"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 19, 2011

Kim Jong Il Dies: Au Up, POSCO & Ag Down; General Moly Updates

Eureka Bound

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.

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 = $1,600.9/oz (December contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 96.02 (declining gold value trend)
Value Adjusted Gold Price© (VAGP) = $1,393.1/oz
COMEX - VAGP = $207.8/oz; gold is trading at a premium to key commodities; the gold-to-copper ratio continues to exceed recession levels but is trending down

Morning Miners!

It is 6:34 AM. Have a Monday cup of Happy to be back. The Colonel is off the road and enjoying a beautiful Diamond Valley vista in the early hours. Let's checkout what's moving the markets...

Kim Jong Il Dies; Gold Steady, POSCO Down

Just to add one more worry to the markets, North Korean Kim Jong Il died over the weekend. The demise of Dear Leader caused a drop in Asian markets led by falls in South Korean equities and the won. POSCO, South Korean steelmaker and 20% owner of the Mt. Hope molybdenum project, lost over 3% share price in early morning trading and gold prices pushed above the $1,600/oz level. Neither move was dramatic as many anticipate that China will provide a firm and stabilizing influence if things get out of hand with the planned succession of Kim's son Kim Jong-un.

Nonetheless, gold needed a little boost from safe haven traders after a miserable last week (COMEX gold plumbed a $1,562.5/oz low on Thursday, 12/15). Predictably, silver futures weakened this morning relative to gold as the closely watched gold-to-silver ratio rose above 55 oz/oz (an increase in ratio indicates gold strengthening with respect to silver). COMEX gold is presently $1,600.9/oz; COMEX silver is 29.085/oz.

The gold move up may prove to fleeting given the latest bearish trend to the downside. If anything, $1,600/oz is an important psychological level. Stay tuned.

General Moly Updates

The latest on General Moly and Mt. Hope...

General Moly Announces Receipt of Water Permits for Mt. Hope
(Press Release, 12/19/2011)

General Moly just announced that "...as of December 14, 2011, the Nevada State Engineer issued the Company, through a subsidiary, all of its water permits - allowing the Mt. Hope project to utilize approximately 7,000 gallons per minute (gpm) of groundwater for mining purposes. The permits follow the Nevada State Engineer's July 2011 ruling granting the Company's water right applications for the use of 11,300 acre-feet annually (afa) of water for mining purposes."

Aditionally, Mining Editor Adella Harding of the Elko Daily Free Press posted an update on the General Moly EIS schedule Friday:

New comment date on Mt. Hope EIS
(Adella Harding, Elko Daily Free Press, 12/16/2011)

The U.S. Bureau of Land Management's deadline for public comments on General Moly's proposed Mt. Hope Project is March 1, originally reported to be March 7.

Daily Market Roundup

Mining Report

This morning's mining stocks...

Barrick (ABX) $44.58 down 0.78%
Newmont (NEM) $61.73 down 0.72%
US Gold (UXG) $3.00 down 4.15%
General Moly (Eureka Moly, LLC) (GMO) $3.28 up 2.18%
Thompson Creek (TC) $6.71 down 0.30%
Freeport-McMoRan (FCX) $36.46 down 1.43% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $14.78 up 0.13%
Timberline Resources (TLR) $0.61 down 4.69

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

ArcelorMittal (MT) $17.24 up 0.47% - global steel producer
POSCO (PKX) $81.07 down 3.42% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) is below-par at 69.31, down from last report's 75.13 and above the 1-month moving average of 70.33. 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 has fallen to just below its 1-month average. Presently the average is moving sideways in a 69-70 range; it need to go back above the 100-level before we can say the miner's have left bear country for safer pasture.

Gold & Silver Report

This morning's...

COMEX gold is up $3.0/oz at $1,600.9/oz (February contract, most active)

COMEX silver is down $0.586/oz at $29.085/oz (March contract, most active)

The gold-to-silver ratio (Au:Ag) is 55.042 oz/oz

Silver 1-month CRS© is 1.20%; bullish level, very stable (Ag bullish)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 96.02, down from last report's 95.52 and below its 1-month average of 96.95. The new record high for 2010-2011 is 109.97 set on Oct. 4, 2011.

The Value Adjusted Gold Price© (VAGP) is $1,393.1/oz which is $207.8/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.

Copper & Molybdenum Report

This morning's...

COMEX copper is down $0.0135/lb at $3.3175/lb (March contract, most active)

The gold-to-copper ratio (Au:Cu) is 482.56 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels" (Cu bearish) but the ratio is trending down (Cu bullish).

Copper 1-monthCRS© is 2.73%; bullish level, converging stability (Cu bullish)

The latest molybdenum oxide spot and futures prices:

Metals Week Average:
As of December 19, 2011
(updated weekly)

Ryan's Notes Average:
As of December 16, 2011
(updated twice weekly)

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

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

US$13.61/lb (US$30,000/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 $94.31
ICE North Sea Brent crude $104.25
Spread (ICE- NYMEX) = $9.94 (last report, $9.82)

Here are the March contracts* with a narrower spread:

NYMEX light sweet crude $94.66
ICE North Sea Brent crude $103.57
Spread (ICE- NYMEX) = $8.91 (last report, $8.87)

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

NYMEX WTI 1-month CRS© is 1.55%; bullish level, converging stability (Oil bullish)

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 121.3 up from last report's 118.7. 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 28.76 points to 12,046.11,895.15; the S&P 500 is up 1.03 points at 1220.69

The Eureka Miner's Grubstake Portfolio is down 0.61% at $1,342,202.79 (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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