Tuesday, January 24, 2012
Is General Moly (GMO) Ready for a Breakout?
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)
COMEX Gold price = $1,664.4/oz (February contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 91.30 (declining gold value trend)
Value Adjusted Gold Price© (VAGP) = $1,523.3/oz
COMEX - VAGP = $141.1/oz; gold is trading at a premium to key commodities; the gold-to-copper ratio continues to exceed recession levels
It is 6:08 AM. Have a cup of Ruby T's Lucky-24. Our market bull couldn't be happier this morning, Ruby loves it when her day of the week falls on the 24th - that's her lucky number! She's even ignoring a pullback in the metals with morning grumblings about Greek debt negotiations turning sour.
No, this ole gal sees better days ahead for moly miners and that's worth another cup of Lucky. On the local scene, General Moly just released their impressions of the recent public hearings in Eureka and Crescent Valley:
General Moly Announces Strong Support at Public Hearings (Press release, 1/24/2012)
As we discussed yesterday, there is still a range of legitimate concerns but Chief Executive Officer Bruce D. Hansen is interpreting the two well-attended meetings in a positive light:
I was very proud to hear community leaders from Eureka stand up in support of the Mt. Hope project. Their support is a testament to the hard work of our team in Nevada and our commitment to mining done right within the Eureka community. Importantly, no new issues were raised during the public hearings and we continue to believe that the BLM has a very robust and defensible DEIS. We look forward to the conclusion of the public comment period on March 1, the completion of the Final EIS in the third quarter, and hopefully initiating construction activities before the end of the year.
Mr. Hansen bought 173,141 additional shares of his company's stock Jan. 6 (Form 4 SEC filing) so he is is backing his upbeat outlook with his own money; never a bad sign from the head honcho of a mining company.
Let's kick the tires a little bit on his haul truck of optimism...
Is General Moly (GMO) Ready for a Breakout?
For starters, 2011 was a horrible year for mining stocks in general. This report's Eureka Miner's Index© (EMI) started last year in the 800s, fell down the mineshaft to the low 20s in October and has since rebounded above the key 100-level in this first month of 2012. An EMI that sustains above 100 is necessary to even start talking about a recovery in the mining sector. Today the EMI is 150.8 and more importantly, the 1-month moving average has been above the 100-level for three consecutive market days - currently at 108.4.
In terms of product, moly oxide has been feeling pretty chipper too. Presently Western and European spot prices are both around $13.90/lb (see Copper & Molybdenum Report below). The London Metal Exchange (LME) sees $31,500/metric ton ($14.29/lb) ahead for their 3-month seller's contract and $32,675/metric ton ($14.82/lb) for the 15-month. This is a considerable improvement from the October lows of last year as seen in this 6-month chart of the LME 3-month seller:
In October the futures dropped to $29,000/metric ton ($13.15/lb) from July's high of $34,000/metric ton ($15.42/lb) - a period when moly futures are seasonally on the rise in more normal times. Being above $31,000/metric ton is a relief especially in light of almost certain recessionary times ahead for Europe.
Moly benchmark miner Thompson Creek (TC) has been on a tear too with share price up over 27% since mid-December. Although this morning is a down day for mining stocks, TC is still very close to breaking its 200-day moving average to the upside, presently trading at $8.33 vs $8.53 for the average. Although GMO and TC roughly tracked each other for much of last year, General Moly has been less fortunate trading flat since the same mid-December to present period. The following 6-month chart is a comparison of share performance between TC (blue line) and GMO (green line) including the TC 200-day average (orange line).
Over six months TC is down 14% to General Moly's 32%. An optimist might say GMO is patiently building a "base" and will move aggressively higher to catch up with the benchmark 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.
Please do your own research, this report could be dead wrong. Also remember all bets are off if Europe goes into a tailspin or the Persian Gulf explodes into conflict. That's what makes markets exciting, pardner.
Daily Market Roundup
This morning's mining stocks...
Barrick (ABX) $45.78 down 2.49%
Newmont (NEM) $57.92 down 2.26%
US Gold (UXG) $4.97 down 3.12%
General Moly (Eureka Moly, LLC) (GMO) $3.22 down 2.13%
Thompson Creek (TC) $8.33 down 2.00%
Freeport-McMoRan (FCX) $43.18 down 1.60% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $14.91 down 0.07%
Timberline Resources (TLR) $0.48 down 4.00%
The Steels (a "tell" for General Moly & Thompson Creek):
ArcelorMittal (MT) $20.86 down 2.48% - global steel producer
POSCO (PKX) $91.02 down 0.85% - South Korean integrated steel producer
The Eureka Miner's Index© (EMI) is above-par at 150.75, down from last report's 166.15 and above the 1-month moving average of 108.39. 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.
Gold & Silver Report
COMEX gold is down $13.9/oz at $1,664.4/oz (February contract, most active)
COMEX silver is down $0.170/oz at $32.100/oz (March contract, most active)
The gold-to-silver ratio (Au:Ag) is 51.850 oz/oz
Silver 1-month CRS© is 2.58% (bullish level); stalled convergence (Ag neutral)
The Eureka Miner’s Gold Value Index© (GVI) is below-par at 91.30, up from last report's 91.15 and below its 1-month average of 92.35. The record high for 2010-2012 is 109.97 set on Oct. 4, 2011.
The Value Adjusted Gold Price© (VAGP) is $1,523.3/oz which is $141.1/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
COMEX copper is down $0.0430/lb at $3.7555/lb (March contract, most active)
The gold-to-copper ratio is 443.19 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels" (Cu bearish)
Copper 1-month CRS© is 2.69% (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
Ryan's Notes Average:
As of January 20, 2012
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 $98.63
ICE North Sea Brent crude $109.91
Spread (ICE- NYMEX) = $11.28 (last report, $11.39)
Here are the May contracts* with a narrower spread:
NYMEX light sweet crude $99.29
ICE North Sea Brent crude $109.77
Spread (ICE- NYMEX) = $10.48 (last report, $10.33)
* NYMEX futures contracts have rolled forward, we now show March and May for a 2-month look-ahead
NYMEX WTI 1-month CRS© is 2.77% (bullish level); weak convergence (Oil neutral)
Prices are off their crisis highs and we have $105+ 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 92.4 up from last report's 87.8. 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 down 65.92 points to 12,642.90; the S&P 500 is down 6.34 points at 1309.66
The Eureka Miner's Grubstake Portfolio is down 1.52% at $1,496,456.20 (what's this?).
Headline photo by Mariana Titus
Write Colonel Possum at firstname.lastname@example.org for answers to your questions or to request e-mail updates on the market