Wednesday, September 8, 2010
Homestake Mining Recap - Gartman "No Double-Dip"
It is 5:27 AM. Have a cup of Hump Day Glory and let's give Old Miner Woden a hand. He's packed away all our Homestake Mining photos and is fixin' to put them above the tool crib for safe keeping.
The Old Miner got quite a kick out of the headline photo of miners in downtown Lead, South Dakota. This Report's friend and Homestake contributor has identified the activity as drilling an exploration hole, perhaps above the Homestake main ledge (see note 1). Portions of the Homestake mine extended far below the town and cave-ins were a real hazard for the townsfolk. Our photo contributor was in Lead when a section of main street caved in over an old shaft allowing folks to look down a couple of thousand feet into the mining complex below. This occurred by the best bar in Lead, the Stampmill (Stampmill Restaurant & Saloon 305 W Main St.). This local watering hole was originally an old process building, with a 12-stamp stampmill right outside the back door - watch your step!
This photo has other secrets. Woden just borrowed my readers and can make out "Black Hills Candy" on the store front window to the right. The awning above the window presumably has the inscription "B.H. Candy" although some of the letters are obscured by the awning flap. There are also trolley tracks in the cobble stone street. Quite a nice town for the historic Homestake Mine I'd say. If you missed any of this Report's Homestake Mining Series, the ole Colonel has listed links to six previous blogs of photographs and stories below. The series starts out with some memories of Eureka's Homestake Ruby Hill Mine which was acquired by Barrick Gold in 2001.
Our thanks again to the faithful reader that made these wonderful photographs available to the Report.
The Homestake Mining Series
Ruby Hill Homestake Mining Memories (8/25/2010)
Silver Breaks $19... (8/26/2010)
When a Bad Number Seems Good (8/27/2010)
Eureka Miner Weekly Roundup (8/30/2010)
China PMI Rockets Metals & Miners (9/1/2010)
Silver Heads for $20... (9/2/2010)
Dennis Gartman Speaks
Dennis Gartman, the "Commodity King" and the Colonel's hero, spoke on CNBC Business News yesterday. He said that the persistent rally of copper and other base metals takes a double-dip recession off the table. With renewed concerns in Europe, Mr. Gartman also believes that the euro has been diminished "on the margin" as a major reserve currency. Gold, however, has established itself as an important reserve by central banks hedging fiat currencies.
Mr. Gartman also pointed out that China has surpassed the U.S. in auto sales. He sees a bright future for the white metals; platinum and palladium for automotive applications (e.g. catalytic converters) and growth in silver's industrial demand.
This Report looks at the value of commodities with respect to gold, a technique used by Mr. Gartman. He has famously stated that base metals taken collectively have a Ph.D in economics. My kind of guy.
Today, the Portuguese government held a successful bond auction which has eased short-term concerns about euro-zone sovereign debt. Euro-worry plagued the marketpalce yesterday. The broader markets are now open and it looks like metals & miners agree with Mr. Gartman's view, we got us a rally, pardner.
Daily Market Roundup
Enough talk, let's walk the walk:
The Eureka Miner's Index(EMI) is above-par at 182.43, up from yesterday's 178.59 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 177.34 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 $0.01 in early trading to $74.10 (October contract, most active); Gold is down $1.7 to $1257.6 (December contract, most active); Silver is up $0.006 to $19.920 (December contract, most active); Copper is up $0.0050 to $3.4755 (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 52.75 points to 10393.44; the S&P 500 is up 5.81 to 1097.65 Miners are happy:
Barrick (ABX) $46.18 up 0.94%
Newmont (NEM) $62.59 up 0.84%
US Gold (UXG) $5.28 up 2.12%
General Moly (Eureka Moly, LLC) (GMO) $3.20 up 1.59%
Thompson Creek (TC) $9.64 up 2.99%
Freeport-McMoRan (FCX) $79.21 up 1.73% (a bellwether mining stock spanning copper, gold & molybdenum)
The Steels are happy too (a "tell" for General Moly & Thompson Creek):
ArcelorMittal (MT) $32.17 up 2.06% - global steel producer
POSCO (PKX) $107.41 up 0.60% - South Korean integrated steel producer
The Eureka Miner's Grubstake Portfolio is is up 1.38% to $1,442,172.04 (what's this?).
(Note 1) Headline photo: Miners in Lead, South Dakota. This report incorrectly stated that the men in the photo were street workers on the publish date of this blog. The above correction identifies the activity as drilling an exploration hole. The headline and other old time photos can be seen at the Homestake Visitor Center on 160 West Main Street, Lead, South Dakota. Please pay them a visit on your next pass through.
Write Colonel Possum at firstname.lastname@example.org for answers to your questions or to request e-mail updates on the market