"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.

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?).


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

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