Eureka Moly (GMO) Town Hall Meeting Today

Þūnresdæg
Morning Miners!

It is 6:10 AM. Have a cup of Morning Sunshine. Nothing upsets our favorite Norseman more than a clearing sky over a Diamond Valley warming to the morning sun. Thor has had enough fun with stormy weather lately; I'm grabbing him by the horns and taking him down to the Eureka Moly Town Hall Meeting today. If you've never met a semi-retired thunder god come and join us. Looks like we'll be at the afternoon session (5:30 to 6:30 PM, Eureka Opera House) but there's a chance Thor and I will make the noon to 1:00 PM session too.


Welcome aboard to Mike Iannacchione our new Mt. Hope General Manager! The ole Colonel has heard General Moly CEO Bruce Hansen and Independent Chairman Patrick James also plan to attend.

Stormy Markets

Thankfully, it looks like the markets are getting a little needed sunshine today too - at least the metals & miners are getting back on their feet. We left yesterday with a lot of troubling domestic and global economic news on our morning doorstep: China PMI suggested the dragon was running out of fire, the ADP jobs report disappointed and ISM numbers indicated a suprising decline in manufacturing in the United States last month. After this report signed off the poor data led to a global selloff in markets with our own DOW plunging 279 points; the S&P 500 falling 31 points. Pretty ugly.

Although COMEX copper sold off it managed to stay above $4/lb and this morning is trading down slightly at $4.0960/lb. If we can avoid a reversal in copper price at the close (i.e. lower high, lower low and lower close from yesterday), Wednesday may have been more willies than worry. Sub-3% 10-year Treasurys are a scary signal from the bond markets (currently, 2.995%) and the U.S. dollar remains weak against the euro (U.S. dollar index is back to early May levels).

It's almost pointless to predict where the markets head next until tomorrow's U.S. Department of Labor jobs report is released at 5:30 AM PT. The broader markets are now open and the miners are mixed but mostly up with bellwether Freeport-McMoRan (FCX) trying to crawl back above its 200-day average, General Moly (GMO) is getting a nice pop to the upside trading at $4.64 and Barrick (ABX) is holding ground at $47.26. The Eureka Miner's Index(EMI) is back below its 1-month moving average but not by much retreating to 288.4 from yesterday morning's 335.9 (see below). Stay tuned, tomorrow is the BIG ONE.

See you at the Opera House!


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 288.40, down from yesterday's 335.92 and below the 1-month moving average of 297.18. The EMI continues to be down from the high set on January 4th and set a new 2011 low of 225.03 on May 23rd. The 1-month moving average continues a troubling downtrend.

The EMI gives us the market temperature for the factors that have the greatest impact on mining in Eureka County. 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 of 100 is the boundary between good lands and bad lands for the metals & miners.

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.

Gold Value Index (GVI)

Our newly minted Gold Value Index (GVI) is below-par at 78.72, up from yesterday's 77.35 and above its 1-month average of 77.53. The gold-gaining-value trend has stalled. Today's Value Adjusted Gold Price (VAGP) is $1,661.2/oz.

The GVI gauges the value of gold in relation to oil, copper and silver independent of currency. Although gold prices have been on the rise, the GVI has been trending down since 6/7/2010 when it had a value of 100. These three commodities were chosen for relative value comparison because 1) oil is a common cost element for all miners, 2) copper has been a reliable proxy for global growth and 3) silver is a precious metal that now competes with gold for investment and as a hedge against fiat currencies.

The Value Adjusted Gold Price (VAGP) is a level that supports current oil, copper & oil prices based on historical commodity norms. If the daily COMEX gold price is below the VAGP, then gold is undervalued; if above, overvalued.

Daily Oil Watch

Latest Nevada Fuel Prices

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 (MENA). It is now above $110/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 the region.

Here are the key front-month contracts as of this morning:

NYMEX light sweet crude $100.33
ICE North Sea Brent crude $115.23
1Spread (ICE- NYMEX) = $14.90 (Yesterday, $14.05)

Here are the September contracts* with a narrower spread:

NYMEX light sweet crude $101.35
ICE North Sea Brent crude $114.48
Spread (ICE- NYMEX) = $13.13 (Yesterday, $13.10)

* NYMEX futures contracts have rolled forward, we now show July & September for a 2-month look-ahead

Prices are off their crisis highs but we still have $110+ Brent and $100+ NYMEX in September favoring high oil prices throughout the summer. My December prediction that we would see NYMEX $100/bbl oil before the Fourth of July came true on February 23rd.

Eureka Outlook Dashboard

4-WD is ON - The miners are on rough roads; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) is just below its 200-day moving average of $50.50 (our new warning level, 05/31 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 The Federal Reserve will phase out buying Treasurys (aka QE2) but maintain low interest rates for now

The YELLOW light is turned back on for Investor Confidence as some investors avoid commodity-sensitive equities

The RED light is turned on our Fuel Gauge with oil above $100

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, Democrats seek to repeal mining tax from the constitution, Rhoads, Ellison oppose repeal of net proceeds tax, Proposal could change net proceeds tax, 'You get to deduct WHAT???' Nevada lawmakers ask gold miners

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is up $0.04 in early trading at $100.33 (July contract, most active); Gold is down $2.6 to $1540.6 (August contract, most active); Silver is down $0.669 to $37.025 (July contract, most active); Copper is down $0.0105 at $4.0960 (July contract, most active)

Western Molybdenum Oxide is $17.00; European Molybdenum Oxide is $16.60; LME cash seller is $16.87, LME moly 3-month seller's contract is $17.01

Stock Market Morning Update

The DOW is down 20.96 points to 12,509.62; the S&P 500 is down 0.48 at 1,314.07

Miners are mixed:

Barrick (ABX) $47.26 down 0.04%
Newmont (NEM) $56.65 down 0.04%
US Gold (UXG) $7.16 up 2.29%
General Moly (Eureka Moly, LLC) (GMO) $4.64 up 1.98%
Thompson Creek (TC) $10.77 up 1.51%
Freeport-McMoRan (FCX) $50.13 up 1.52% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $14.49 unchanged

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

ArcelorMittal (MT) $32.23 down 0.03% - global steel producer
POSCO (PKX) $100.09 up 0.40% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is up 1.00% at $1,731,665.22(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 (source: Wikipedia)

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