"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.

Monday, December 13, 2010

Copper New High, Silver Pops - Metals & Miners Weekly Roundup

Morning Miners!

It is 6:09 AM. Have a hot cup of Monday ether and let's see if we can start your diesel. Copper and silver are running hard already, let's get to work...

Copper posts a new high, Silver pops

Spot copper (below) got a boost to new highs on strong economic data from China and a decision not to raise interest rates yet to blunt their rising inflation:

Copper hits record high on China data (Reuters, 12/13/2010)

After being in the doldrums lately, COMEX Silver got a nice pop to a morning high of $29.740/oz but short of its recent record of $30.75/oz.

For the record keepers, COMEX copper has posted a new high besting $4.154/lb set 12/9 with $4.2065/lb in the early hours. Here's where we stand for the big three:

COMEX Gold $1432.5/oz 08:25:00 ET 12/7/2010, February contract most active
COMEX Silver $30.75/oz 08:25:00 ET 12/7/2010, March contract most active
COMEX Copper $4.2065/lb 08:30:00 ET 12/13/2010, March contract most active

This is the Colonel's bet on copper price to close out the year:

COMEX copper will break $4.25/lb before New Year's Eve

You can review this and my other bets in The Colonel's Beer Derby at the bottom of the column to the right of this blog.

Weekly Molybdenum Roundup

Moly futures weakened some last week but there is still a mild contango between western moly oxide spot prices and the London Metal Exchange (LME) 3-month and 15-month seller contracts. Contango occurs when the price of a commodity for future delivery is higher than the spot price, or a far future delivery price is higher than a nearer future delivery. The 3-month seller at $15.88/lb is still above the Colonel's mid-range moly price target for 2010 of $15.71/lb.

Western Moly Oxide $15.75/lb (the price tracked by Base Metals on the General Moly Website)

Moly Oxide, Europe (Mo Drummed Molydbic Oxide EU) $16.05/lb (the price reported in the Metals Bulletin)

LME Futures Contracts

LME cash seller is at $34500/metric ton $15.65/lb

3-Month (Buyer) $33,000/metric ton $14.97/lb
3-Month (Seller) $35,000/metric ton $15.88/lb

15-Month (Buyer) $35,000/metric ton $15.88/lb
15-Month (Seller) $37,000/metric ton $16.75/lb

Here is a chart of the LME 3-month contract (seller) from the February launch to the present:

Eureka Miner's Index (EMI)

The Eureka Miner's Index (EMI) gives us the market temperature for the sectors that have the greatest impact on mining in Eureka County. Below is a chart of the EMI at Friday's close. The magenta line is the EMI with a low interest cap of 3% on 10-year Treasurys (LIRC) and adjustments for gold and silver prices (i.e., Au:Ag ratio). A 1-month moving average is given by the blue line. A larger and more readable chart appears near the bottom of this blog page.

The Eureka Miner's Index(EMI) is above-par at 723.32, a good move up from Friday's 650.78. The 1-month moving average is 529.92. The 2010 record high for the EMI is 739.13 set 12/7/2010; the low was set 6/7/2010 at 50.7. An EMI greater than 100 signals better times for the metals & miners relevant to Eureka County, the EMI re-established an upward trend on Friday, 12/3.

200-day averages are used in the EMI to normalize current mining company share price and are updated monthly. Upper and lower trend lines are updated weekly.

Oil & Copper Correlations with Gold

Oil & copper correlations with gold give us insight into what may happen next for the metals & miners.

Here are the latest correlations given this morning's NYMEX/COMEX trading:

Oil/Au correlation +0.8659 (1-month) +0.9220 (3-month)
Cu/Au correlation +0.7364 (1-month) +0.8884 (3-month)
Cu/Oil correlation +0.9227 (1-month) +0.9387 (3-month)

Here are the numbers from the last Monday's roundup (12/06/2010):

Oil/Au correlation +0.8843 (1-month) +0.9137 (3-month)
Cu/Au correlation +0.8249 (1-month) +0.9394 (3-month)
Cu/Oil correlation +0.9021 (1-month) +0.9307 (3-month)

All these correlations remain very high and positive which is a bullish condition for the metals & miners. The 1-month and 3-month correlations of copper & oil are quite amazing resting solidly above 0.9 for some time. Expect higher copper and oil prices.

Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Outlook Dashboard

4-WD is OFF - Markets are in Christmas rally mode; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) in the low-$100s above its 200-day average of $79.39 (our new warning level, 12/06 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

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 Watch as the Federal Reserve resumes buying Treasurys (aka QE2)

The GREEN light is turned back on for Investor Confidence as investment returns to the equity markets

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 $1.34 in early trading at $89.13 (January contract, most active); Gold is up $11.6 to $1396.5 (February contract, most active); Silver is up $0.935 to $29.540 (March contract, most active); Copper is up $0.0855 to $4.1975 (March contract, most active)

Western Molybdenum Oxide is $15.75; European Molybdenum Oxide is $16.05; LME moly 3-month seller's contract is $15.88, LME cash seller is $15.65

Stock Market Morning Update

The DOW is up 22.10 points to 11432.42; the S&P 500 is up 3.73 to 1244.13. Miners are happy campers:

Barrick (ABX) $53.92 up 1.16%
Newmont (NEM) $62.13 up 1.16%
US Gold (UXG) $7.64 up 1.73%
General Moly (Eureka Moly, LLC) (GMO) $5.54 up 0.73%
Thompson Creek (TC) $14.08 up 2.32%
Freeport-McMoRan (FCX) $115.39 up 2.23% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $37.28 up 3.18% - global steel producer
POSCO (PKX) $104.23 up 1.89% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 1.65% to $1,868,463.81 (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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