Friday, February 18, 2011
Silver 31-Year Record - Barrick (ABX) Rocks On
It is 5:46 AM. Have a brimming cup of Raine's Classic Red Label. Time for a little more Eureka history, more stuff for the record books, a happy mining company and then its a 3-day weekend for the markets. For the New York Stock Exchange (NYSE), Monday is still "Washington's Day." Out of no disrespect for our Founding Father, I found the official reason the NYSE doesn't recognize "President's Day" to be rather amusing and have included their full explanation in Note (1) below.
Eureka County in Photographs (circa 1940s)
Today's headline photograph continues our series of photographs by Arthur Rothstein who captured images of Eureka County in the early 1940s (more detail at the bottom of this blog). This photo shows Main Street looking south-east; the building on the far corner is now the Nevada State Bank. Next to the bank is the Eureka Drug and Fountain and then the Kitchen Brother's Market which later became Raine's Market in 1973 (inset photo). Brothers Hiram and Joe Kitchen ran the market, the ole Colonel now lives in the house that Joe and his wife Isabel owned on North O'Neil Avenue. The old Drug and Fountain location was added to Raine's in 1979 to create a larger store. The fellow walking on the sidewalk is a much younger Old Miner Woden who helps me prepare this report every Wednesday morning. You can check out more fun fatcs about early Eureka in the town's self-guiding tour .
Silver's new 31-year record
COMEX silver spent much of the day setting new records yesterday and then set another in the wee hours this morning at $31.960/oz. This is a 31-year water mark going back to the days of the Hunt Brother's speculative scandal when silver price peaked at $48.70/oz.
Let's update our record book of our three big metals and Brent crude oil:
COMEX Gold $1432.5/oz 08:25:00 ET 12/7/2010, February contract most active
COMEX Silver $31.960/oz 03:15:00 ET 02/18/2011, March contract most active
COMEX Copper $4.6495/lb 18:15:00 ET 02/14/2011, March contract most active
ICE Brent crude $104.52/bbl 16:30:00 ET 02/16/2011, April contract most active
This morning we've pulled back some to $31.775/oz but the gold/silver ratio is at an amazingly low 43.6 with gold trading at $1,386.0/oz. This closely watched ratio has been compressing for some time with strong silver/weak gold price movements. Here is 5-year chart showing we are at multi-year lows dating back to early 2006:
Barrick Gold (ABX) Rocks On
Barrick Gold (ABX) released their fourth quarter and year-end results yesterday. Here's the link to their report:
FOURTH QUARTER AND YEAR-END REPORT 2010
A more easily digestible summary that includes conference call comments by CEO Aaron Regent was reported by Mining Editor Adella Harding in last night's Elko Daily Free Press:
Barrick reports golden earnings (Adella harding, Elko Daily Free press, 2/17/2011)
As her title implies, Barrick had a good'un. I heartily recommend this article, it has good updates on Cortez, Goldstrike, Turquoise Ridge and our nearby Ruby Hill mines. Investors were also pleased with Barrick Gold which is presently trading at $51.07 up 1% from yesterday's closing price.
Remember when everyone hated big gold miners in January and the ole Colonel suggested it might be a good time to throw a little Barrick in your buckboard (Buy Barrick? But Newmont?)? It was trading at $48 then, today we're up 6.4% with more to go from where I sit. Barrick also just upped their dividend to 12 cents/share or 0.95% yield at today's price. That beats most 1-year CDs these days, pardner. Do your own research, sometimes I'm just an old fool.
Daily Oil Watch
On February 1st we identified North Sea Brent crude oil as a good barometer for the developing crisis in the Middle East. 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 2). The Report normally follows the latter but will track both until things settle out in this volatile region.
Here are the most active front month contracts as of this morning:
NYMEX light sweet crude $90.07
ICE North Sea Brent crude $101.75
Spread (ICE- NYMEX) = $11.86 (yesterday $16.02)
Here are the June contracts with a narrower spread:
NYMEX light sweet crude $93.46
ICE North Sea Brent crude $102.39
Spread (ICE- NYMEX) = $8.93 (yesterday $12.06)
Although prices are off their crisis highs, we have $100+ Brent and $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 600.87, up slightly from from yesterday's 599.62 and above the 1-month moving average of 550.47. The EMI continues to be down from the high set on January 4th but a trend reversal to the upside may be in the works.
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 miners are still in a rough patch but conditions are improving; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) is stuck between its 50-day and 100-day moving 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 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, R&R Partners parts ways with Nevada Mining Association, Obama budget includes mining royalty , Mineral commission fights consolidation
Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)
Commodity Market Morning Update
NYMEX/COMEX: Oil is up $1.23 in early trading at $90.07 (April contract, most active); Gold is up $0.9 to $1386.0 (April contract, most active); Silver is up $0.205 to $31.960 (March contract, most active); Copper is down $0.0230 to $4.4610 (March contract, most active)
Western Molybdenum Oxide is $17.00; European Molybdenum Oxide is $17.82; LME moly 3-month seller's contract is $18.14, LME cash seller is $17.96
Stock Market Morning Update
The DOW is up 17.26 points to 12,335.32; the S&P 500 is down 0.05 at 1340.38. Miners are mixed:
Barrick (ABX) $51.07 up 0.85%
Newmont (NEM) $59.37 up 0.70%
US Gold (UXG) $7.20 up 5.11%
General Moly (Eureka Moly, LLC) (GMO) $5.78 up 1.05%
Thompson Creek (TC) $13.88 down 0.64%
Freeport-McMoRan (FCX) $54.47 down 1.39% (a bellwether mining stock spanning copper, gold & molybdenum)
The Steels are down (a "tell" for General Moly & Thompson Creek):
ArcelorMittal (MT) $37.23 down 1.17% - global steel producer
POSCO (PKX) $108.81 down 0.51% - South Korean integrated steel producer
The Eureka Miner's Grubstake Portfolio is is up 1.11% at $1,816,398.52(what's this?).
Note 1 - Splitting hairs on holiday designations at the NYSE:
"Washington's Birthday was first declared a federal holiday by an 1879 act of Congress. The Monday Holiday Law, enacted in 1968, shifted the date of the commemoration of Washington's Birthday from February 22 to the third Monday in February, but neither that law nor any subsequent law changed the name of the holiday from Washington's Birthday to President's Day.
Although the third Monday in February has become popularly known as President's Day, the NYSE's designation of Washington's Birthday as an Exchange holiday (Rule 51) follows the form of the federal holiday outlined above (section 6103(a) of title 5 of the United States Code)." (NYSE)
Note 2 - 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 firstname.lastname@example.org for answers to your questions or to request e-mail updates on the market
Headline photograph from the Library of Congress
* Title: Main street. Eureka, Nevada
* Creator(s): Rothstein, Arthur, 1915-1985, photographer
* Date Created/Published: 1940 Mar.
* Medium: 1 negative : safety ; 3 1/4 x 4 1/4 inches or smaller.
* Reproduction Number: LC-USF34-029883-D (b&w film neg.)
Rights Advisory: No known restrictions. For information, see U.S. Farm Security Administration/Office of War Information Black & White