"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, January 23, 2012

Gold 6-Week High; General Moly Update

The Eureka Canyon Subdivision goes up

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 = $1,667.6/oz (February contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 91.15 (declining gold value trend)
Value Adjusted Gold Price© (VAGP) = $1,528.7/oz
COMEX - VAGP = $138.9/oz; gold is trading at a premium to key commodities; the gold-to-copper ratio continues to exceed recession levels

Morning Miners!

It is 6:04 AM. Have a hot Monday cup of Here's Hoping. Looks like we've got a good'un on a new moon...

Gold 6-Week High

COMEX gold pushed to prices not seen since mid-December to make a 6-week high at $1,677.9/oz; now trading down a bit at $1,667.6/oz. Today we enter the never-never land in metal futures trading as the Chinese break for their Lunar New Year holiday. Europe has taken a pause too in their ongoing crises as Germany's latest offer of short-term debt drew strong demand.

On a more sober note, International Monetary Fund chief Christine Lagarde warned the German Council on Foreign Relations in Berlin that the global economy faces a depression-era collapse in demand if Europe doesn't act more aggressively in addressing their debt problems. She said, "It is about avoiding a 1930s moment, in which inaction, insularity, and rigid ideology combine to cause a collapse in global demand. A moment, ultimately, leading to a downward spiral that could engulf the entire world."

Nothing like a party-pooper at a New Years party.

COMEX copper didn't listen to Lagarde's warning and bumped up $0.435/lb to trade presently at $3.7885/lb. COMEX silver is feeling frisky too, up another $0.245/oz at $31.920/oz. The closely watched gold-to-silver ratio has compressed to levels not seen since early November (i.e. silver strengthening with respect to gold) checking in at 52.24.

All our favorite miners are whistling to work this morning except Quadra and Timberline Resource which are down a tad. Barrick (ABX) is up 1.53% at $46.53; General Moly (GMO) is up 0.30% at $3.31 (see Mining Report).

Importantly, this report's Eureka Miner's Index© (EMI) has a 1-month average cresting 100 - a sign that miners are returning to better times.

General Moly Update

The Colonel was on the road when the U.S. Bureau of Land Management conducted an open house and hearing on the draft study of General Moly's proposed Mt. Hope molybdenum project last week. Mining Editor Adella Harding did a nice piece on the event which packed the Eureka Opera House:

BLM hearing on Mt. Hope draws full house (Adella Harding, Elko Daily Free Press, 1/19/2012)

To borrow a line from Winston Churchill, the long and arduous process to bring Mt. Hope online has seemed at times like "a riddle wrapped in a mystery inside an enigma." At other times, there appears to be great hope for Mt. Hope with its job-creating molybdenum mine and 44-year life expectancy.

After witnessing one of the driest December-January periods in Eureka County since the late-1880s, I can certainly empathize with ranchers and farmers concerned about the mine's expected water usage. I hope the present resource monitoring and mitigation plans will bring a beneficial and satisfactory solution for all parties concerned.

General Moly is expecting the BLM to approve the project by September. When mine construction begins, there will be plenty of housing available in the new Eureka Canyon Subdivision (headline photos).

Thanks Adella for a good report!

Daily Market Roundup

Mining Report

This morning's mining stocks...

Barrick (ABX) $46.53 up 1.53%
Newmont (NEM) $59.37 up 0.17%
US Gold (UXG) $5.18 up 4.02%
General Moly (Eureka Moly, LLC) (GMO) $3.31 up 0.30%
Thompson Creek (TC) $8.46 up 1.56%
Freeport-McMoRan (FCX) $43.63 up 1.25% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $15.05 down 0.39%
Timberline Resources (TLR) $0.49 down 2.00%

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

ArcelorMittal (MT) $21.43 up 1.66% - global steel producer
POSCO (PKX) $92.31 up 0.87% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) is above-par at 166.15, up from last report's 161.00 and above the 1-month moving average of 105.17. The new record low for 2010-2012 was set Oct. 4, 2011 at 22.88. The 1-month average is currently above 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 2010-2012 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.

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 above the 100-level. The 1-month moving average has fortunately crested this key level also, a necessary condition for returning our miners to bull pasture.

Gold & Silver Report

This morning's...

COMEX gold is up $3.6/oz at $1,667.6/oz (February contract, most active)

COMEX silver is up $0.245/oz at $31.920/oz (March contract, most active)

The gold-to-silver ratio (Au:Ag) is 52.243 oz/oz

Silver 1-month CRS© is 2.26% (bullish level); stalled convergence (Ag neutral)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 91.15, up from last report's 91.76 and below its 1-month average of 92.52. The record high for 2010-2012 is 109.97 set on Oct. 4, 2011.

The Value Adjusted Gold Price© (VAGP) is $1,528.7/oz which is $138.9/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 on average. 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 more 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 91.15 is below an average of 92.52 and down 17.1% from its 2010-2011 high of 109.97.

Copper & Molybdenum Report

This morning's...

COMEX copper is up $0.0435/lb at $3.7885/lb (March contract, most active)

The gold-to-copper ratio is 440.17 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels" (Cu bearish)

Copper 1-month CRS© is 2.76% (bullish level); divergent (Cu bearish)

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

Metals Week Average:
As of January 23, 2012
(updated weekly)

Ryan's Notes Average:
As of January 20, 2012
(updated twice weekly)

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

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 $99.00
ICE North Sea Brent crude $110.39
Spread (ICE- NYMEX) = $11.39 (last report, $11.68)

Here are the April contracts* with a narrower spread:

NYMEX light sweet crude $99.70
ICE North Sea Brent crude $110.03
Spread (ICE- NYMEX) = $10.33 (last report, $10.63)

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

NYMEX WTI 1-month CRS© is 2.65% (bullish level); weak convergence (Oil neutral)

Prices are off their crisis highs and we have $110+ Brent and $95+ 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 87.8 up from last report's 84.4. 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 37.61 points to 12,758.09; the S&P 500 is up 6.22 points at 1321.60

The Eureka Miner's Grubstake Portfolio is up 1.00% at $1,521,356.39 (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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