"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 2, 2010

Silver Heads for $20, Gold Holds $1250+, Copper hits $3.50

Morning Miners!

It is 5:52 AM. Have a cup of Thor's thunderous java and help me get our favorite Norseman away from the tube. He's been watching the Weather Channel nonstop since one whopper hurricane and two tropical storms popped up in the Atlantic. Thor always liked a good blow but its been many moons since he's dipped an oar in those waters. I can't even get him to generate a little heat lightening over the Diamonds lately, the poor ole boy has got to get out more.

Silver Rips

Last Thor's Day we were excited to see silver break $19/oz; this morning it looks like we may be headed for $20/oz pasture soon; COMEX silver is presently at $19.63/oz but hit $19.72 in early trading.

The Report suggested it may be time to buy silver last Monday (Good Time to Buy Silver or Sift Sand for Bean Gold?) and COMEX silver dipped to a low of $17.78/oz on Tuesday. Here's the spread from intraday lows to highs for both metals:

COMEX Silver
Tuesday (8/24/10) low $17.78/oz
Today (9/2/10) high $19.72/oz up 10.9%

Tuesday (8/24/10) low $1211/oz
Yesterday (9/1/10) high $1255/oz up 3.6%

Now don't you wish you'd listened to the ole Colonel? Maybe you did. A better than 10% gain in a little more than a week sure beats CD rates or a "bean gold" rise of less than 4% (see note 1). The gold-silver ratio (Au:Ag ratio) is presently 63.86 down from 68.21 last Monday. At these levels a decrease in Au:Ag signals that fear is receding from the marketplace (at least for now, watch out for tomorrow's monthly labor report).

Copper Hits $3.50 - Approaches High for the Year

COMEX copper is nearly at its 2010 high on April 12th of $3.5840/lb. This morning it traded up to $3.50/lb before falling back to $3.4935/lb. This is terrific news for the global growth story. Here is an article from Bloomberg London correspondent Anna Stablum explaing South Korea's contribution to the copper bounce:

Copper Climbs to Four-Month High as IMF Raises South Korea Growth Forecast (Anna Stablum, Bloomberg News, 9/2/2010)

With rising expectations for Asia we can reasonably assume brighter days for South Korean steelmaker POSCO who owns 20% of our Mt. Hope project. What's good for POSCO is good for General Moly and that's good for Eureka County. No wonder billionaire investor Warren Buffet is giddy about the Asian steel giant (by my calculation Buffet owns 1% of Mt. Hope via his investment in POSCO).

Homestake Mine Compressed Air Locomotives

Today we look at compressed air locomotives as another part of our continuing series on the Homestake Mine in South Dakota (Ruby Hill & Homestake Mining Memories).

H. K. Porter, Inc. manufactured light-duty railroad locomotives in the U.S., starting in 1866. The company became the largest producer of industrial locomotives and produced almost eight thousand. Their last locomotive rolled out in 1950. In 1890 Porter built their first compressed air locomotive to work in a coalmine in Pennsylvania. Compressed air was stored in a two tanks and used to drive the pistons instead of steam. This allowed locomotive haulage inside mine tunnels without the fumes from burning coal in a boiler or the dangers of high pressure steam.

The Homestake mine came to extensively us compressed air locomotives. This Report's friend and contributor gave us the picture of Porter air locomotive #13 operating in a mineshaft (inset photo) and the giant air compressor at the Homestake Ross Shaft (headline photo). Below is a larger photo of a similar model that I found on the Railway Tourism website, good old #104.

Porter went on to build over 400 compressed air locomotives for use in mines, plants, and even the street railways of New Orleans. One of their largest was used at the Homestake Mine from 1928 to 1961 and is on outside display in Lead, South Dakota.

Maybe Eric can take a ride on one of these beauties next year if he can find one in working condition! (see Eric Rides the Rails).

Daily Market Roundup

Enough talk, let's walk the walk:

The Eureka Miner's Index(EMI) hits an above-par 172.66 (see note 2), moving smartly up from yesterday's 161.58 and a long way up 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 confirms a new up-trend. 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 (hurrah!) - improving roads in the marketplace; The VIX or "fear index" is below 25; metals & miners are on firmer timber, bellwether Freeport-McMoRan (FCX) remains above its 200-day average of $75.3 as of 8/05. The new 200-day average is $74.51 (EMI update pending); 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 GREEN light is turned back on for Investor Confidence with favorable news on the global recovery although 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 $0.42 in early trading to $73.49 (October contract, most active); Gold is up $5.7 to $1253.8 (December contract, most active); Silver is up $0.242 to $19.635 (December contract, most active); Copper is up $0.0160 to $3.4935 (December contract, most active)

Western Molybdenum Oxide is $15.50; European Molybdenum Oxide is $16.00; LME moly 3-month seller's contract is $16.67, LME cash seller is $16.44

Stock Market Morning Update

The DOW is up 12.83 points to 10282.30; the S&P 500 is up 5.42 to 1085.71. Miners are mostly up:

Barrick (ABX) $45.36 up 0.07%
Newmont (NEM) $60.79 up 0.78%
US Gold (UXG) $5.28 up 0.19%
General Moly (Eureka Moly, LLC) (GMO) $3.14 up 1.29%
Thompson Creek (TC) $9.14 down 0.11%
Freeport-McMoRan (FCX) $76.97 up 1.02% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $31.04 up 1.97% - global steel producer
POSCO (PKX) $103.16 down 1.90% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.42% to $1,411,300.66(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: During the Great Depression many poor miners sifted dry sand for placer gold in hopes that a day's find would be enough to buy a can of beans, hence the name "bean gold."

Note 2: The Report incorrectly reported the EMI to be 200.77 for 9/2/2010. It should have been 172.66 which is the 200.77 number corrected for a low interest rate cap of 3% (correction 9/3/2010 AM).

Headline photo: Air Compressor at the Ross Shaft near Homestake Mine in Lead, South Dakota. 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.

Our thanks again to the faithful reader that made these wonderful photographs available to the Report (Homestake Ross compressor and Porter Locomotive 13)

The Porter Locomotive 104 photograph can be seen at the Railway Tourism website

The large yellow Porter locomotive at Lead, South Dakota, is from Wikipedia.

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