"The history of Eureka lies in its future." - Lambert Molinelli, 1878

DISCLOSURE

The author/editor of the Eureka Miner owns common shares of local mining stocks, General Moly (GMO), McEwen Ming (MUX) 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, October 25, 2011

General Moly Announces Completion of Draft Environmental Impact Statement

Barrel Top, NYMEX oil breaks $90/bbl

*** BREAKING NEWS *** COMEX gold briefly broke $1,700/oz touching $1,701.20/oz (11:55 ET)

My latest Kitco commentary:
Copper and Gold, "What a Long Strange Trip It's Been" (10/17/2011)


My Latest International Business Times commentary: What is Up (or Down) with Silver and Gold?
(10/6/2011)


This morning's...
COMEX Gold price = $1,656.4/oz (December contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 96.27
Value Adjusted Gold Price© (VAGP) = $1,437.6/oz
COMEX - VAGP = $218.8/oz; gold is trading at a premium; the gold:copper ratio exceeds recession levels but is trending down (bullish move)



Morning Miners!

It is 5:41 AM. Have cup of Bright Tomorrow - yes, our indefatigable market bull is in the house. It's a shame Ruby T couldn't be here yesterday for a real bull run; today's mood is tempered by news that the Euro-zone finance ministers' meeting scheduled for Wednesday has been cancelled although the leaders' summit will proceed as planed. Oh well, no one said the Euro-melodrama was over; this soap opera is good for at least several more seasons. We do have good news from General Moly...

General Moly Announces Completion of Draft Environmental Impact Statement

At 5:37 AM (PT) this morning, General Moly sent out a press release to announce that last Friday, the Battle Mountain Nevada office of the U.S. Bureau of Land Management (BLM) approved the Mt. Hope Draft Environmental Impact Statement (DEIS) for printing, advancing the document toward publication of a Notice of Availability (NOA) of the DEIS in the Federal Register. Here's the link:

General Moly Announces Completion of Draft Environmental Impact Statement for Mt. Hope Project (Press Release, 10/25/2011)

This is a big step forward in the prolonged and arduous permitting process for the Mt. Hope molybdenum project. Bruce D. Hansen, Chief Executive Officer, said,

This is truly a significant accomplishment for our project, the BLM, the cooperating and reviewing agencies, and our team. The completion of the DEIS represents the culmination of five years of intense review and scientific evaluation of the Mt. Hope project and an enormous effort from our team and the BLM. We will work to expedite the publication process in Washington, DC to the extent possible and anticipate publication of the NOA in the Federal Register before the end of the year.

And,

We look forward to the public comment period and the BLM preparing the final EIS. We fully expect that other major Nevada State permits will be completed in this same time period to complete the EIS and Record of Decision (ROD) and the project will go into construction shortly after issuance of the ROD in the second half of 2012.

Although the process going forward has historically taken many months, efforts by the BLM and US Department of Interior (DOI) recently have resulted in faster processing time lines.

General Moly (GMO) stock is up 1.52% at $3.33/share on a day when most mining equities are in the red.

Gold continues to lose value

Although gold dollar price has stabilized in a range, its value relative to key commodities, notably oil and copper, continues to decline. The Eureka Miner’s Gold Value Index© (GVI) today is 96.27 down 12.5% from a 2010-2011 GVI peak of 109.97 on Oct. 4, 2011.

The GVI is also now below its 1-month moving average (MVA) that reached its highest value of 103.26 at Friday's close, Oct. 21, 2011. Today's MVA is 102.70.

Given these two conditions, a trend from higher to lower relative value for gold appears to be in place. NYMEX WTI crude is up significantly in 2-days to $93.49/bbl narrowing the BRENT-WTI spread rather remarkably (see Daily Oil Watch below). COMEX copper is presently trading at $3.4450/lb and the red metal touched $7,820/tonne ($3.5471/lb) on the London Metal Exchange (LME) yesterday for the 3-month seller contract. Copper giant Freeport-McMoRan (FCX) closed up 8% yesterday.

This report believes a fall in gold value from elevated levels is a positive indication for base metals and mining equities. Stay tuned, pardner.


Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Miner's Index(EMI)

This morning the Eureka Miner's Index© (EMI) is below-par at 53.35, up from yesterday's 56.13 and above the 1-month moving average of 44.57. The new record low for 2010-2011 was set Oct. 4, 2011 at 22.88. The 1-month average is currently below the 100-level putting us solidly in bear country for the metals & miners.

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. An EMI of 100 is the boundary between hot and cold markets for the metals & miners.

200-day averages are used to update mining equity norms in the EMI on a monthly basis.

Gold Value Index (GVI)

The Eureka Miner’s Gold Value Index© (GVI) is above-par at 96.27, down from yesterday's 99.98 and below its 1-month average of 102.7. The new record high for 2010-2011 is 109.97 set on Oct. 4, 2011.Value Adjusted Gold Price© (VAGP) is $1,437.6/oz which is $218.8/oz below the current COMEX gold price.

The GVI initially trended down from 6/7/2010 when it had a value of 100; gold regained value reversing the trend, moved sideways for a time and and headed back up with vigor. A sustained presence around the 100-level is bearish but no longer necessarily an indication for domestic recession.

The GVI gauges the value of gold in relation to oil, copper and silver independent of currency. These three commodities were chosen for relative value comparison because 1) oil derivatives are a common cost element for all miners, 2) copper has proven to be a reliable proxy for global growth and 3) silver is a precious and industrial 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 price is less than the VAGP, then gold is undervalued; if above, overvalued.

Daily Debt Crisis Watch

July 26th we introduced the Debt Crisis Index (DCI). The DCI is computed in the mornings and at the market close Friday in much the same way we do the EMI and GVI indices. Today, the DCI has a value of 186.0 down from yesterday's 190.3. A level above 200 is time for serious concern. We are now above that level.

Daily Oil Watch

Latest Nevada Fuel Prices

On February 1st we identified North Sea Brent crude oil as a good barometer for the ongoing crises in the Middle East and North Africa (MENA). It is now 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 the region.

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

NYMEX light sweet crude $93.49
ICE North Sea Brent crude $110.87
Spread (ICE- NYMEX) = $17.38 (last report, $22.15)

Here are the February contracts* with a narrower spread:

NYMEX light sweet crude $92.80
ICE North Sea Brent crude $108.51
Spread (ICE- NYMEX) = $15.71 (last report, $19.99)

* NYMEX futures contracts have rolled forward, we now show December and February for a 2-month look-ahead

Prices are off their crisis highs and we have $100+ Brent and $90+ NYMEX in February favoring high oil prices throughout the late fall and winter.

Eureka Outlook Dashboard

4-WD is ON - The miners are on very rough roads; The VIX or "fear index" is above 25; in early morning trading, bellwether Freeport-McMoRan (FCX) is seriously below its 200-day moving average of $49.56(our new key level, 10/18 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

The ORANGE light is turned on for Commodity Reflation with copper trading below $3.50/lb

The YELLOW light is turned on for Stable Markets with the VIX above the 30 level (what's this?)

The YELLOW light is turned on for Inflation Watch The Federal Reserve phased out buying Treasurys June 30 (aka QE2) but will maintain low interest rates until mid-2013. Presently they are engaged in a bond program called "Operation Twist" to control long interest rates.

The ORANGE light is turned back on for Investor Confidence with investors less adverse to commodity-sensitive equities

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, 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 $2.22 in early trading at $93.49 (November contract, most active); Gold is up $4.1 to $1656.4 (December contract, most active); Silver is up $0.021 to $31.665 (December contract, most active); Copper is up $0.0040 at $3.4450 (December contract, most active)

Western Molybdenum Oxide (General Moly update) is $13.50/lb to $14.20/lb; European Molybdenum Oxide (Bloomberg) is $12.95/lb; LME cash seller is $13.15/lb, LME moly 3-month seller's contract is $13.15/lb

Stock Market Morning Update

The DOW is down 128.21 points to 11,785.41; the S&P 500 is down 13.74 points at 1,240.45

Miners are unhappy except for General Moly:

Barrick (ABX) $46.07 down 0.45%
Newmont (NEM) $63.11 down 1.11%
US Gold (UXG) $4.20 unchanged
General Moly (Eureka Moly, LLC) (GMO) $3.33 up 1.52%
Thompson Creek (TC) $6.90 down 2.82%
Freeport-McMoRan (FCX) $38.44 down 2.68% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $10.63 down 1.37%
Timberline Resources (TLR) $0.59 down 1.67%

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

ArcelorMittal (MT) $19.68 down 1.99% - global steel producer
POSCO (PKX) $80.48 down 1.19% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is down 0.73% at $1,392,364.61 (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)

Note 2 - The impact of the U.S. debt ceiling debate affected investment decisions for weeks before its resolution August 2nd and was followed by an S&P credit downgrade. Global sovereign debt issues have been an overhang on markets for many, many months starting with the Dubai crisis in late November, 2009 and spreading to the euro-zone in 2010-2011.

Headline photo 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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