American Vanadium in Eureka County

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*** BREAKING NEWS *** President Hosni Mubarak has stepped down and the Egyptian army is now in charge of power transition. This created downward pressure on oil and gold but the U.S. dollar index has remained positive: COMEX gold $1355.80/oz down $6.2; NYMEX oil $85.24/bbl down $1.61 and .DXY 78.58 up 0.4% (09:30 AM PT)


Morning Miners!

It is 5:52 AM. Have a hot cup of Raine's Red Label magic and let's put a wrap on this week. Today's eleven-eleven date sounds kind of lucky, maybe some has rubbed off on the miners...

American Vanadium in Eureka County

In case you haven't heard, American Vanadium Corp. (AVC - TSX Venture) is now developing the Gibellini vanadium deposits in the southeast corner of our County. They were formerly called Rocky Mountain Resources, a name familiar to some of you with their office on Buel Street. The Report has been carrying the vanadium story since last year (A Third tank on Our Hill? 3/22/2011) and it's an exciting one. In the words from their website:

"American Vanadium is currently developing the Gibellini Project, a world-class vanadium resource in the state of Nevada, U.S.A. Vanadium is growing in importance as an alloying metal used to strengthen steel as well as the emerging uses with lithium vanadium batteries and storage cells for renewable energy. Gibellini’s low cost production capability and low cost heap leach recovery gives the Company the opportunity to become North America’s first and only primary producer of Vanadium." (American Vanadium Corp. website)

If you want to brush up on the present and future uses of vanadium, Dr. Jon Hykway of Byron Capital Markets put together a terrific presentation when the operation was still Rocky Mountain Resources:

Vanadium the Supercharger (Dr. Jon Hykway, Byron Capital Markets)

It looks like they are putting a good team in place. Yesterday AVC announced that Mike Doyle of Sparks, Nevada has been appointed as Executive Vice President, Operations to develop the Company's Gibellini Vanadium Project. Mr.Doyle was once been the General Manager of Round Mountain Gold Corporation and more recently was Executive Vice President Operations at Allied Nevada Gold. Here is a link to their release:

American Vanadium Appoints Executive VP, Operations Mike Doyle to Join Senior Management Team (Press Release, 2/10/2011)

Mr. Dolye had to say about his new position with AVC:

"I am looking forward to be back working in Eureka, Nevada on the Gibellini Project...This project is a very straight forward open pit heap leach operation. The resilient steel industry and the commercialization of the vanadium redox battery for the mass storage of green energy makes this the ideal time to aggressively bring online a domestic, low cost vanadium producer." (Press Release, 2/10/2011)

AVC is showing a lot of optimism that first production is "slated for start-up at the end of 2012." Given General Moly's arduous path through the permitting process, we'll have to wait and see. General Moly's Seth Foreman sent me this helpful comment on the AVC schedule this morning:

"The key for American Vanadium is that they are proposing a small enough operation that they can get by with an Environmental Assessment (EA) rather than a full-blown EIS. Their “footprint” is quite small. This could potentially reduce the permit timeline by years. However, if they wanted to expand beyond their proposed small footprint (or lengthen their operating life), they will likely need to do a EIS at some point, perhaps after they have initiated production."

Gold and the Dollar trend higher

I don't think Hosni Mubarak will get a public speaking award for his speeches but they have been good for the U.S. dollar and gold prices. After yesterday's delegation-of-power-but-I'm-still-here televised obfuscation, the dollar and gold rallied modestly. More importantly, the trend is upward as the crisis in Egypt unfolds; gold put in a bottom on January 28th and the U.S. dollar index (.DXY) followed on February 1st. This morning the .DXY is up another 0.21% but still below the key 80-level at 78.414. and COMEX gold is presently trading at $1362.1/oz. The pre-crisis low was $1309.1/oz.

This morning the Wall Street Journal reports that President Mubarak has departed for his Red Sea resort of Sharm El-Sheikh. We'll have to wait and see how this action and apparent delegation of power to the Vice President play out in the gold/currency world - oh, don't forget oil...

Daily Oil Watch

Last week we identified North Sea Brent crude oil as a good barometer for the developing crisis in Egypt. The most active front month contract remains above $100/bbl with a very large spread from the North American benchmark, Western Texas Intermediate or "Texas light sweet crude", traded on the NYMEX (see note 1). The Report normally follows the latter but will track both until things settle out in the Middle East.

Here are the most active front month contracts as of this morning:

NYMEX light sweet crude $86.69
ICE North Sea Brent crude $102.45
Spread (ICE- NYMEX) = $15.76 (yesterday $15.27)

Here are the June contracts with a narrower spread:

NYMEX light sweet crude $95.07
ICE North Sea Brent crude $103.01
Spread (ICE- NYMEX) = $7.94 (yesterday $8.12)

Although prices are still off their crisis highs, we have $100+ Brent and mid-$90 NYMEX in June favoring higher oil prices for the summer. I'll still stick with my December prediction that we will see NYMEX $100/bbl oil before the Fourth of July.


Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Miner's Index(EMI)

This morning the Eureka Miner's Index(EMI) is above-par at 556.67, down from from yesterday's 517.29 sitting below the 1-month moving average of 572.59. The EMI continues to trend down from the high set on January 4th.

The record high for the EMI is 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.

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 ON - The metals & miners have hit a rough patch; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) is below its 50-day moving average and just above its 100-day average. FCX is still well above its 200-day average of $43.06 (our new warning level, 02/02 update after the FCX 2:1 stock split); 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, R&R Partners parts ways with Nevada Mining Association

Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)

Commodity Market Morning Update

NYMEX/COMEX: Oil is down $0.04 in early trading at $86.69 (March contract, most active); Gold is down $0.4 to $1362.1 (April contract, most active); Silver is up $0.084 to $30.010 (March contract, most active); Copper is down $0.0460 to $4.4975 (March contract, most active)

Western Molybdenum Oxide is $17.00; European Molybdenum Oxide is $17.92; LME moly 3-month seller's contract is $18.14, LME cash seller is $17.96

Stock Market Morning Update

The DOW is down 14.4 points to 12,214.42; the S&P 500 is down 2.40 at 1319.47. Miners are mixed:

Barrick (ABX) $48.11 up 0.82%
Newmont (NEM) $57.22 up 0.42%
US Gold (UXG) $7.45 up 2.62%
General Moly (Eureka Moly, LLC) (GMO) $5.41 up 1.69%
Thompson Creek (TC) $13.68 down 0.15%
Freeport-McMoRan (FCX) $53.39 down 0.43% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $37.86 down 0.60% - global steel producer
POSCO (PKX) $106.57 down 1.90% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.63% at $1,771,798.78(what's this?).

Cheers,

Colonel Possum

Note 1 - West Texas intermediate (WTI), also known as Texas light sweet, is a type of crude oil used as a benchmark in oil pricing and is the underlying commodity of New York Mercantile Exchange's (NYMEX) oil futures contracts. The price of WTI is often referenced in North American news reports on oil prices, alongside the price of North Sea Brent crude (Wiki).

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