"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.

Wednesday, February 8, 2012

General Moly (GMO) & Thompson Creek (TC) Rock; Moly Prices Bounce


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 International Business Times commentary: Gold and Silver Move Uptown for 2012 (02/06/2011)

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

This morning's...
COMEX Gold price = $1,742.9/oz (April contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 92.26 (Possible second reversal in gold value trend, down)
Value Adjusted Gold Price© (VAGP) = $1,578.5
COMEX - VAGP = $164.4/oz; gold is trading at a premium to key commodities; the gold-to-copper ratio continues to exceed recession levels

Morning Miners!

It is 6:18 AM. Old Miner Woden just left the break room in a huff. Our market bear can't take a hump day when 16 of 19 global markets are in the green. "I'm gettin' durn tired of waiting for the world to end!" he said as he stomped off to his cave. Have a cup of Cheer, the ole Colonel just washed Woden's Cold Reality brew down the sink...

General Moly (GMO) & Thompson Creek (TC) Rock

While the world awaits the latest Greek Salad of debt-restructuring and next round of bellicose threats from Iran, it appears we have peaceful Wednesday morning at our door. What better time to check on the moly miners - the Report has been tracking General Moly (GMO) and moly benchmark miner Thompson Creek (TC) for several weeks:

General Moly (GMO) Breakout? Yes, but.... (1/31/2012)

Is General Moly (GMO) Ready for a Breakout? (1/24/2012)

Before we look at their relative performance there are several other cool things going on:

1) General Moly has just launched a new and dandy website - check it out!

2) A faithful follower of this report sent a link to a recent upbeat Thompson Creek article:

Thompson Creek Metals In Rally Mode (Chris Damas, Seeking Alpha, 2/3/2012)

3) If you have never been there, the Yahoo GMO message board is a terrific place to find the latest buzz on General Moly. There's one for Thompson Creek also.

When we started checking, Thompson Creek was enjoying a strong recovery but GMO hadn't made a 2012 breakout to the upside. Now, both moly miners look positive with their share price surging above their respective 200-day averages (a key bullish indicator). Here is the latest 6-month chart of benchmark TC (blue line) and its average (green):

And here is the companion chart for GMO with the same color scheme:

Finally, here are the two together showing the relative performance of General Moly (blue line) and Thompson Creek (green line).

General Moly hasn't quite caught up with the benchmark but is posting a solid 11% gain from 6-months ago; Thompson creek is up an impressive 29%.

What about moly prices?

Moly Prices Bounce

Yesterday, the London Metal Exchange (LME) 3-month seller's contract bounced to $32,600/metric ton ($14.79/lb). This has been matched by recent moves in the spot markets on both sides of the pond. Western moly oxide is $14.25/lb (Ryan's notes) and $14.40/lb in Europe (Bloomberg). See the complete report below (Copper & Molybdenum Report)

Daily Market Roundup

Mining Report

This morning's mining stocks...

Barrick (ABX) $49.39 up 0.22%
Newmont (NEM) $61.11 up 0.41%
McEwen Mining (MUX) 5.61 unchanged (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $4.03 up 2.81%
Thompson Creek (TC) $9.25 up 1.54%
Freeport-McMoRan (FCX) $46.77 up 2.23% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $15.10 unchanged
Timberline Resources (TLR) $0.53 up 1.92%

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

ArcelorMittal (MT) $23.06 up 4.01% - global steel producer
POSCO (PKX) $91.28 up 0.47% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) is above-par at 231.86, up from last report's 215.96 and above the 1-month moving average of 168.57. 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 down $5.5/oz at $1,742.9/oz (April contract, most active)

COMEX silver is down $0.0190/oz at $34.175/oz (March contract, most active)

The gold-to-silver ratio (Au:Ag) is 50.999 oz/oz

Silver 1-month CRS© is 2.88% (bullish level); stalled convergence (Ag neutral)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 92.26, down from last report's 93.92 and above its 1-month average of 92.50. The record high for 2010-2012 is 109.97 set on Oct. 4, 2011.

The Value Adjusted Gold Price© (VAGP) is $1,578.5/oz which is $164.4/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 0.0490/lb at $3.9250/lb (March contract, most active)

The gold-to-copper ratio is 444.05 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels" (Cu bearish)

Copper 1-month CRS© is 2.19% (bullish level); stalled divergence (Cu neutral)

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

Metals Week Average:
As of February 6, 2012
(updated weekly)

Ryan's Notes Average:
As of February 7, 2012
(updated twice weekly)

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

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

US$14.79/lb (US$32,600/metric ton)

Daily Oil Watch

Latest Nevada Fuel Prices (click this link)

A faithful friend of this report in Mumbai sent this insightful article on China, Iran and oil:

China buys up Saudi, Russian oil to squeeze Iran (Published on Wed, Feb 08, 2012, Reuters)

"Things are hotting up in the Middle East!" (England)

"die Lage im Nahen Osten spitzt sich zu or verschärft sich!" (Germany)

"IDC INDB!" (U.S.)

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 $99.76
ICE North Sea Brent crude $116.33
Spread (ICE- NYMEX) = $16.57 (last report, $20.40)

Here are the May contracts* with a narrower spread:

NYMEX light sweet crude $100.65
ICE North Sea Brent crude $115.44
Spread (ICE- NYMEX) = $14.79 (last report, $18.51)

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

NYMEX WTI 1-month CRS© is 4.43% (bearish level); divergent (Oil bearish)

Prices are off their crisis highs but we have $115+ Brent and $100+ NYMEX in May favoring high oil prices this spring. A front-month spread >$20/bbl is a trouble sign.

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 79.5 down from last report's 81.2. 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 14.00 to 12,892.20; the S&P 500 is up 3.73 points at 1,350.78

The Eureka Miner's Grubstake Portfolio is up 0.82% at $1,629,133.08 (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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