Tuesday, March 20, 2012
BHP Warning on China; American Vanadium Pledge
BREAKING NEWS: Words from a trusted source and friend of the Report, "[Eureka]County Commissioners rejected General Moly’s $12M water settlement offer just moments ago." (e-mail received 10:15 AM PST)
Latest Nevada Fuel Prices (click this link)
NEW FORMAT for 2012
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 Bids Adieu to Gold and Silver (3/19/2011)
My Latest International Business Times commentary: Silver to Gold, “Whither Thou Goest…” (02/27/2011)
COMEX Gold price = $1,582.9/oz (April contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 87.07 (gold value trending down)
Value Adjusted Gold Price© (VAGP) = $1,582.9/oz
COMEX - VAGP = $66.6/oz; gold is trading at a declining premium to key commodities; the gold-to-copper ratio remains below its 3-month average and compressing (Cu bullish)
It is 6:19 AM. Scott Raine delivered some of his famous Green Label Spring Java to the break room last night - let me pour you a cup of fresh brew. Ruby T has a big circle on March 20 on our Raine's Market calendar to remind us this is the first day of spring - have a good'un.
BHP Warning on China
Metals & Miners will unfortunately not have a great spring day after the world's largest miner BHP Billiton raised concerns about the possibility of a sharp slowdown in metals demand from China. London Reuters carries the story this morning:
METALS-Copper falls on China demand concerns, dollar strength (By Susan Thomas, London Reuters, Tue Mar 20, 2012 12:20pm GMT)
BNP Paribas analyst Stephen Briggs is quoted as saying, "There is a slowing trend in China ... moving increasingly away from the growth model that they have had, which may be a little less metals intensive. This is not new, but recognition by big mining companies would have had an effect."
As always, it is a matter of degree and that will remain hard to quantify for the time being. LME copper stocks are falling in London but rising in Shanghai warehouses. Yesterday, the report said the mining sector needed a catalyst to move it from its recent sideways performance. This may be the beginning as the Eureka Miner's Index© (EMI) dropped from 6-market days of low-200s to 172.11 this morning, just above the lower trend line (see report below). Assertively breaking this trend in the next several days would indeed be bearish for both metals and miners. Our market bull Ruby T just told me to quit my whining, I think I'll join her for some more Green Label!
American Vanadium Pledge
A faithful reader brought the following to my attention for those of us tracking the old Gibellini vanadium properties...
American Vanadium - the United State's only developer of critical mineral derivative, vandium pentoxide - plans to make batteries here, not China. American Vanadium is presently working the Gibellini Project in south-east corner of Eureka County. Here's the report from Industrial Metals:
AMERICAN VANADIUM FEATURED IN INDUSTRIAL MINERALS AND LAS VEGAS TRIBUNE (Industrial Metals - March 5, 2012)
The company's president and CEO Bill Radak explained to Industrial Minerals,"We are not going to be shipping tank-loads of vanadium to China...We aim to make the batteries here in he U.S."
The best of luck to these guys!
Daily Market Roundup
This morning's mining stocks...
Barrick (ABX) $42.64 down 2.29%
Newmont (NEM) $52.75 down 1.46%
McEwen Mining (MUX) 3.96 down 3.65% (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $3.35 down 2.62%
Thompson Creek (TC) $6.87 down 3.10%
Freeport-McMoRan (FCX) $37.98 down 2.96% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $n/a
Timberline Resources (TLR) $0.49 down 2.00%
The Steels (a "tell" for General Moly & Thompson Creek):
ArcelorMittal (MT) $20.48 down 4.16% - global steel producer
POSCO (PKX) $86.97 down 3.26% - 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 172.11, down from last report's 201.21 and below the 1-month moving average of 206.00. The 1-month average is falling but still 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
COMEX gold is down $17.8/oz at $1,649.5/oz (April contract, most active)
COMEX silver is down $0.645/oz at $32.310/oz (May contract, most active)
The gold-to-silver ratio (Au:Ag) is 51.052 oz/oz
Silver 1-month CRS© is 1.76% (bullish level); CRS© weak convergence (Ag neutral)
The Eureka Miner’s Gold Value Index© (GVI) is below-par at 87.07, up from last report's 86.38 and below its 1-month average of 89.17. Gold value is now trending down. The record high for 2010-2012 is 109.97 set on Oct. 4, 2011.
The Value Adjusted Gold Price© (VAGP) is $1,582.9/oz which is only $66.6/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 $0.0805/lb at $3.8285/lb (May contract, most active)
The gold-to-copper ratio is 430.85 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels"; the ratio is below its 3-month moving average of 451.22 (Cu bullish trend emerging in Price Domain B)
Copper 1-month CRS© is 3.07% (bullish level); divergence stalling (Cu neutral)
The latest molybdenum oxide spot and futures prices (courtesy of Thompson Creek Metals):
Metals Week Average:
As of March 19, 2012
Ryan's Notes Average:
As of March 16, 2012
(updated twice weekly)
European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday):
London metal Exchange (LME) molybdenum 3-month seller's contract:
US$14.52/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 $106.85
ICE North Sea Brent crude $124.16
Spread (ICE- NYMEX) = $17.31 (last report, $18.03)
Here are the June contracts* with a narrower spread:
NYMEX light sweet crude $107.77
ICE North Sea Brent crude $123.76
Spread (ICE- NYMEX) = $15.99 (last report, $16.57)
* NYMEX futures contracts have rolled forward, we now show April and June for a 2-month look-ahead
NYMEX WTI 1-month CRS© is 2.76% (bullish level); CRS© divergent (Oil bearish)
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 between Brent and WTI >$20/bbl is a trouble sign, OK for now but getting closer.
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 is 76.4 up from last report's 70.5. A level above 200 is time for serious concern - we are now well below that level. The highest level recorded since inception was 271.0 Aug. 9, 2011; the lowest level is 65.1 on Mar. 13, 2012
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 91.95 to 13,147.18; the S&P 500 is down 9.08 points at 1,400.67
The Eureka Miner's Grubstake Portfolio is down 2.25% at $1,435,286.83 (what's this?).
Headline photograph by Mariana Titus
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