Wednesday, July 21, 2010
General Moly (GMO) Goes to London - Freeport (FCX) & Copper Bounce
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%
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?).
Write Colonel Possum at email@example.com for answers to your questions or to request e-mail updates on the market
Headline photograph by Mariana Titus