"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.

Tuesday, February 28, 2012

Silver Breaks $36; Thompson Creek (TC) & Moly Blues

Silver Shines

*** BREAKING NEWS *** COMEX silver moved above $37 presently trading at $37.080 per ounce. With COMEX gold at $1,790.1 per ounce the GSR is a bullish 48.28 (see below) - 9:43 AM PT

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: Silver to Gold, “Whither Thou Goest…” (02/27/2011)

My latest Kitco commentary: A Foreboding Alignment in the Copper-Gold Firmament (02/21/2012)

Latest Nevada Fuel Prices (click this link)

This morning's...
COMEX Gold price = $1,782.0/oz (April contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 90.37 (gold value weakly trending up)
Value Adjusted Gold Price© (VAGP) = $1,647.6/oz
COMEX - VAGP = $134.4/oz; gold is trading at a premium to key commodities; the gold-to-copper ratio is staying near but below its 3-month average (Cu neutral)

Morning Miners!

It is 6:08 AM. Have a cup of Ruby T's famous Blue Skies. Our dauntless market bull is looking forward to a good day in the markets as silver shines but there are a few clouds in her blue sky for moly miners and Big Mo...

Silver Breaks $36

COMEX silver (May contract most active) broke $36 at 4:30 AM PT and is continuing to gap up trading presently at $36.205 per ounce. Although COMEX gold is also up $7.1 at $1,782.0 per ounce, silver is showing greater relative strength as the gold-to-silver (GSR) ratio drops below 50 into 40-territory currently at 49.220. The GSR has not been below 50 since shortly before gold set its record high Sept.26 of last year. I wouldn't be surprised to see silver reach the mid-$36 per ounce range later today.

The Report threw up another bullish flag for the white metal after a strong close last week as I explained in my latest International Business Times commentary: Silver to Gold, “Whither Thou Goest…”. The present price is a long way from from last year's bearish close at $27.915 per ounce; silver is now up nearly 30% at this morning's price. This report has had its eye on the white one since the Colonel's Christmas barbeque thanks to my good friend John. There should be more room to run; my 2012 peak price prediction is $40+ with a nominal price of $35.

Thompson Creek (TC) & Moly Blues

I wish things were doing as well for benchmark moly miner Thompson Creek (TC). They had their quarterly conference call early this morning and TC is presently down 12.4% at $7.61 - Ouch!

A faithful contributor to this report made these insightful comments a short while ago:

Was up early listening to TC conf. call.....didn't go well at all.

Analysts were not happy at all because the cost estimates for Mt. Milligan were dramatically

Loughery and Saxton tried to say that's mining cost inflation because of demand but I don't think the analysts were buying it...look for lots of downgrades...but it's already happened in the share price.

Unfortunately I didn't hear much talk about moly and it's demand going forward..and that was my main reason for the conf. call.

Here is yesterday's TC Press release:

Thompson Creek Reports 2011 Record Molybdenum Sales of 40.1 Million Pounds and Revenue of $669.1 Million (Press release, 2/28/2012)

I can't speak directly to future demand but the London Metal Exchange (LME) moly futures contracts have been trending down lately. Yesterday, the LME 3-month seller fell to $14.51 per pound ($32,000 per metric ton) placing it in backwardation to both Western and European spot prices ($14.78-$14.90 and $14.88 per pound respectively). The 15-month contract is still keeping its head above $15 per pound at $15.16 ($33,425 per metric ton). Here's a 3-month plot of the 3-month seller's contract:

General Moly (GMO) is off today too but faring much better; down 0.82% at $3.63.

Daily Market Roundup

Mining Report

This morning's mining stocks...

Barrick (ABX) $48.77 up 0.54%
Newmont (NEM) $61.35 down 0.28%
McEwen Mining (MUX) 5.64 up 2.17% (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $3.66 down 0.82%
Thompson Creek (TC) $7.61 down 12.43%
Freeport-McMoRan (FCX) $43.72 up 0.95% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $15.02 down 0.07%
Timberline Resources (TLR) $0.60 unchanged

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

ArcelorMittal (MT) $21.43 up 0.85% - global steel producer
POSCO (PKX) $92.18 down 0.31% - South Korean integrated steel producer

The Eureka Miner's Index© (EMI) was re-calibrated 2/8 to reflect current 200-day moving averages for benchmark miners.

The EMI is above-par at 226.61, down from last report's 230.09 and below the 1-month moving average of 232.07. The 1-month average is safely 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 $7.1/oz at $1,782.0/oz (April contract, most active)

COMEX silver is up $0.610/oz at $36.205/oz (May contract, most active)

The gold-to-silver ratio (Au:Ag) is 49.220 oz/oz

Silver 1-month CRS© is 1.32% (bullish level); CRS© divergent (bullish compression)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 90.37, down from last report's 91.05 and below its 1-month average of 92.54. Gold value is weakly trending up after moving sideways for much of this month. The record high for 2010-2012 is 109.97 set on Oct. 4, 2011.

The Value Adjusted Gold Price© (VAGP) is $1,647.6/oz which is $134.4/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 $0.0315/lb at $3.9205/lb (May contract, most active)

The gold-to-copper ratio is 454.53 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels"; the ratio is near its 3-month moving average of 463.00 (Cu bearish, Price Domain B)

Copper 1-month CRS© is 1.64% (bullish level); CRS© weak convergence (Cu neutral)

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

Metals Week Average:
As of February 27, 2012
(updated weekly)

Ryan's Notes Average:
As of February 21, 2012
(updated twice weekly)

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

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

US$14.51/lb (US$32,000/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 $120/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 $108.13
ICE North Sea Brent crude $123.30
Spread (ICE- NYMEX) = $15.17 (last report, $15.56)

Here are the June contracts* with a narrower spread:

NYMEX light sweet crude $109.07
ICE North Sea Brent crude $121.90
Spread (ICE- NYMEX) = $12.20 (last report, $13.15)

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

NYMEX WTI 1-month CRS© is 3.19% (bullish level); CRS© weak divergence (Oil neutral)

Prices are near highs for 2012, we have $120+ Brent and $105+ NYMEX in June favoring high oil prices this spring into summer. A front-month spread >$20/bbl is a trouble sign, OK for now.

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 79.1 down from last report's 84.9. 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 20.02 to 13,001.53; the S&P 500 is up 3.11 points at 1,370.70

The Eureka Miner's Grubstake Portfolio is up 0.09% at $1,608,487.05 (what's this?).


Colonel Possum

Headline Photograph 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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