"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.

Tuesday, March 1, 2011

Silver, Gold & Oil Surge; Moly Drops; General Moly (GMO) & Quadra FNX (QUX.TO) Updates

Come gather 'round people
Wherever you roam
And admit that the waters
Around you have grown
And accept it that soon
You'll be drenched to the bone.
If your time to you
Is worth savin'
Then you better start swimmin'
Or you'll sink like a stone
For the times they are a-changin'.

Bob Dylan

*** UPDATE ***

COMEX gold & silver made new records at the same time a short while ago:

COMEX gold $1433.40/oz 14:35:00 ET April contract most active
COMEX silver $34.590/oz 14:35:00 ET May contract most active

The closely watched gold/silver ratio was an incredibly low 41.44 at this time, my records on ratios only go back 10 years so this may be a new record too. A lower ratio is another sign of silver's strength relative to gold.

*** BREAKING NEWS *** COMEX gold came within one dollar of breaking its December Pearl Harbor Day record hitting $1431.5/oz at 12:40:00 ET, April contract most active

Morning Miners!

It is 5:51 AM. Have a hot cup of global turmoil. Let's help Sweet Ruby T change a tire - she hauled in a new record for silver but that flat on Pancake Summit may signal trouble ahead for molybdenum...

Silver, Gold, Oil Surge

Whatever you may think of Libyan dictator Moammar Gadhafi, nobody can say he hasn't been good for silver, gold and oil prices. Government opponents held on to the rebel-held oil city of Zawiya after six hours of fighting overnight while China sent four military transport planes to help extract the last of its citizens. Apparently that drama and anticipation of what Fed Chairman Bernake may say about inflation later today sent silver to new 31-year record, shoved gold closer to its December watermark and returned NYMEX crude to $100+/bbl for its June contract (see below).

Phew. Did you know there were 30,000 Chinese in Libya? Chinese media reported that by Monday morning 29,000 have already been rescued. These times they are a-changin', pardner. This is the first time that the Chinese air force has participated in a civilian evacuation mission overseas. Didn't we rent a ferry for our folks?

This morning COMEX silver has settled back to $34.335/oz after hitting $34.485/oz for the new record earlier this morning. COMEX gold is up $10.7 to $1420.6/oz and copper fell to $4.4960/lb. As usual the London Metal Exchange (LME) headline has a knack for putting it all very simply, "Geopolitics and inflation woes haunt metals markets."

Let's tidy up the record books for the big three metals and the oil Bobbsey twins:

COMEX Gold $1432.5/oz 08:25:00 ET 12/7/2010, February contract most active
COMEX Silver $34.485/oz 08:15:00 ET 03/01/2011, May contract most active
COMEX Copper $4.6375/lb 06:15:00 ET 02/04/2011, March contract most active
NYMEX WTI Crude $103.41/bbl 02:45:00 ET, 02/24/2011, April contract most active
ICE Brent crude $119.79/bbl 02:45:00 ET 02/24/2011, April contract most active

Moly Drops

Speaking of haunting ghosts at the LME, something spooked molybdenum futures contracts yesterday. Western and European spot prices are now both in backwardation with respect to futures prices; the 3-month and 15-month contracts both fell 4%. We have been tracking a down trend in the futures contracts for several weeks. On February 23rd, the ole Colonel predicted that Euro moly oxide would drop below $17.50/lb before we lift a Guinness on Saint Paddys. Presently Euro Moly is steady at $17.75/lb and its Western cousin remains unchanged at $17.00/lb (as reported by Base Metals on the General Moly website).

Here are the latest futures prices:

3-month seller $36,100/metric ton or $16.37/lb
15-month seller $37,275/metric ton or $16.91/lb

You may be inclined to say, "so what?" Moly prices were supposed to be going up not down, good buddy. Remember $20/lb? - I haven't given up but I think Miss Moly is catching a winter cold or maybe a touch of the Libyan flu.

The 3-month seller at $16.37/lb is still above the Colonel's mid-range moly price target for 2010 of $15.71/lb but below my target of $20.21/lb for 2011.

General Moly & Quadra Updates

Mining Editor Adella Harding of the Elko Daily Free Press has put together two good summaries on the latest press releases from General Moly (GMO) and Ely Robinson Mine operator/owner, Quadra FNX (QUX.TO):

General Moly names new director (Adella Harding, Elko Daily Free Press, 2/28/2011, 2011 12:44 pm)

Quadra reports $57.9 million profit (Adella Harding, Elko Daily Free Press, 2/28/2011 5:40 pm)

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 and North Africa. The most active front month contract remains above $100/bbl with a 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 this volatile region.

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

NYMEX light sweet crude $97.62
ICE North Sea Brent crude $112.94
Spread (ICE- NYMEX) = $15.32 (yesterday $14.33)

Here are the June contracts with a narrower spread:

NYMEX light sweet crude $100.27
ICE North Sea Brent crude $112.73
Spread (ICE- NYMEX) = $12.46 (yesterday $11.65)

Although prices are off their crisis highs, we still have $100+ Brent and NYMEX in June favoring higher oil prices for the summer. The Colonel's Dcember prediction that we will see NYMEX $100/bbl oil before the Fourth of July came true on February 23rd.

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 532.89 up from yesterday's 532.34 and just below the 1-month moving average of 546.25. The EMI continues to be down from the high set on January 4th and a trend reversal in the short term may again 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) remains trapped between its 100-day and 150-day moving averages but still 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 $0.65 in early trading at $97.62 (April contract, most active); Gold is up $10.7 to $1420.6 (April contract, most active); Silver is up $0.515 to $34.335 (May contract, most active); Copper is up $0.0500 to $4.4960 (March contract, most active)

Western Molybdenum Oxide is $17.00; European Molybdenum Oxide is $17.75; LME moly 3-month seller's contract is $16.37, LME cash seller is $15.88

Stock Market Morning Update

The DOW is down 12.64 points to 12,213.70; the S&P 500 is down 3.11 at 1324.11. Miners are mixed:

Barrick (ABX) $53.62 up 1.51%
Newmont (NEM) $56.03 up 1.38%
US Gold (UXG) $7.45 up 2.62%
General Moly (Eureka Moly, LLC) (GMO) $5.25 up 0.19%
Thompson Creek (TC) $13.42 up 1.82%
Freeport-McMoRan (FCX) $52.61 down 0.64% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $36.64 down 0.08% - global steel producer
POSCO (PKX) $102.74 down 0.33% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.74% at $1,805,515.78 (what's this?).


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).

Headline photograph by Mariana Titus

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

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