Tuesday, January 4, 2011
General Moly Prepares to Double Down, POSCO Looks North & South
It is 6:03 AM. Grab a cup of Tuesday Joe and wave goodbye to Sweet Ruby T. Her trailer empty of new metal records, she decided to take the day off and head out to Tonopah to kick a few rocks. As she left the break room she was whistling Gene Pitney's memorable tune, "Liberty Valance." We'll check out what has caught her interest in a minute....
Gold & Silver stumble
COMEX gold stumbled in the early morning hours dropping below the $1400/oz level to a low of $1393.2/oz. COMEX silver dropped also but stayed above $30/oz for a low of $30.12/oz. They are both up some now ($1397.3/oz and $30.350/oz) and the gold/silver ratio is a very low 46.0, roughly the same as yesterday at this time.
There has been much talk about a precious metal correction given the improving economic outlook for the United States as money moves from traditional safe havens to rising equity markets. The ole Colonel senses this is a temporary pullback and will stick with his prediction that the lustrous stuff will break $1570/oz before July 4th.
Here is what the price action in the London spot markets were for gold & silver in early trading:
The meteoric rise in copper prices took a rest this morning. A new record was set at the London Metal Exchange (LME) of $9,754/metric ton but there was no follow through at the COMEX with yesterday's record of $4.4980/lb (March contract) remaining intact. Our favorite London metals correspondent, Claudia Carpenter, explores some of the forces behind the pause in her morning Bloomberg article:
Copper Rises to Record for Fourth Day in London on U.S. Growth Speculation (Claudia Carpenter, Bloomberg News, Jan 4, 1/04/2011, 5:45 AM PT)
The Monday holiday in Europe, hedge funds and building inventories at the LME make for some interesting cross-currents swirling about the enigmatic red metal. Stay tuned buckaroos - as copper goes, so go the metals & miners, so go the broader markets from the Colonel's perch.
General Moly Prepares to Double Down
There is some pretty exciting news for those of us that follow General Moly (GMO). The company announced yesterday that it intended to resume the evaluation process at their Liberty Project just north of Tonopah. Here's their afternoon press release:
GENERAL MOLY TO RESTART LIBERTY PROJECT EVALUATION AND DEVELOPMENT (Press Release, 01/03/2010, 2:29 PM PT)
Bruce D. Hansen, Chief Executive Officer, says:
"In early 2009, with the collapse of the global markets, we suspended evaluation activities at the Liberty project. However, given our positive outlook for both the moly and copper markets, and the Liberty project's potential economics, we will begin advancing our second world-class project toward production. We also have non-Mt. Hope-related funding from the early exercise of warrants which have already provided approximately $18.5 million in proceeds and are anticipated to provide approximately $4 million in further proceeds by mid-February."
Adella Harding wrote an excellent article on this development in last night's Elko Daily Free Press covering the history of the Hall-Tonopah mine and the acquisition by General Moly (then Idaho General Mines) in 2006:
General Moly to restart evaluation of Liberty (Adella Harding, Elko Daily Free Press, 01/03/2011)
My view is that if General Moly can bring both Mt. Hope and Liberty into production over the next several years there is a good chance they can replace Thompson Creek (TC) as the low cost moly producer (TC is presently the benchmark moly miner in the Eureka Miner's Index(EMI)).
Liberty has the advantage of having significant copper as well as molybdenum mineral assets. If copper prices remain high due to rising global demand and supply tightness, General Moly can use production of the red metal to effectively reduce their base cost for producing molybdenum. The reverse of this accounting procedure is often used in large copper mines to reduce the cost of mining copper by selling their molybdenum byproduct. Comme ci comme ça.
The Liberty Project is also on private lands which should simplify the permitting process and accelerate the start-up time table. No wonder Sweet Ruby T is high tailing out to Liberty this morning. Always the rock hound, she told me there are also some beautiful specimens of creedite around the Hall-Tonopah diggings.
Say, there's some more good news coming our way, from faraway...
POSCO Looks North & South
South Korean POSCO (PKX) and 20% owner of the Mt. Hope molybdenum project, is on the move too. The world's No.3 steelmaker plan to develop resources in Africa, Siberia and polar areas to dramatically increase their total group sales by 2020:
Posco to tap Africa, Siberia, poles for resources (Mining Weekly, 01/03/2011)
Warren Buffet invests in POSCO, POSCO invests in Mt. Hope, POSCO and General Moly both have a plan for the future. I like this picture, pardner!
Daily Market Roundup
Enough talk, let's walk the walk:
Eureka Miner's Index(EMI)
This morning the Eureka Miner's Index(EMI) sets yet another record high breaking 800 at 816.78, up from yesterday's record 796.00. This is the fourth straight record setting market day. The 1-month moving average is now 666.21.
The record high for the EMI is now 816.78 set 01/04/2011; 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.
Eureka Outlook Dashboard
4-WD is OFF - Markets are stable; 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 ORANGE light is turned on our Fuel Gauge with oil above $90
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 $0.15 in early trading at $91.40 (February contract, most active); Gold is down $25.6 to $1397.3 (February contract, most active); Silver is down $0.775 to $30.350 (March contract, most active); Copper is up $0.0030 to $4.4605 (March contract, most active)
Western Molybdenum Oxide is $16.00; European Molybdenum Oxide is $16.70; LME moly 3-month seller's contract is $17.01, LME cash seller is $16.78
Stock Market Morning Update
The DOW is down 1.06 points to 11,669.69; the S&P 500 is down 1.46 to 1270.41. Miners are mixed:
Barrick (ABX) $52.36 down 0.44%
Newmont (NEM) $60.12 down 1.59%
US Gold (UXG) $7.94 unchanged
General Moly (Eureka Moly, LLC) (GMO) $6.80 up 4.94%
Thompson Creek (TC) $15.43 up 0.31%
Freeport-McMoRan (FCX) $120.06 up 0.40% (a bellwether mining stock spanning copper, gold & molybdenum)
The Steels are mixed (a "tell" for General Moly & Thompson Creek):
ArcelorMittal (MT) $38.19 down 0.75% - global steel producer
POSCO (PKX) $110.86 up 2.48% - South Korean integrated steel producer
The Eureka Miner's Grubstake Portfolio is is up 0.56% at $1,968,993.41 (what's this?).
Write Colonel Possum at firstname.lastname@example.org for answers to your questions or to request e-mail updates on the market
Headline photograph by Mariana Titus