"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.

Thursday, September 9, 2010

The Cold One is Coming - La Niña & San Juan (SJT)

Morning Miners!

It is 5:50 AM. Have a cup of Thor's wickedly thunderous java. I didn't like the mischievous eye of our favorite Norseman when I walked into the break room this morning. He tossed a book at me and laughed, "you're going to freeze your butt off, Colonel!" Catching the Nordic missile coming in my direction, I soon understood what Thor was telling me - it could be a cold one this winter, pardner. Thor has been reading the recently released Old Farmer's Almanac 2011. You can order one on Amazon for $6.95. Here's an AP article this morning on their winter prediction:

'Old Farmer's Almanac' Predicts Frigid Winter (Russell Contreras, AP, 09-09-10)

Being in a northern Nevada county with its fair share of ranchers and farmers, I'm sure there is a range of opinions on this subject. In fact, the Almanac actually says that the West may be spared the worst with only a mild winter and average precipitation (Thor always jumps to conclusions without reading the details). The AP article gives a different spin, "NOAA's Climate Prediction Center anticipates a warmer-than-normal winter for the mid-Atlantic and Southeast and colder-than-normal weather in the Northwest. That puts it at odds with the almanac." Take your pick, the ole Colonel is siding with Thor on a cold'un.

Of course the culprit behind a change in 2011 from last winter is that bad girl La Niña who is chasing her nemesis El Niño out the back door with her unusually cool temperatures in the Pacific. This Report carries a link to the NOAA El Niño website in the Weather & Climate section to the lower right of this blog. It will give you the latest on the adventures of these two children of the sea. Let the Colonel know what you think Ole Man Winter has up his sleeve.

San Juan Basin Royalty Trust (SJT)

I'm betting on cold and threw a few more shares of my favorite land-based natural gas play in the buckboard. San Juan Basin Royalty Trust (SJT) is a trust with natural gas royalty interests in the San Juan Basin of northwestern New Mexico. At this morning's prices ($22.68/share), SJT pays a monthly dividend of 5.32% on an annualized basis. Their dividend typically moves up or down with the price of natural gas (NG). Presently COMEX NG is at low levels not seen in many years trading at $3.822 (October contract); the low for the year was August 30th at $3.693. NG prices tend to peak in January-February during the coldest spell of winter; the February futures contract is now $4.544 or an 18.8% premium to the October price. To put this in perspective, the NG high was $10.80 on 7/1/2008 before the recession really put the brakes on our economy.

Even though domestic NG is currently in over-supply, I think the future energy needs of this country will be served by this most abundant energy source. You should check out the T. Boone Pickens Plan to understand why this is so, you've probably seen the ole boy's adds on television - a great plan to reduce our dependence on foreign oil.

Finally, SJT is just breaking out of its 200-day average. Followers of this Report know that this is often a good time to make a move if the prospects are good for a company moving forward. Here is a one-year chart of SJT:

I plan to use some of that monthly SJT dividend to offset my propane bill this year buckaroos. Get out the long johns.

Daily Market Roundup

Enough talk, let's walk the walk:

The Eureka Miner's Index(EMI) is above-par at 191.77, up from yesterday's 182.43 and a long way from the 6/7/10 low of 50.7. The EMI high for the year was 259.35 on 4/12/2010 - the same day that COMEX copper peaked. Today's number remains above a lower trend level of 186.36 and support is 132.23. Remember an EMI greater than 100 is good times (or at least better times) for the metals & miners relevant to Eureka County.

Eureka Outlook Dashboard

4-WD is OFF - improving 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 high-$70s above its 200-day average of $74.48 (our new warning level, 9/03 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 below 3.00%

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

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

The GREEN light is turned back on for Investor Confidence as investment returns to the equity markets but the bond markets still 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?)

Commodity Market Morning Update

NYMEX/COMEX: Oil is up $1.06 in early trading to $75.73 (October contract, most active); Gold is down $2.2 to $1255.3 (December contract, most active); Silver is down $0.044 to $19.965 (December contract, most active); Copper is down $0.0430 to $3.4575 (December contract, most active)

Western Molybdenum Oxide is $15.50; European Molybdenum Oxide is $15.80; LME moly 3-month seller's contract is $16.33, LME cash seller is $16.01

Stock Market Morning Update

The DOW is up 57.29 points to 10444.30; the S&P 500 is up 8.82 to 1107.69. Miners are mixed:

Barrick (ABX) $44.87 down 1.27%
Newmont (NEM) $60.71 down 1.40%
US Gold (UXG) $4.98 down 0.40%
General Moly (Eureka Moly, LLC) (GMO) $3.18 up 1.92%
Thompson Creek (TC) $9.62 up 0.94%
Freeport-McMoRan (FCX) $78.92 down 0.28% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $32.00 up 0.09% - global steel producer
POSCO (PKX) $107.68 up 0.30% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.02% to $1,443,658.46 (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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