"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, September 21, 2010

How Well is Eureka County Doing? Ask the Grubstake!

*** BREAKING NEWS *** COMEX gold hit a new high of $1292.4/oz (December contract, most active) at 15:45:00 EDT

Morning Miners!

It is 5:43 AM. Have a cup of Tuesday java with Ruby and me. She is some proud this morning, pardner. A custom shop in Carson is going to turn her Pete 379 into the beautiful ride she deserves. Checkout this computer graphic they created of what the the new Ruby Tuesday will become (inset photo)...ohh-weee! She'll need to drive to California to get an ocean sunset like that. It should be roaring down the Highway 50 by the end of this month, give her a toot. Oh, by the way the Great Recession is over...

The Great Recession is Over

The National Bureau of Economic Research (NBER) has determined that the recession that began in December, 2007, ended last year in the month of June, 2009. The so-called Great Recession marked the longest slump since the Great Depression, destroyed 7.3 million jobs, cut 4.1% from economic output and cost Americans 21% of their net worth. For many folks this official determination offers little solace, especially if you're still out of work.

The Eureka Miner's Grubstake Portfolio

Mining helped buffer Eureka County from some of the harshest effects of this recession. Coincidentally, this Report created the Eureka Miner's Million Dollar Grubstake Portfolio the month before the official end of the recession. At that time we gave the readers one million dollars to invest in twelve stocks that directly or indirectly impact our local economy. I thought it would be interesting to compare its performance with the broader market to gauge how well we're doing in recovery. Here's the present composition (see note 1):

Stocks Related Directly to Eureka County Mining:

Barrick (ABX) - Senior benchmark gold miner
Newmont (NEM) - Senior gold miner
US Gold (UXG) - Junior gold miner
General Moly (Eureka Moly, LLC) (GMO) - Junior molybdenum miner
ArcelorMittal (MT) - International steel producer, investor in General Moly
POSCO (PKX) - South Korean integrated steel producer, investor in the Mt. Hope Project (Eureka Moly, LLC)

Stocks Related to Domestic & Global Recovery:

Gold exchange traded fund (ETF) (GLD) - Gold investment fund
Silver ETF (SLV) - Silver investment fund
Caterpillar (CAT) - Global supplier of mining equipment
Freeport-McMoRan (FCX) - Bellwether miner spanning copper, gold & molybdenum
Thompson Creek (TC) - Benchmark molybdenum miner & producer
EOG Resources (EOG) - Domestic oil & gas producer

The first market day for the Grubstake was May 11, 2009. On that day the S&P 500 closed at 909.24 and gold was trading at $913/oz. The broader markets have just opened, let's see how we're doing by comparison:

S&P 500 today, 10:15 a.m. EDT 1141.30 up 25.5%

COMEX gold (December contract) today, $1278.9/oz up 40.1%

Eureka Miner's Grubstake Portfolio today, $1,474,914.84 up 47.5%

I'd say we're doing pretty good buckaroos!

How do the individual stocks stack up? In order of highest return:

1 -US Gold (UXG) up 98.1%
2 - Caterpillar (CAT) up 89.2%
3 - General Moly (Eureka Moly, LLC) (GMO) up 73.9%
4 - Freeport-McMoRan (FCX) up 59.0%
5 - Silver ETF (SLV) up 46.4%
6 - Newmont (NEM) up 43.2%
7 - Gold ETF (GLD) up 38.5%
8 - Barrick (ABX) up 33.9%
9 - POSCO (PKX) up 23.8%
10 - ArcelorMittal (MT) up 16.5%
11 - EOG Resources (EOG) up 14.4%
12 - Thompson Creek (TC) down 9.8%

In fairness Thompson Creek and US Gold were swapped in early this year (see note 1). If we compare their performance back to 5/11/2009, the overall returns would be:

US Gold (UXG) up 152.1%
Thompson Creek (TC) up 42.5%

This keeps US Gold at the top of the stack and Thompson Creek would just edge out the gold ETF for the number seven spot.

All in all, not too bad if the Grubstake performance is any indication of how well the mining business is doing in our county. If you must have a recession, it's good to live in Eureka, Nevada!

Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Outlook Dashboard

The Eureka Miner's Index(EMI) is above-par at 243.85, up from yesterday's 242.25 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 is just below a lower trend level of 244.02 but comfortably above support at 186.51. Remember an EMI greater than 100 is good times (or at least better times) for the metals & miners relevant to Eureka County.

4-WD is OFF - improving roads in the marketplace; The VIX or "fear index" is below 25; metals & miners are on firm timber with bellwether Freeport-McMoRan (FCX) in the low-$80s 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 still 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 down $0.11 in early trading at $76.08 (November contract, most active); Gold is down $1.9 to $1278.9 (December contract, most active); Silver is down $0.083 to $20.720 (December contract, most active); Copper is up $0.0025 to $3.5070 (December contract, most active)

Western Molybdenum Oxide is $15.50; European Molybdenum Oxide is $15.65; LME moly 3-month seller's contract is $16.33, LME cash seller is $16.01

Stock Market Morning Update

The DOW is down 6.17 points to 10747.45; the S&P 500 is down 1.41 to 1141.30. Miners are down except for Thompson Creek:

Barrick (ABX) $45.59 down 1.85%
Newmont (NEM) $62.67 down 0.95%
US Gold (UXG) $5.27 down 2.23%
General Moly (Eureka Moly, LLC) (GMO) $3.20 down 3.03%
Thompson Creek (TC) $11.03 up 0.73%
Freeport-McMoRan (FCX) $82.37 down 1.18% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $33.43 up 1.18% - global steel producer
POSCO (PKX) $110.19 down 0.74% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.87% to $1,474,914.84 (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

Note 1 - There were two changes to the Eureka Miner Grubstake for 2010:
Thompson Creek Metals (TC) replaced Nucor (NUE) 01-05-2010 and
US Gold (UXG) replaces ConocoPhilips (COP) 01-12-2010.

Headline photograph by Mariana Titus

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