"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, December 6, 2011

Quadra FNX Shocker! Au, Ag & Cu Drop on S&P Warning

Shootout

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 = $1,712.9/oz (December contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 95.52 (declining gold value trend)
Value Adjusted Gold Price© (VAGP) = $1,498.3/oz
COMEX - VAGP = $214.6/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 2.29%; bullish level, converging stability (Cu bullish)

Oil 1-month CRS© is 3.24%; bullish level, stalled divergence (Oil neutral)


Morning Miners!

It is 6:06 AM. Have a hot cup of Ruby's 44-Magnum. Our market bull has been packing her pistol lately, Ruby says she's on the hunt for an S&P credit analyst. "How would you know one if you saw one?" I asked after my first cup of Magnum.

"Shoot first and if the vultures don't come around, you got one!" Ruby patted her sidearm confidently, "And I used to think my ex-husband was the most worthless critter on earth!"

Nothing like a ratings agency to take some sizzle off Santa's rally...Wait!...What just happened to Quadra FNX???

Quadra FNX agrees to $3.5-billion takeover

Talk about breaking news, this should get folks in Ely (and a few in Eureka) talking. Check this out:

Quadra FNX agrees to $3.5-billion takeover (Peter Koven, FP Investing, Dec 6, 2011 – 9:22 AM ET; Last Updated: Dec 6, 2011 10:35 AM ET)

Apparently, Quadra FNX Mining Ltd. has agreed to be acquired by Polish KGHM Polska Miedz S.A. in a $3.5-billion all-cash deal. KGHM is the world’s ninth largest producer of copper and third largest producer of silver. Quadra FNX operates the Robinson copper mine outside Ely. Quadra stock is up a startling 36% on a day when most mining equities are in the tank.

Have a second cup of Magnum!

Gold, Silver, Copper Drop on S&P Warning

Standard & Poor's is warning of a sweeping credit downgrade of euro zone countries if European leaders fail to cook up a new deal to solve the Europe's debt crisis this week. That's a tall order for the European Summit scheduled for Friday.

Of course, this comes from the same credit agency that ignored danger signs prior to the 2008-2009 financial crisis and was quick to drop the U.S. rating this summer a cut below France. No wonder Ruby is seeing red - so are gold, silver and copper this morning. Nuts.

The good news is that most markets are down but not by much. Chicken Little's cries just don't stampede the herd like they did in August. A bigger issue for metals may be the slowdown in China and gold demand weakness in India. Reuter's Susan Thomas puts things in perspective for us:

METALS-Copper falls on S&P warning of euro zone downgrade (Susan Thomas, Reuters, Tue Dec 6, 2011 1:26pm GMT)

It's not Friday yet, pardner.

Daily Market Roundup


Mining Report

This morning's mining stocks...checkout Quadra FNX...

Barrick (ABX) $49.98 down 0.58%
Newmont (NEM) $65.58 down 0.62%
US Gold (UXG) $3.80 down 2.56%
General Moly (Eureka Moly, LLC) (GMO) $3.34 down 2.05%
Thompson Creek (TC) $7.32 up 0.14%
Freeport-McMoRan (FCX) $39.97 up 0.65% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $15.26 up 36.04%
Timberline Resources (TLR) $0.65 up 4.84%

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

ArcelorMittal (MT) $19.32 down 1.68% - global steel producer
POSCO (PKX) $86.55 down 0.93% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) is below-par at 85.23, down from last report's 93.40 and above the 1-month moving average of 70.65. 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.

Gold & Silver Report

This morning's...

COMEX gold is down $21.6/oz at $1,712.9/oz (February contract, most active)

COMEX silver is down $0.472/oz at $31.900/oz (March contract, most active)



The Eureka Miner’s Gold Value Index© (GVI) is below-par at 95.52, up from last report's 95.14 and below its 1-month average of 98.54. The new record high for 2010-2011 is 109.97 set on Oct. 4, 2011.

The Value Adjusted Gold Price© (VAGP) is $1,498.3/oz which is $214.6/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.

Copper & Molybdenum Report

This morning's...

COMEX copper is down $0.0655/lb at $3.5500/lb (March contract, most active)

The gold-to-copper ratio (Au:Cu) is 482.51 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:
US$13.40
As of December 5, 2011
(updated weekly)

Ryan's Notes Average:
US$13.45
As of Dec 02, 2011
(updated twice weekly)

European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday):
US$13.40/lb

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 $100.74
ICE North Sea Brent crude $110.11
Spread (ICE- NYMEX) = $9.37 (last report, $8.95)

Here are the March contracts* with a narrower spread:

NYMEX light sweet crude $100.88
ICE North Sea Brent crude $109.48
Spread (ICE- NYMEX) = $8.60 (last report, $7.86)

* 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 $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 150.4 up from last report's 145.5. 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 19.03 points to 12,116.86; the S&P 500 is down 0.53 points at 1,256.55

The Eureka Miner's Grubstake Portfolio is up 1.27% at $1,457,409.74 (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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