"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 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

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