (UXG) $4.78 down 0.42%
General Moly (Eureka Moly, LLC) (GMO) $3.34 up 1.21%
Thompson Creek (TC) $9.39 up 0.32%
Freeport-McMoRan (FCX) $71.12 up 0.06% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $32.59 down 1.09% - global steel producer
POSCO (PKX) $108.57 down 0.46% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.08% to $1,393,270.70 (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

Note 1: The LME copper inventory high for the year occurred on 2/19/2010 at 555,575 metric tons

Headline photograph by Mariana Titus

Friday, July 23, 2010

Eureka Housing Shortage - Barrick Now, General Moly Soon


Morning Miners!

It is 6:04 AM. Let me pour you a brimming cup of Raine's delicious Red Label TGIF coffee and we'll start the day with a quick story.

As the ole Colonel lowered his flag some time last month, he was approached by two deputy sheriffs. The reptilian area of the human brain that controls basic motor skills emits an involuntary "Uh-oh" in such circumstances. Not to worry, it was just a friendly visit - one of the truly nice things that happen in rural Nevada. After we chatted about the weather, one of the deputies asked me if I intended to reopen the trailer park; he needed a place to put his trailer. My flagpole is in the middle of an abandoned trailer park built in the 1960s to provide miners a place to stay as Hecla Mining attempted to reopen the old Ruby Hill Mine.

Similar to problems encountered in the late 1800s, the Hecla underground mining effort was plagued by water and the operation and trailer park were soon closed. Several years ago Homestake Mining and now Barrick Gold found great success in the open pit approach to mining Ruby Hill. The widening pit gets closer to my backyard every day.

Like the deputy searching for trailer spots, Barrick needs more housing to support its expanded efforts. Dwarfing that need, General Moly (i.e. subsidiary, Eureka Moly LLC) expects to start major mine construction next summer for their Mt. Hope molybdenum project. Pardner, we got a housing shortage in Eureka!

This is not news to the folks that live in this small northern Nevada town, housing has been critically short here for quite a while. No, sorry - the Ruby Hill trailer park will remain mothballed; Mariana and I enjoy our unobstructed view of Diamond Valley.

Fortunately, Barrick already has 48 housing units which include apartments and houses which lie just north of my place at the end of Nob Hill. They plan to build four more houses this year in their subdivision followed by multiple-family housing next year. General Moly got a good start at earthwork northeast of the Barrick housing but had to stop development of this housing site when the economy nose-dived and their moly project was delayed. Recently, Eureka County has taken over this project (General Moly Good News, 7/8/2010) which should prove a win-win for both our town and their mine.

Adella Harding, mining editor of the Elko Daily Free Press (and Mining Quarterly Magazine) wrote an excellent article on this creative solution to the housing shortage earlier this week:

Eureka County addresses housing needs (Elko Daily Free Press, 7/21/2010)

Of course, the devil is always in the details. Eureka residents were encouraged to to ask questions about the plan Wednesday night during a community meeting co-sponsored by Eureka County Commissioners and the Nevada Rural Housing Authority (NRHA)


The ole Colonel couldn't attend but a good friend of the Report, whose opinion I greatly respect, provided me a summary of the affair together with his personal observations. He began by noting that the meeting, announced via the latest county newsletter, had a "pretty decent turn out."

There were naturally "lots of questions and concerns" at this point in the planning process. The first step for the NRHA is to conduct a housing needs study which will also take into consideration community needs and concerns, "The NRHA has said time and again that their goal is to create a housing development that is appealing to potential buyers and acceptable to the existing community."

He went on to observe,, "Unfortunately, I don’t think they [NHRA] were met with the enthusiasm they were hoping for last night. Many citizens are concerned about the county’s role in the development and what it may ultimately cost us as taxpayers. Until the study is completed, that’s somewhat of an unknown; however, the county has agreed to assist NRHA with loan backing to help them get off the ground."

Apparently, stage one of the development will include two model homes, 50 apartment units and construction of the administration building which will be used for property and apartment management as well as lot and home sales. Lot sizes will be around 9500 square feet and home sizes can range from 1200 to 2000 square feet. Based on an average median income level of $64,500 for Eureka, price point is probably going to be from $130,000 to $175,000. NHRA plans to construct stick built structures and they have the 50 apartment units ready to be erected today.

My friend's personal opinion is that, "apartments and rental units are the most urgent need in Eureka right now..." and, "Permanent housing will more than likely come into play once the Mt. Hope project has been up and running for a while."

The NRHA is preparing to deliver a development plan to the commissioners by September 6th and if all is approved, construction could take place by November of this year.

He closed by saying, "A much faster track than we were on with Eureka Moly. Many more conversations to be had before this project can get its wheels spinning and gain some traction." Stay tuned buckaroos.

Enough talk, let's walk the walk:

The Eureka Miner's Index(EMI) remains above par at 112.72, down a bit from yesterday's 115.01 and a big improvement from the 6/7/10 low of 50.7. Remember an EMI greater than 100 is good times for metals & miners (NOTE: at market close Friday, 7/23, the EMI was 112.61)

4-WD is ON - rough but improving roads in the marketplace; The VIX or "fear index" is just above 25; metals & miners remain on shaky but firmer timber with benchmark FCX trading in the high-$60s but still 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 GREEN light is turned back on for Commodity Reflation with copper trading above $3/lb

The GREEN light is turned on for Stable Markets the VIX below the 30 level (what's this?)

The YELLOW light remains on for Investor Confidence as further market corrections are possible but less 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, U.S. House committee debates miner workplace safety bill

Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)

NYMEX/COMEX: Oil is down $0.44 in early trading to $78.86 (September contract, most active); Gold is up $1.5 to $1197.1 (August contract, most active); Silver is up $0.035 to $18.155 (September contract, most active); Copper is up $0.0045 to $3.1690 (September contract, most active)

Western Molybdenum Oxide is $14.00; European Molybdenum Oxide is $14.50; LME moly 3-month seller's contract is $14.29, LME cash seller is $14.08

The DOW is down 1.29 points to 10,321.01; the S&P 500 is down 2.32 to 1091.35. The miners are up:

Barrick (ABX) $42.72 up 1.16%
Newmont (NEM) $59.51 up 0.85%
US Gold (UXG) $4.69 up 0.64%
General Moly (Eureka Moly, LLC) (GMO) $3.20 unchanged
Thompson Creek (TC) $9.18 up 0.55%
Freeport-McMoRan (FCX) $69.75 up 1.41% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $32.61 up 1.15% - global steel producer
POSCO (PKX) $108.59 up 0.17% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.49% to $1,381,876.15 (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

Thursday, July 22, 2010

Copper Soars, CAT Hauls - Congress & Jobs Chill



Morning Miners!

It is 6:06 AM. Thor is back from his weekend romp in England - have a cup of his thunderous brew! No longer the terror of his younger days, our favorite Norseman has only a few postcards and trinkets to show for his trip. However, he did have enough zip to throw a thunderbolt or two into the London Metal Exchange (LME) as copper continues its rally hitting 2-month highs and breaking it's 200-day moving average. Here is the reaction of spot prices this morning:


Copper and oil are two important commodities to watch to gauge the health of global recovery. NYMEX Oil is also up today moving closer to $80 territory at $77.40/bbl; COMEX copper is trading at $3.1565/lb. The falling LME copper inventories we noticed earlier this month (Maybe Things Aren't So Bad After All) are apparently due to copper price differences between the LME and the Shanghai Futures Exchange. As explained by a recent article in the Wall Street Journal, Chinese copper prices have been about $60 more on a per-ton basis making it cheaper for traders to buy copper at the LME and ship it to China for delivery.

Caterpillar reported a knock out quarter this morning, another important piece of the global story. Here is a link to their press release:


Caterpillar Second-Quarter Profit up 91 Percent, Sales and Revenues Increase 31 Percent; Raises 2010 Outlook for Sales and Revenues and Profit (Press release, 7/22/2010)

Chairman and Chief Executive Douglas Oberhelman said, "We continue to be positive about the longer-term prospects for many of the industries we serve--like mining, energy, infrastructure, electric power and rail..." Good news for CAT skinners and miners, pardner.

Of course there is always a party pooper, this morning there may be two. I am starting to think that the U.S. Congress may be the greatest threat to our nascent global recovery. Yesterday they began two-day hearings with poor old Uncle Ben from the Federal Reserve. I'm sure he would rather go to his dentist for multiple root canals. As the testimony started at 2:00 p.m. (EDT) the S&P 500 rally dropped more than 18 points in sixty minutes (1.7% decline). He didn't say much more than he has said previously restating that the U.S. economic outlook was "somewhat weaker" but the setting and nattering questions from lawmakers chilled the markets.

The second headwind comes from a disappointing morning report from the U.S. Labor Department. According to the Wall Street Journal:

"In its weekly report Thursday, the U.S. Labor Department said the number of U.S. workers filing initial claims for jobless benefits increased by 37,000 to 464,000 in the week ended July 17. Economists had expected claims would rise by 21,000." (WSJ, 7/22/2010).

OK, the broader markets are open and it looks like we have a rally. All of our favorites are in the green and let's pray the second day of the Federal Reserve Chairman's testimony doesn't reverse all the positive earnings reports and outlooks of the past several days. The Eureka Miner's Index(EMI) just pegged 115, let's keep her above par buckaroos.

Enough talk, let's walk the walk:

The Eureka Miner's Index(EMI) is comfortably above par at 115.01, up from yesterday's 102.40 and a big improvement from 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 but improving roads in the marketplace; The VIX or "fear index" is below 25; metals & miners remain on shaky but firmer timber with benchmark FCX trading in the high-$60s but still 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 GREEN light is turned back on for Commodity Reflation with copper trading above $3/lb

The GREEN light is turned on for Stable Markets the VIX below the 30 level (what's this?)

The YELLOW light is on for Investor Confidence as further market corrections are possible.

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, U.S. House committee debates miner workplace safety bill

Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)

NYMEX/COMEX: Oil is up $0.84 in early trading to $77.40 (September contract, most active); Gold is down $5.1 to $1186.7 (August contract, most active); Silver is down $0.028 to $17.775 (September contract, most active); Copper is up $0.0635 to $3.1565 (September contract, most active)

Western Molybdenum Oxide is $14.00; European Molybdenum Oxide is $14.50; LME moly 3-month seller's contract is $14.29, LME cash seller is $14.08

The DOW is up 195.18 points to 10,315.71; the S&P 500 is up 23.33 to 1092.92. The miners are mixed:

Barrick (ABX) $42.42 up 1.66%
Newmont (NEM) $58.77 up 1.03%
US Gold (UXG) $4.57 up 2.74%
General Moly (Eureka Moly, LLC) (GMO) $3.12 up 1.63%
Thompson Creek (TC) $9.05 up 2.96%
Freeport-McMoRan (FCX) $69.28 up 4.87% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $31.78 up 5.23% - global steel producer
POSCO (PKX) $108.34 up 3.45% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 2.24% to $1,365,977.10 (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

Wednesday, July 21, 2010

General Moly (GMO) Goes to London - Freeport (FCX) & Copper Bounce


Morning Miners!

It is 5:58 AM. Have a cup of hump day java and I'll tell you why the ole Colonel thinks the metals & miners may be over the hump. Before we check out why, there is a fun item that just came over the news wire seven minutes ago. General Moly (GMO) is planning a trip to London:

General Moly, Inc. - Presents at Credit Suisse Group's Steel and Mining Conference, Sep-22-2010 . Venue: 20 Columbus Courtyard, Canary Whar, London E14 4DA, Greater London, United Kingdom (CapIQ, 7/21/2010)

As you may remember we trundled our Miss Moly across the pond last February so she could make her debut at the London Metal Exchange (LME) with cousin Cobalt (Miss Moly Flies to London). Molybdenum and cobalt futures contracts have been trading ever since as investors are slowly drawn to these two important minor metals. I'll bet she'll have a front row seat at the Credit Suisse shindig to hear the General speak. Exciting stuff, pardner.

OK, what else is making the Colonel feeling better about things this morning? Let's start with copper, our proud canary in the global recovery mineshaft. Look at her soar in the spot market this morning:


Here is some interesting background from Reuters on the recent bounce:

METALS-Copper at 3-wk high on buying, lower inventories
(Reuters, 7/21/2010)

This Report pointed to the decline LME copper inventories on 7/14 (Maybe Things Aren't So Bad After All). There has been a sense for some time that the Chinese were winding down their own copper stocks until market prices came down; now they are buying again. Will this be like the feverish restocking of 2009? No, their growth estimate has been lowered along with everyone else - that's not necessarily bad news if scaled back copper miners can still make a decent profit. That leads us to the next tidbit.

Our bellwether miner and copper giant, Freeport-McMoRan (FCX), started today with a better-than-anyone-expected second quarter report:

Freeport-McMoRan Copper & Gold Inc. Reports Second-Quarter and Six-Month 2010 Results (Press Release, 7/21/2010)

Here's a London Reuter's article on their solid results:

Miner Freeport-McMoRan's Q2 profit rises (Reuters, 7/21/2010)

Both profit and revenue beat the analysts' expectations through a very choppy spring for the red metal. The broader markets are now open and Freeport is getting a healthy pop following a 5.7% jump in share price yesterday. I just calculated today's Eureka Miner's Index(EMI) and it just nudges over par at 102.40. That's enough to put a smile on my face buckaroos.

I'll close with a more subtle indicator of improving conditions. On May 24th, the Report talked about the importance of tracking the 3-month U.S. dollar Libor rate (It's All About Oil, Gold, Copper...and Libor?). The London Interbank Offered Rate (or Libor) is a daily reference rate based on the interest rates that banks borrow unsecured funds from other banks in the London wholesale money market. It's calculated in 10 currencies including our own. As we pointed out in May, Libor is a measure of how well the banks trust each other - if Libor goes up, trust erodes; if Libor goes down, trust is reinforced. The health of domestic and global financial systems is key to sustaining the global growth story and is therefore important for the metals & miners and most all sectors of the equity markets. Here's how Libor has fared this year:

3-month USD Libor

January through March 0.25%
April 0.29%
May 0.35%
June 0.54%

The May-June turmoil in our markets closely coincides with the rise in Libor. The good news is that it has finally nudged down in the past few days. For the latest update, the 3-month USD Libor was 0.51%. Maybe we're turning a corner. Stay tuned, the European bank stress test results are due this Friday.

Enough talk, let's walk the walk:

The Eureka Miner's Index(EMI) is just above par at 102.40, up from yesterday's 84.57 and a big improvement from 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 but improving roads in the marketplace; The VIX or "fear index" just below 25; metals & miners remain on shaky but firmer timber with benchmark FCX trading above the mid-$60s but still 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 GREEN light is turned back on for Commodity Reflation with copper trading above $3/lb

The GREEN light is turned on for Stable Markets the VIX below the 30 level (what's this?)

The YELLOW light is on for Investor Confidence as further market corrections are possible.

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, U.S. House committee debates miner workplace safety bill

Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)

NYMEX/COMEX: Oil is up $0.82 in early trading to $78.40 (September contract, most active); Gold is up $1.6 to $1193.3 (August contract, most active); Silver is up $0.157 to $17.850 (September contract, most active); Copper is up $0.0915 to $3.0930 (September contract, most active)

Western Molybdenum Oxide is at $14.00; European Molybdenum Oxide is at $14.25; LME moly 3-month seller's contract is $14.74, LME cash seller is $14.54

The DOW is up 15.44 points to 10,245.40; the S&P 500 is up 1.30 to 1084.78. The miners are mixed:

Barrick (ABX) $41.87 up 0.14%
Newmont (NEM) $58.59 down 0.68%
US Gold (UXG) $4.59 unchanged
General Moly (Eureka Moly, LLC) (GMO) $3.16 down 0.32%
Thompson Creek (TC) $8.93 down 1.11%
Freeport-McMoRan (FCX) $66.63 up 3.59% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $30.70 up 0.72% - global steel producer
POSCO (PKX) $106.43 up 0.94% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.32% to $1,353,875.85 (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

Tuesday, July 20, 2010

A Look Back - The Best & Worst Days for the Eureka Miner


Morning Miners!

It is 6:00 AM sharp. Grab a cup of Tuesday brew and take a seat in the break room's new La-Z-Boy forecaster. As you may remember we fitted this old armchair in early July with a windshield and rear view mirrors so we could better see where we're headed in the markets and where we've been (The Death Cross & Armchairs). The ole Colonel said then:

"Rear view mirrors are great for historians but the rest of us need to look out the windshield occasionally or we're going to going to crash. I believe a predictive measure like the Eureka Miner's Index(EMI) should be used in combination with backward looking averages to achieve a balanced view of where we're headed in the marketplace." (The Eureka Miner's Market Report, 7/6/2010)

Lately the metals & miners have been bouncing down some pretty rough county roads and the Report has updated the EMI on a daily basis to gauge what lies ahead. Today I thought it might be useful to look in the rear view mirror for a moment to remember how good (and bad) things have been over the past several years.

If you are a miner and live in Eureka, you're probably recalling your best and worst days after reading the title of today's blog. Chances are they don't coincide with the peaks and valleys for local mining companies but their performance in the marketplace may very well affect your future.

The Great Recession started officially in December 2007. There's some debate about whether it's really over and some economists are predicting the dreaded double-dip. To date there have been some wild rides for the metals & miners; I've picked four dates to review these extremes and calculate a corresponding EMI. The dates correspond to the high and lows for copper prices and the broader market (S&P 500). We can use these numbers to better understand how far we've come as well as the depth of the market's mineshaft.

Things didn't get too bad for the metals & miners until after the collapse of Lehman Brothers in the Fall of 2008. Copper prices plummeted along with Freeport-McMoran (FCX) share price until both hit bottom early that December, roughly one year from the beginning of the recession.

Freeport is not one of our local mining companies but it is a very good bellwether since they mine not only copper but also gold and molybdenum as by-products. Freeport is also very well managed so their stock performance typically reflects marketplace reality and not the consequences of poor management decisions. Their worst day in the past three years occurred on 12/5/08. This is where FCX together some of our favorite miners, commodities, VIX and interest rates stood on that dark day (200-day moving averages are shown for the miners included in the EMI):

12/5/2008 (near the COMEX copper bottom):

COMEX copper $1.30/lb
COMEX gold $745.2/oz
COMEX silver $9.40/oz
NYMEX oil $35.00/bbl

Freeport-McMoran (FCX) $16.80 (200-day average $83.74)
Barrick (ABX) $25.14 (200-day average $37.45)
Thompson Creek (TC) $2.70 (200-day average $14.98)
General Moly (GMO) $0.97

VIX 59.93 (fear index > 25 is scary)
Au:Ag ratio 79.28 (gold/silver ratio, alternative measure of market fear)

10-year Treasury 2.657%

Eureka Miner's Index (with Au:Ag) = 1.30

Considering that an EMI of 100 is the dividing line for good & bad days for the metals & miners, an EMI of 1.30 on 12/5/08 was a bad-bad day, pardner!

Before we get too teary-eyed let's look at where things sat this spring when COMEX copper hit an intraday high of $3.5840 on 4/12/10:

4/12/2010 (at the COMEX copper top):

COMEX copper $3.5840/lb
COMEX gold $1163.4/oz
COMEX silver $18.440/oz
NYMEX oil $86.02/bbl

Freeport-McMoran (FCX) $84.40 (200-day average $76.00)
Barrick (ABX) $40.76 (200-day average $39.60)
Thompson Creek (TC) $14.00 (200-day average $12.40)
General Moly (GMO) $3.59

VIX 15.58 (fear index > 25 is scary)
Au:Ag ratio 63.09 (gold/silver ratio, alternative measure of market fear)

10-year Treasury 3.843%

Eureka Miner's Index (with Au:Ag) = 259.35 (that's more like it!)

From the ones to the two-hundreds, that's an EMI on the move buckaroos. Let's see how everyone fared during the broader market highs and lows. The S&P 500 hit a closing low of 676.53 on March 9th of last year:

3/9/2008 (S&P 500 bottom):

COMEX copper $1.70/lb
COMEX gold $905.7/oz
COMEX silver $12.7/oz
NYMEX oil $60.00/bbl

Freeport-McMoran (FCX) $32.32 (200-day average $83.74)
Barrick (ABX) $27.96 (200-day average $37.45)
Thompson Creek (TC) $2.84 (200-day average $14.98)
General Moly (GMO) $0.71 (near its 3-year low)

VIX 49.68 (fear index > 25 is scary)
Au:Ag ratio 71.32 (gold/silver ratio, alternative measure of market fear)

10-year Treasury 2.819%

Eureka Miner's Index (with Au:Ag) = 6.76 (horrible but better than 12/5/08)

To complete our comparison these are the numbers for the S&P 500 intraday high of 1219.8 on 4/26/2010:

4/26/2010 (at the S&P 500 top):

COMEX copper $3.5840/lb
COMEX gold $1155.3/oz
COMEX silver $18.370/oz
NYMEX oil $86.47/bbl

Freeport-McMoran (FCX) $80.4 (200-day average $76.00)
Barrick (ABX) $40.46 (200-day average $39.60)
Thompson Creek (TC) $13.80 (200-day average $12.40)
General Moly (GMO) $3.62

VIX 17.47 (fear index > 25 is scary)
Au:Ag ratio 62.891 (gold/silver ratio, alternative measure of market fear)

10-year Treasury 3.806%

Eureka Miner's Index (with Au:Ag) = 215.06 (less than 4/12/08 but still durn good!)

That's a lot of numbers to digest, pardner, but it might make you feel a little better about where we are today. The EMI has struggled to stay above par lately but is far and away better than the dark days of yore. The markets are open now and the EMI is 84.57, let's get back up in the two-hundreds and pray we never see single-digits again!

Enough talk, let's walk the walk:

The Eureka Miner's Index(EMI)) remains sub-par at 84.57, up from yesterday's 81.30 and a big improvement from 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 but improving roads in the marketplace; The VIX or "fear index" is above 25; metals & miners remain on shaky timber with benchmark FCX trading 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 back on for Commodity Reflation with copper trading below $3/lb

The GREEN light is turned on for Stable Markets the VIX below the 30 level (what's this?)

The YELLOW light is on for Investor Confidence as further market corrections are possible.

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, U.S. House committee debates miner workplace safety bill

Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)

NYMEX/COMEX: Oil is down $0.48 in early trading to $76.42 (September contract, most active); Gold is up $2.1 to $1184.00 (August contract, most active); Silver is up $0.057 to $17.600 (September contract, most active); Copper is up $0.0345 to $2.9725 (September contract, most active)

Western Molybdenum Oxide is at $14.00; European Molybdenum Oxide is at $14.25; LME moly 3-month seller's contract is $14.74, LME cash seller is $14.52

The DOW is down 83.93 points to 10,070.5; the S&P 500 is down 6.67 to 1064.58. The miners are up except for Thompson Creek:

Barrick (ABX) $41.68 up 1.29%
Newmont (NEM) $58.67 up 1.12%
US Gold (UXG) $4.48 up 2.99%
General Moly (Eureka Moly, LLC) (GMO) $3.02 up 1.00%
Thompson Creek (TC) $8.66 down 0.69%
Freeport-McMoRan (FCX) $62.89 up 3.34% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $29.83 up 0.61% - global steel producer
POSCO (PKX) $103.71 up 2.21% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 1.04% to $1,322,024.82 (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

Monday, July 19, 2010

A China Surprise - Gold Drops to 2-Month Low


Morning Miners!

It is a thin flat washer past 6:00 AM. Have a hot cup of Monday Joe and let's get to work. Most news headlines are like highway signs on a very long trip. Some catch your eye, some don't; their message is usually forgotten quicker than they become small dots in your rear view mirror. Once in a long while there is a sign not forgotten, one that perhaps changes your trip plan - "Let's go see the Grand Canyon, it's only a few miles north of here." Some may even change your destination, "Eureka seems like a nice town, why should I bother going any further?"

There is a headline in this morning's Wall Street Journal that caught my eye and deserves at least a rest stop on our trip down the global recovery highway: "China Becomes Top Energy Consumer."


Whoa, what's going on here? The United States has been the world's largest consumer of energy for more than a century - I bet since Grandpa Edison flipped the first switch! As the Chinese dragon's appetite has grown bigger and bigger, I seem to remember someone saying that this crossover would occur some time in the future - can we be there already?

According to this story, new data from the International Energy Agency (IEA) says yes:

"The Paris-based agency, whose forecasts are generally regarded as bellwether indicators for the energy industry, said China devoured 2,252 million tons of oil equivalent last year, or about 4% more than the U.S., which burned through 2,170 million tons of oil equivalent. The oil-equivalent metric represents all forms of energy consumed, including crude oil, nuclear, coal, natural gas and renewable sources such as hydropower." (WSJ, 7/19/2010)

The WSJ goes on to say that the old estimate for this baton hand off was five years. Apparently the recession has changed all that. Although we remain the largest energy consumer per capita (five times more than the average Chinese citizen), our economic slowdown and energy-efficiency programs have rapidly brought this date forward. IEA chief economist Fatih Birol says, "The fact that China overtook the U.S. as the world's largest energy consumer symbolizes the start of a new age in the history of energy."

This is a thought worth contemplating buckaroos. The diameter of this earth doesn't expand with population growth, especially with more new folks arriving around the world that want to live as we do. Demand for new energy sources and diminishing natural resources will write the history pages of this new century. That affects everyone but especially those who live in commodity-sensitive economies like our own.

Let's leave this rest stop for now and continue down our highway. I promise we'll stop again on this topic.

Gold started this week by dropping to 2-month lows on the London spot exchange:


We'll keep on eye on the glitter - copper moved up thankfully and, with the exception of the gold diggers, the metals & miners are recovering some from last week's malaise (Metals & Miners Call in Sick for Friday). Here's how Miss Moly fared last week:

Weekly Molybdenum Update

Molybdenum prices remain in a close but stable range with Western moly oxide price now slightly below European moly and LME futures seller contracts. The Report's new mid-range price target for 2010 moly prices is $15.71/lb.

Western Moly Oxide (FeMo65) remains at $14.00/lb (the price reported by Infomine and tracked by Base Metals on the General Moly Website)

Moly Oxide, Europe (Mo Drummed Molydbic Oxide EU) moves up to 14.25/lb (the price reported in the Metals Bulletin)

LME Futures Contracts

LME cash seller is at $31,550/metric ton $14.31/lb

3-Month (Buyer) $31,000/metric ton $14.06/lb
3-Month (Seller) $32,000/metric ton $14.52/lb

15-Month (Buyer) $31,000/metric ton $14.06/lb
15-Month (Seller)$32,000/metric ton $14.52/lb

Here is a chart of the LME 3-month contract (seller) from the February launch to the present:



Eureka Miner's Index (EMI)

Below is a chart of the Eureka Miner's Index (EMI) through Friday's close. The EMI gives us the market temperature for the sectors that have the greatest impact on mining in Eureka County.


(a larger, more readable chart is near the bottom of this blog page)

The Eureka Miner's Index remains sub-par at 81.30, slightly down from Friday's 82.13 and a big improvement from the 6/7/10 low of 50.7. Remember an EMI greater than 100 is good times for metals & miners.

Enough talk, let's walk the walk:

4-WD is ON - rough but improving roads in the marketplace; The VIX or "fear index" is above 25; metals & miners remain on shaky timber with benchmark FCX trading in the low to 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 below the 30 level (what's this?)

The YELLOW light is on for Investor Confidence as further market corrections are possible.

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, U.S. House committee debates miner workplace safety bill

Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)

NYMEX/COMEX: Oil is up $0.08 in early trading to $76.46 (September contract, most active); Gold is down $5.6 to $1182.6 (August contract, most active); Silver is down $0.078 to $17.710 (September contract, most active); Copper is up $0.0090 to $2.9385 (September contract, most active)

Western Molybdenum Oxide is at $14.00; European Molybdenum Oxide is at $14.25; LME moly 3-month seller's contract is $14.52, LME cash seller is $14.31

The DOW is up 71.06 points to 10,168.96; the S&P 500 is up 7.92 to 1072.80. The miners are up except for the gold diggers:

Barrick (ABX) $41.30 down 1.08%
Newmont (NEM) $58.13 down 1.31%
US Gold (UXG) $4.43 down 2.64%
General Moly (Eureka Moly, LLC) (GMO) $3.03 up 1.00%
Thompson Creek (TC) $8.79 up 0.34%
Freeport-McMoRan (FCX) $60.58 up 0.83% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $29.95 up 3.10% - global steel producer
POSCO (PKX) $101.50 up 1.51% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.08% to $1,314,717.55 (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