Thursday, July 29, 2010
Red Metal Rally - Cortez & Goldstrike "Strong Performance"
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?).
Write Colonel Possum at firstname.lastname@example.org for answers to your questions or to request e-mail updates on the market
Headline photograph by Mariana Titus