"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 28, 2010

Thompson Creek (TC) & General Moly (GMO) Rock On

*** BREAKING NEWS *** Silver just hit another new high: COMEX silver $21.775 12:55:00 ET, December contract, most active
*** BREAKING NEWS *** Gold just moved to another new high: COMEX gold $1311.8 12:50:00 ET, December contract, most active
*** BREAKING NEWS *** After starting out in the red, gold just pegged a new high: COMEX gold $1309.9 12:20:00 ET, December contract, most active

Morning Miners!

It is 5:45 AM. Grab a cup of joe and some of that home-baked on the table. Sweet Ruby T rolled in Tuesday at the strike of midnight and left us the goodies. The second day of the week is all she's rolling these days with her Pete still in the shop over in Carson City. The grandkids are driving her crazy and she can't wait to get back in the cab - look for that pretty ruby red 379 pouring coal later this week.

How are the Moly Miners Doing?

With the Eureka Miner's Index(EMI) setting a new record for the year Friday, it is high time to check on the moly miners. Let's start with our moly producer benchmark, Thompson Creek (TC). TC is important because it is a pure molybdenum play and a reasonable model for what General Moly (GMO) will become once Mt. Hope transitions to production (mine construction scheduled to begin next summer).

During the May-June commodity correction, Thompson Creek stock dropped from $14 high-grade to the low-$8 level of the mineshaft to become the worst performing stock in the Eureka Miner's Grubstake Portfolio. Although molybdenum prices were amazingly resilient during this period, TC was punished by a grim view of future moly demand against a backdrop of financial crisis in Europe.

That was then, this is now. The euro hit a 5-month high against the dollar this morning at 1.3509 and the outlook for Europe has much improved since early summer. There are still concerns about Ireland but a successful Spanish bond auction and statements of support from the ECB have investors thinking the worst is over (at least for now).

More importantly, Asia has shown real strength lately as evidenced by POSCO (PKX), South Korean steel producer and 20% investor in Mt. Hope. POSCO has risen from $88 this spring to north of $110 this September (up 25%). Improving steel demand in Asia is an important measure of growth in that region and positive support for moly going forward.

Here is a one-year chart of Thompson Creek. At yesterday's close, TC was very near its 200-day moving average (green line) in $11 territory moving steadily up from the bottom set on 8/25.

Bellwether miner Freeport-McMoRan(FCX) has been on a similar trajectory since late August. Copper giant FCX is important because they produce gold and molybdenum as well as copper and is a thereby a key benchmark in our EMI. Here is a a one-year chart of FCX:

Thompson Creek to Acquire Terrane Metals Corp

A final note on Thompson Creek is their planned acquisition of Terrane Metals Corp, a Canadian mineral development and exploration company. This will increase their metal diversification with Terrane's Mt. Milligan copper-gold project and the Berg copper-molybdenum-silver project, both in central British Columbia, Canada. The completion of the acquisition is expected to occur early next month as announced yesterday,

Thompson Creek Metals Company Receives Final Court Order For Transaction With Terrane Metals Corp. (Press release, 9/27/2010)

Genral Moly Snap-back Rally

General Moly (GMO) has had a nice snap-back rally too finding its way to $3.50 pasture after falling to sub-$3 levels this summer. Unlike TC and FCX, GMO has managed to stay mostly above its 200-day moving average since early spring:

The markets are now open and it looks like the miners are getting punished by some mixed headline news on our domestic recovery. The S&P Case-Shiller home-price indexes showed that home prices rose again in July but this good news was swamped by weaker-than-expected reports on consumer confidence and manufacturing. Interestingly, while the miners are in currently the red, POSCO is showing green today. This perhaps illustrates again the push-pull dynamic between domestic and global recovery stories. Stay tuned, buckaroos.

Daily Market Roundup

Enough talk, let's walk the walk:

The Eureka Miner's Index(EMI) is above-par at 233.65, down from yesterday's 263.74 and a long way from the 6/7/10 low of 50.7. Today's number is also below the lower trend level of 248.18 but very comfortably above support at 186.51. The 1-month moving average is 193.53. The new 2010 record high for the EMI is 274.66 set Friday, 9/24/2010. 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 firm timber with bellwether Freeport-McMoRan (FCX) in the mid-$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 $0.19 in early trading at $76.33 (November contract, most active); Gold is down $2.6 to $1296.0 (December contract, most active); Silver is down 0.161 to $21.310 (December contract, most active); Copper is up $0.0060 to $3.6030 (December contract, most active)

Western Molybdenum Oxide is $15.00; European Molybdenum Oxide is $15.05; LME moly 3-month seller's contract is $15.42, LME cash seller is $15.15

Stock Market Morning Update

The DOW is down 24.74 points to 10787.30; the S&P 500 is down 4.54 to 1137.62. Miners are down:

Barrick (ABX) $45.08 down 1.49%
Newmont (NEM) $61.89 down 1.21%
US Gold (UXG) $4.74 down 4.05%
General Moly (Eureka Moly, LLC) (GMO) $3.43 down 0.58%
Thompson Creek (TC) $10.71 down 2.72%
Freeport-McMoRan (FCX) $85.08 down 1.71% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $32.89 down 0.09% - global steel producer
POSCO (PKX) $110.73 up 0.21% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 1.32% to $1,480,440.58 (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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