"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.

Tuesday, August 17, 2010

Copper & Gold Back in the Swing - LME Moly Breaks Target Price

Morning Miners!

It is 5:49 AM. Ruby Tuesday came into the break room early this morning and left us some fresh donuts from her Elko haul back run. Bless her soul. Grab a cup, a glazed twister and let's checkout what's happening in the metals markets. Pardner, we got us a rally brewin'.

COMEX copper is out of the gate at $3.3345/lb and tin just hit a 2-year high at the London Metal Exchange (LME). LME moly is feeling pretty frisky too; both the cash seller and 3-month seller contracts exceeded the Colonel's 2010 target price of $15.71/lb ($34,640/metric ton), closing yesterday at $16.08/lb and $15.87/lb respectively. Here is a 6-day chart of the LME molybdenum cash & settlement:

The best news is that copper and gold are in back in the swing again with the lustrous stuff bumping up to $1227.7/oz on the COMEX exchange. This Report maintains that the red metal and gold need to continue to swing in the same direction to sustain a broader metal's rally (Will Gold & Copper Ever Make Up?). Here is the progress of the one and three-month correlations from a severe copper/gold inversion this June:

Copper/Gold Rolling Correlations

Today (8/17/2010)

1-month +0.3055
3-month -0.4884

Last Thursday morning (8/12/2010):

1-month -0.063
3-month -0.533

At the inversion peak (6/24/2010):

1-month -0.340
3-month -0.867

When both of these numbers are positive we can start sipping a little JD, buckaroos. Unless some big scary headline comes out of China or Europe, the Colonel believes this rally may have another boost this fall.

The broader markets are now open and it looks like the miners are being rewarded for the shine of their metallic product. Bellwether miner Freeport-McMoran (FCX) is up 3%, benchmark Barrick (ABX) is just shy of a 1% move and benchmark moly producer Thompson Creek (TC) is bouncing north of 2%. General Moly (GMO) is feeling her oats too with a 3% pop.

The biggest mining news today is an attempt by BHP Billiton Ltd. (BHP) to takeover Potash Corp. of Saskatchewan Inc. (POT). The Russian wheat crisis has been very beneficial for fertilizer producers and the Wall Street Journal reports this morning that "the fertilizer industry is trying to consolidate to take advantage of growing demand for wheat." The offer for fertilizer producer Potash was $130/share, the news caused POT to jump over $140/share (up 25%) even though Potash has rejected the bid.

I think I'll quit while the going is good. Ride high in the saddle, pardner, and we'll see what the morrow brings.

Enough talk, let's walk the walk:

The Eureka Miner's Index(EMI) is above-par at 134.50, a decent move from yesterday's 115.17 and a big improvement from the 6/7/10 low of 50.7. Importantly, the high and low trends remain positive since the EMI high on 6/25. Remember an EMI greater than 100 is good times (or at least better times) for metals & miners.

4-WD is ON - rough roads in the marketplace; The VIX or "fear index" is below 25; metals & miners are on firmer timber with bellwether Freeport-McMoRan (FCX) in the low-$70s and closing on its 200-day average of $75.3 (our new warning level, 8/05 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment but there is some deflationary caution now that we are sub-3%.

The YELLOW light is turned back on for Commodity Reflation. Although copper is trading above $3/lb, the 10-yr T-Note is solidly below 3.00%

The GREEN light is turned on for Stable Markets the VIX below the 30 level (what's this?)

The YELLOW light is turned on for Inflation/Deflation Watch as the Federal Reserves resumes buying back Treasurys and the 10-yr T-Note remains below 3.00%

The YELLOW light is turned back on for Investor Confidence as the bond markets signal trouble ahead

The GREEN light is 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 $0.72 in early trading to $75.96 (September contract, most active); Gold is up $1.5 to $1227.7 (December contract, most active); Silver is up $0.123 to $18.550 (September contract, most active); Copper is up $0.0550 to $3.3345 (September contract, most active)

Western Molybdenum Oxide is $14.75; European Molybdenum Oxide is $15.45; LME moly 3-month seller's contract is $15.87, LME cash seller is $16.08

The DOW is down 48.63 points to 10,350.64; the S&P 500 is up 7.46 to 1086.84. The miners are up:

Barrick (ABX) $43.95 up 0.73%
Newmont (NEM) $57.57 down 0.24%
US Gold (UXG) $4.84 up 0.41%
General Moly (Eureka Moly, LLC) (GMO) $3.17 up 2.92%
Thompson Creek (TC) $9.11 up 2.24%
Freeport-McMoRan (FCX) $72.78 up 3.04% (a bellwether mining stock spanning copper, gold & molybdenum)

The Steels are up, (a "tell" for General Moly & Thompson Creek):

ArcelorMittal (MT) $31.19 up 2.53% - global steel producer
POSCO (PKX) $104.58 up 1.63% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 1.30% to $1,380,730.95 (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

Headline photograph by Mariana Titus

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