"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.

Wednesday, November 24, 2010

Happy Thanksgiving! Barrick (ABX) & Newmont (NEM)

Morning Miners!

It is 6:18 AM. Have a brimming cup of hump day brew with Old Miner Woden and me. The ole boy is in town for the winter and plans to return to his Lone Mountain diggins' in the spring. The Colonel is trying like heck to get him in senior housing but his reputation for hell raising is getting in the way. For now he is camping out in the hi-bay but complains that there aren't any pretty gals to chase around. Let me know if you have any ideas, for now - Happy Thanksgiving from the two of us!

Anchors aweigh and a little bad Irish Luck

A U.S. carrier group is sailing off to join South Korea in a naval drill to punish their errant neighbor for the artillery assualt yesterday. Thankfully, South Korean steelmaker POSCO has rerecovered nearly all of its losses from yesterday's nose dive. The metals & miners are back on their feet too with some improving data on our domestic economy as the number of U.S. workers filing new claims for jobless benefits fell to the lowest level since July 2008. There was also good news on American's personal income growth and consumer spending on the heels of the upcoming holidays.

The scary bit is continued sovereign-debt contagion fears in Europe which has kept the euro on the slide against the U.S. dollar and Japanese yen. This time Ireland is in the hot seat with troubles brewing in Spain and Portugal. You may remember that the sovereign debt booger bear appeared one year ago with the Dubai crisis followed by Greece well into 2010. Both had a devasting effect on the metals & miners with the Eureka Miner's Index(EMI) hitting a low of 50.7 in early June. The index has been above the 400s this month (see below), let's hope we're not headed down the same road as last November - stay tuned.

Barrick Gold and Newmont Mining

Yesterday we took a look at Eureka's two aspiring junior miners, General Moly and U.S. Gold; today let's see how the senior class is doing. Below are 1 -year charts of gold mining giants Barrick Gold (ABX) and Newmont Mining (NEM). The blue line is share price; the green line shows their 200-day moving average:

Here is a comparison of their relative performance over the same time period:

Neither of the senior gold miners have enjoyed the 100+ % returns of General Moly or U.S. Gold but their performance has been very respectable: Barrick is up 17% in a year and Newmont, 12.5%. It is important to note that both have risen more than 30% from the lows in early February boosted by gold's impressive gains. Now that Barrick is unhedged it can fully enjoy this increase in gold price. One should expect stable but not particular startling performance from large mining companies in production globally when compared to juniors in exploratory phases or on the verge of production as is the case for General Moly. Eureka County presently benefits from a mix of both contributing to a stable source of mining income from the former and a promise of new jobs and additional revenue as the juniors come on line.

To give this some perspective, the Eureka Miner's Grubstake Portfolio, which has all four stocks and eight others related directly or indirectly to Eureka county, is up 32.0% over this same time period:

Portfolio 11/24/2010 $1,702,624
Portfolio 11/24/2009 $1,289,411

Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Miner's Index (EMI)

The Eureka Miner's Index(EMI) has recovered most of its losses from yesterdays dust-up in Korea. This morning the EMI is above-par at 515.09, up from yesterday's 449.30 and nearly back to Monday's 526.33. The 1-month moving average is 452.23. The 2010 record high for the EMI is 661.28 set 11/9/2010; the low was set 6/7/2010 at 50.7. Remember an EMI greater than 100 signals improving 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 low $100s above its 200-day average of $75.91 (our new warning level, 11/01 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 GREEN light is turned back on for Commodity Reflation with copper trading comfortably above $3.50/lb

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 Treasurys (QE2)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 may flag trouble ahead

The YELLOW light is turned on our Fuel Gauge with oil above $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 $0.11 in early trading at $$81.36 (January contract, most active); Gold is down $2.2 to $1375.4 (December contract, most active); Silver is down $0.202 to $27.370 (December contract, most active); Copper is up $0.0370 to $3.7395 (December contract, most active)

Western Molybdenum Oxide is $15.75; European Molybdenum Oxide is $16.20; LME moly 3-month seller's contract is $15.60, LME cash seller is $15.88

Stock Market Morning Update

The DOW is up 109.51 points to 11145.88; the S&P 500 is up 11.48 to 1192.21. Miners are feeling better:

Barrick (ABX) $51.06 up 0.47%
Newmont (NEM) $60.72 up 0.21%
US Gold (UXG) $5.78 up 0.87%
General Moly (Eureka Moly, LLC) (GMO) $5.52 up 0.73%
Thompson Creek (TC) $12.35 up 1.98%
Freeport-McMoRan (FCX) $100.48 up 1.80% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $32.06 up 0.56% - global steel producer
POSCO (PKX) $98.94 up 3.78% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.94% to $1,702,2624.24(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 the ole Colonel

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