"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.

Monday, December 5, 2011

$36 Silver? Mt. Hope Draft EIS Published (GMO)

Metallic Art by Mariana Titus

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!

My Latest International Business Times commentary: Gold and Silver “Together Again” (12/05/2011)

My latest Kitco commentary:
What does CRS© tell us about Gold, Copper & Oil? (11/28/2011)

This morning's...
COMEX Gold price = $1,738.0/oz (December contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 95.14 (declining gold value trend)
Value Adjusted Gold Price© (VAGP) = $1,526.5/oz
COMEX - VAGP = $211.5/oz; gold is trading at a premium to key commodities; the gold-to-copper ratio continues to exceed recession levels but is trending down (Cu bullish)

Copper 1-monthCRS© is 2.15%; bullish level, converging stability (Cu bullish)

Oil 1-month CRS© is 3.30%; bullish level, stalled divergence (Oil neutral)

Morning Miners!

It is 6:18 AM. Have a cup of Monday ether to get that diesel going. Looks like we're setting up for quite a week, some have dubbed the next five days a "make-or-break" for the euro currency. The ole Colonel is confident this can will be kicked into the new year. French President Nicolas Sarkozy and German Chancellor Angela Merkel announced they favor a historic change to European Union treaties to address fiscal discipline and restore investor confidence in the euro zone. The European Summit is Friday, Dec. 9. Stay tuned...

$36 Silver?

This weekend the ole Colonel put together his thoughts on silver and gold for the International Business Times in the commentary: Gold and Silver “Together Again”. Check it out, I think $1,800/oz gold and $36/oz silver are in the cards.

Mt. Hope Draft EIS Published

It is a big day for General Moly (GMO). At 5:33 AM PT they announced publication of the Mt. Hope Project's Draft Environmental Impact Statement (DEIS). The Notice of Availability process took only one month, it usually takes three and that sounds like progress to me:

General Moly Announces Publication of the Mt. Hope Project's Draft Environmental Impact Statement (Press Release, 12/05/2011)

Bruce D. Hansen, Chief Executive Officer, said:

The publication of the Mt. Hope DEIS is one of our most significant permitting accomplishments in the last five years and I am extremely pleased with and proud of our team for their continued efforts toward this goal. We believe the Mt. Hope project's DEIS is extremely robust and defensible and will continue to assist the BLM to the extent possible in finalizing the Final EIS for the project.

I would also like to commend the State and Federal offices of the BLM for their efforts in expediting the Notice of Availability process for this project. A process that has historically taken 3 months or longer was accomplished in less than 1 month, in large part due to the administrative efforts of the BLM offices to expedite projects.

Finally, I would like to encourage those who support the Mt. Hope project to participate in the public comment process and submit supportive comments to the BLM over the next 90 days.

Rock on. Let's move some earth next year.

Daily Market Roundup

Mining Report

This morning's mining stocks...

Barrick (ABX) $51.46 up 0.86%
Newmont (NEM) $67.05 up 0.03%
US Gold (UXG) $4.00 up 4.17%
General Moly (Eureka Moly, LLC) (GMO) $3.50 up 8.02%
Thompson Creek (TC) $7.32 up 2.95%
Freeport-McMoRan (FCX) $40.19 up 2.26% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $10.92 up 3.46%
Timberline Resources (TLR) $0.61 up 1.67%

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

ArcelorMittal (MT) $19.88 up 4.58% - global steel producer
POSCO (PKX) $88.22 up 0.68% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) is below-par at 93.40, up from last report's 84.70 and above the 1-month moving average of 70.20. 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 10/4/2011 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):

Today's EMI is very close to breaking 100 and clearly out of the the descending channel (dotted lines) which we first left in late October. Unfortunately that some of that momentum was lost and the average (blue line) fell back. The 1-month moving average is headed north again and needs to move above 100 to return our miners to bull pasture.

Gold & Silver Report

This morning's...

COMEX gold is down $13.3/oz at $1,738.0/oz (February contract, most active)

COMEX silver is up $0.054/oz at $32.740/oz (March contract, most active)

The gold-to-silver ratio (Au:Ag) is 53.085 oz/oz

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 95.14, down from last report's 96.66 and below its 1-month average of 98.69. The new record high for 2010-2011 is 109.97 set on Oct. 4, 2011.

The Value Adjusted Gold Price© (VAGP) is $1,526.5/oz which is $211.5/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 presently declining. Here is plot of the GVI at Friday's close (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 at 95.14 is below an average of 98.69 and down 13.5% from its 2010-2011 high of 109.97.

Copper & Molybdenum Report

This morning's...

COMEX copper is up $0.0310/lb at $3.6150/lb (March contract, most active)

The gold-to-copper ratio (Au:Cu) is 480.17 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels" but the ratio is now trending down (Cu bullish).

The latest molybdenum oxide spot and futures prices:

Metals Week Average:
As of December 5, 2011
(updated weekly)

Ryan's Notes Average:
As of Dec 02, 2011
(updated twice weekly)

European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday):

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

US$13.83/lb (US$30,500/metric ton)

Daily Oil Watch

Latest Nevada Fuel Prices (click this link)

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 this morning:

NYMEX light sweet crude $102.2
ICE North Sea Brent crude $111.15
Spread (ICE- NYMEX) = $8.95 (last report, $9.13)

Here are the March contracts* with a narrower spread:

NYMEX light sweet crude $102.47
ICE North Sea Brent crude $110.03
Spread (ICE- NYMEX) = $7.86 (last report, $8.19)

* 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 $110+ Brent and $100+ 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 145.5 down from last report's 150.3. A level above 200 is time for serious concern. We are now 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 up 123.47 points to 12,143.50; the S&P 500 is up 15.14 points at 1,259.72

The Eureka Miner's Grubstake Portfolio is up 2.22% at $1,458,966.54 (what's this?).


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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