"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.

Monday, November 21, 2011

New Season for the Eureka Miner


*** BREAKING NEWS *** COMEX gold plunged $48.6/oz to $1,676.4/oz at 9:30 AM PT

NEW FORMAT for 2012

The Eureka Miner's Market Report has a new format. Three daily reports, "Mining", "Gold & Silver" and "Copper & Molybdenum" consolidate key morning market information for metals and mining relevant to Eureka County and surrounding areas with new expanded detail on moly prices.

The "Daily Market Roundup" also includes an "Oil Watch" and "Debt Crisis Watch" to monitor the impacts of global events on oil and fuel prices and the unfolding debt crises here and in Europe. Finally, "Stock Market Morning Update" provides the latest on the broader markets as well as the Eureka Miner's Million Dollar Grubstake Portfolio.

Have a good read and welcome back!

This morning's...
COMEX Gold price = $1,711.3/oz (December contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 100.00
Value Adjusted Gold Price© (VAGP) = $1,430/oz
COMEX - VAGP = $281.3/oz; gold is trading at a premium to key commodities; the gold-to-copper ratio continues to exceed recession levels


Morning Miners!

It is 6:05 AM. Have a hot cup of Raine's Red Label as we start a new season with our six hundredth daily market report for Eureka County. It's been a long ride in the markets since that first report in March 2009 but we've come a fer piece. Unfortunately, all of Europe's woes are still with us as increasing sovereign debt concerns drive the U.S. dollar higher and precious and base metals lower.

This week the inability of the Super-committee to reach a compromise on U.S deficit and debt reduction is adding to a "risk-off" sentiment to global markets. We start this holiday week with 10-year Treasury yields once again below 2% and the closely watched gold-to-silver ratio trending higher - both bearish signs moving forward. There could be a lot more bumps in the road for the metals & miners, pardner...

Daily Market Roundup


Mining Report

This morning's mining stocks...

Barrick (ABX) $47.78 down 2.17%
Newmont (NEM) $64.66 down 1.22%
US Gold (UXG) $4.07 down 4.91%
General Moly (Eureka Moly, LLC) (GMO) $3.22 down 3.30%
Thompson Creek (TC) $6.02 down 2.75%
Freeport-McMoRan (FCX) $36.09 down 2.30% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $9.60 down 3.57%
Timberline Resources (TLR) $0.65 down 4.41%

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

ArcelorMittal (MT) $16.74 down 4.72% - global steel producer
POSCO (PKX) $80.04 down 3.91% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) is below-par at 45.70, down from Friday's closing 56.36 and below the 1-month moving average of 73.56. 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.

The EMI gives us the market temperature for the factors that have the greatest impact on mining in Eureka County. The record 2010-2011 high for the EMI is 816.78 set 01/04/2011; the low was set 10/4/2010 at 22.88. An EMI of 100 is the boundary between hot and cold markets for the metals & miners.

Here is the Eureka Miner's Index© (EMI) through Friday's close (a larger more readable plot is near the bottom of the blog page):


Although the EMI (magenta line) broke out of a descending channel (dotted lines) in late October the average (blue line) is losing upward momentum. The 1-month moving average needs to move above 100 to take our miners back to bull pasture. This morning's average at 73.56 says we're still in deep bear country.

Gold & Silver Report

This morning's...

COMEX gold is down $13.8/oz at $1,711.3/oz (December contract most active)

COMEX silver is down $1.147/oz at $31.270/oz (December contract, most active)

The gold-to-silver ratio (Au:Ag) is 54.727 oz/oz

The Eureka Miner’s Gold Value Index© (GVI) is par or 100.00, up from Friday's closing 98.72 and above its 1-month average of 98.76. The new record high for 2010-2011 is 109.97 set on Oct. 4, 2011.Value Adjusted Gold Price© (VAGP) is $1,430.0/oz which is $281.3/oz below the current COMEX gold price.

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.

The Eureka Miner’s Gold Value Index© (GVI) is bullish for key commodities going forward. Here is plot of the GVI (also near the bottom of the blog page):


To get the metals & miners back on their feet, we need gold to give up some relative value to copper, oil and silver. Remember, the GVI and EMI typically (but not always) have an inverse relation; as the GVI falls, the EMI rises. It is bullish for miners then to see the GVI 1-month average (dark line) trending down. Presently, the GVI is right at 100.0 sitting above an average of 98.76 and down 9.0% from its 2010-2011 high of 109.97 set on Oct. 4.

Copper & Molybdenum Report

This morning's...

COMEX copper is down $0.0765 at $3.3255/lb (December contract, most active)

The gold-to-copper ratio (Au:Cu) is 514.60 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels"

Western molybdenum oxide (price per pound):

Metals Week Average:
US$13.85
As of November 21, 2011
(updated weekly)

Ryan's Notes Average:
US$13.70
As of Nov 18, 2011
(updated twice weekly)

European Molybdenum Oxide (Bloomberg):
US$14.05

London metal Exchange (LME) molybdenum 3-month seller's contract:

US$13.83/lb

Copper and gold have made a complete lap around the Report's correlation map from early August, when the wheels started coming off the U.S. and European debt wagons, to this Friday's close. We are back in positive correlation territory (green "+, +" quadrant) which is typically bullish for the metals & miners.


Unfortunately, the present trajectory direction toward the yellow "-, +" quadrant may signal another lap around the track which would be a decidedly bearish development.

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 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.

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

NYMEX light sweet crude $96.74
ICE North Sea Brent crude $107.11
Spread (ICE- NYMEX) = $9.49 (Friday, $10.39)

Here are the March contracts* with a narrower spread:

NYMEX light sweet crude $96.82
ICE North Sea Brent crude $106.77
Spread (ICE- NYMEX) = $9.95 (Friday, $9.19)

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

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

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 199.9 up from Friday's closing 183.9. A level above 200 is time for serious concern. We are now just below that level.

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.

Stock Market Morning Update

The DOW is down 262.85 points to 11,533.31; the S&P 500 is down 26.14 points at 1,189.51

The Eureka Miner's Grubstake Portfolio is down 3.63% at $1,360,416.83 (what's this?).

Cheers,

Colonel Possum

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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