Friday, July 30, 2010
GDP "Less Better" - General Moly (GMO) Reports
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?).
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Headline photograph of Mariana Titus by Mariana Titus