"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, January 31, 2012

General Moly (GMO) Breakout? Yes, but....

A Point of Balance - Devil's Gate, Eureka, Nevada

NEW FORMAT for 2012

Morning Commentary
Daily Market Roundup
- Gold & Silver Report
- Copper & Molybdenum Report
- Oil Watch
- Debt Crisis Watch
- Stock Market Morning Update
- Eureka Miner's Million Dollar Grubstake Portfolio


My latest Kitco commentary: Copper and Gold Plan Their 2012 World Tour (01/30/2012)

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

This morning's...
COMEX Gold price = $1748.8/oz (February contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 92.64 (possible gold value trend reversal)
Value Adjusted Gold Price© (VAGP) = $1,577.3/oz
COMEX - VAGP = $171.5/oz; gold is trading at a premium to key commodities; the gold-to-copper ratio continues to exceed recession levels



Morning Miners!

It is 6:37 AM. Have a cup of Ruby T's famous Blue Skies. Our market bull is whistling Willie Nelson's hopeful tune as the morning markets react positively to progress in Europe.

A European Union pact to tighten fiscal ties and a statement by Greek Prime Minister Lucas Papademos that negotiators had made "significant progress" on debt talks with a possible agreement by the end of this week put 17 of 19 global markets in the green. Spot copper jumped more than 1% and COMEX gold hit $1,750.6/oz before falling back slightly to $1,748.8/oz. My target for this week was $1,750/oz so the Colonel's buying Ruby coffee this morning. There's another reason too...

General Moly (GMO) Breakout? Yes, but...

Last Tuesday Ruby T whispered in my ear that General Moly was long overdue for a breakout in stock price. I looked at the charts and surmised:

An optimist might say GMO is patiently building a "base" and will move aggressively higher to catch up with the benchmark [Thompson Creek] on any good news regarding the DEIS, water rights and so forth. A pessimist may characterize the flat line stock price as "dead money" and move on to greener pasture.

The ole Colonel just threw a few shares in the buckboard at $3.25 so I guess I'm just another one of those durn optimists - at least there is a CEO riding shotgun with me.
(Eureka Miner, 1/24/2012)

The CEO reference was to General Moly's boss Bruce Hansen who felt good enough about the future to have added to his position in the company January 6.

How has GMO done since last Tuesday? As of yesterday's close, the moly miner logged five consecutive market days in rally mode. This morning GMO is up another 1% trading presently at $3.77 or a full 16% up from when the Colonel put his toe in the water. That's a breakout from dead money in my book.

Whether today will be day-6 of the rally is uncertain and I won't be surprised to see a pullback with some profit taking. The ole Colonel is staying put. Here's a six-month chart of GMO (blue line) versus benchmark moly miner Thompson Creek (TC, green line) and GMO's 200-day moving average (orange line):


GMO has gone from flat line to closing fast on the benchmark. TC is down 5% from 6 months ago and GMO is still 20% off the mark. Importantly, GMO is now threatening to cross its 200-day average to the upside ($3.77 vs $3.81 average), a bullish development. This could also bring on selling pressure later today.

Western and European moly oxide spot prices and London Metal Exchange (LME) moly futures are all equal to or above $14/lb, another bullish indication (see Copper & Molybdenum Report below).

A faithful follower of this report and serious General Moly investor offered these four comments when I asked him last night what he thought about the recent move in share price (I've added some comments of my own in brackets []):

Q. Are we ready to call GMO a "gap up?"

A. Looks good.

and...

1) We only had one day of high volume [1,111,529 shares on 1/26, 90-day volume is 644,093]... all the rest was nothing [i.e. less than 90-day].

2) Short interest has gone down which is perplexing...maybe some smart ppl are accumulating? Maybe all sellers have dried up?

3) I'm watching level II closely.. and don't see large buys just slow and steady.

4) Relative against TC looking very good [as shown in the above chart].


This cowboy does his homework, please do your own research too. The report could be dead wrong about the prospects of any stock. As the Colonel said last week, all bets are off if Europe goes into a tailspin or the Persian Gulf explodes into conflict.

I'm going to buy Ruby another cup of java.

Daily Market Roundup


Mining Report

This morning's mining stocks...

Barrick (ABX) $49.69 up 1.04%
Newmont (NEM) $62.04 up 1.34%
McEwen Mining (MUX) 6.01 up 2.56% (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $3.77 up 1.07%
Thompson Creek (TC) $8.61 up 0.94%
Freeport-McMoRan (FCX) $46.80 up 1.52% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $15.01 down 0.33%
Timberline Resources (TLR) $0.55 up 3.77%

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

ArcelorMittal (MT) $20.79 up 0.58% - global steel producer
POSCO (PKX) $92.64 up 0.38% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) is above-par at 191.49, up from last report's 172.36 and above the 1-month moving average of 131.69. The new record low for 2010-2012 was set Oct. 4, 2011 at 22.88. The 1-month average is currently above the key 100-level.

The EMI gives us the market temperature for the factors that have the greatest impact on mining in Eureka County. The record 2010-2012 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 up $14.4/oz at $1,748.8/oz (April contract, most active)

COMEX silver is down $0.473/oz at $34.000/oz (March contract, most active)

The gold-to-silver ratio (Au:Ag) is 51.435 oz/oz

Silver 1-month CRS© is 3.44% (bullish level); weak convergence (Ag neutral)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 92.64, down from last report's 93.74 and above its 1-month average of 92.11. The record high for 2010-2012 is 109.97 set on Oct. 4, 2011.

The Value Adjusted Gold Price© (VAGP) is $1,577.3/oz which is $171.5/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.

Copper & Molybdenum Report

This morning's...

COMEX copper is up $0.0470/lb at $3.8735/lb (March contract, most active)

The gold-to-copper ratio is 451.48 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels" (Cu bearish)

Copper 1-month CRS© is 2.56% (bullish level); divergent (Cu bearish)

The latest molybdenum oxide spot and futures prices (courtesy of Thompson Creek Metals):

Metals Week Average:
US$14.00
As of January 30, 2012
(updated weekly)

Ryan's Notes Average:
US$14.00
As of January 27, 2012
(updated twice weekly)

European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday):
US$14.05/lb

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

US$14.29/lb (US$31,500/metric ton)

Daily Oil Watch

Latest Nevada Fuel Prices (click this link)

On February 1st, 2011, we identified North Sea Brent crude oil as a good barometer for the crises in the Middle East and North Africa (MENA). The next conflict could be in the Persian Gulf. Brent remains above $100/bbl maintaining a spread above 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 $101.18
ICE North Sea Brent crude $112.76
Spread (ICE- NYMEX) = $11.58 (last report, $12.44)

Here are the May contracts* with a narrower spread:

NYMEX light sweet crude $101.89
ICE North Sea Brent crude $112.16
Spread (ICE- NYMEX) = $10.71 (last report, $11.12)

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

NYMEX WTI 1-month CRS© is 3.87% (neutral level); weak divergence (Oil neutral)

Prices are off their crisis highs and we have $110+ Brent and $100+ NYMEX in May favoring high oil prices this 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 83.1 down from last report's 87.4. A level above 200 is time for serious concern. We are now well 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 and continuing into 2012.

Stock Market Morning Update

The DOW is up 36.71 points to 12,690.43; the S&P 500 is up 3.58 points at 1316.59

The Eureka Miner's Grubstake Portfolio is up 1.16% at $1,616,258.82 (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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