"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.

Thursday, March 8, 2012

Crow Moon - Red Metal Revival? Moly Stable, Miners Up

March 6 Diesel $4.37, Regular $3.99, E-Z Stop Eureka
Photo by Eric Pastorino

Latest Nevada Fuel Prices (click this link)

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 Kitco commentary: Silver & Copper 2012 - A Tale of Two Metals (03/05/2012)

My Latest International Business Times commentary: Silver to Gold, “Whither Thou Goest…” (02/27/2011)

This morning's...
COMEX Gold price = $1,695.0/oz (April contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 89.03 (gold value trending down)
Value Adjusted Gold Price© (VAGP) = $1,590.0/oz
COMEX - VAGP = $104.1/oz; gold is trading at a declining premium to key commodities; the gold-to-copper ratio is not far below its 3-month average again (Cu cautious)

Morning Miners!

It is 5:44 AM. Have a thunderous cup of Thor's Storm Chaser. It looks like our favorite Norseman has chased the big storms away for now. That certainly wasn't the situation several days ago as shown in the headline photo of the E-Z Stop sent in by Eric Pastorino. He reported Regular prices a thin flat washer below $4.00 per gallon at $3.99 on March 6. Today the Nevada average price is falling slightly to $3.812 per gallon compared to the national average of $3.717 per gallon. This morning NYMEX West Texas Intermediate is up a quarter at $ 106.39 per barrel; global benchmark Brent crude is $125.18. Looks like higher prices are with us for a while pardner. Let's see how some other of our favorite commodities are doing...

Crow Moon - Red Metal Revival? Moly Stable, Miners Up

It is a full Crow moon today amid the first wave of a fairly major solar flare (the first particles traveling 4 million miles per hour hit Eureka at 4 AM this morning and will continue until 8AM). That apparently was enough to lift 18 of 20 global markets, most mining stocks, gold, copper and silver into the green which is welcome relief for an otherwise rough market week. Oh, progress in the Greek debt restructuring process preceding the fateful March 20 date may have something to do with this morning's burst of optimism too.

The ole Colonel thinks we're at a critical inflection point for the metals & miners after an excellent January-February start. March has certainly been more sobering and I'd look to copper to understand where things head next. One interesting fact is that the London metal Exchange inventories are at 2 1/2-year lows while the Shanghai warehouses are showing only so-so demand. Here's a 30-day chart of the LME copper inventory that is showing no signs of bottoming at 283,575 metric tons:

If Europe can muddle along and the U.S. economy continues with better-than-expected growth, demand softness in China for the red metal is mitigated to some degree. That's a tall order since the dragon consumes 40% of the world's copper. These aren't bullish times for base metals but more periods of crashing prices as in 2011 could be avoided. This report intends to track copper like a bulldog in the coming weeks. As copper goes, so go the metals & miners, so go the broader markets in my world.

If we can stay above $3.62 per pound ($8,000 per metric ton), there's hope for this coming spring. This morning COMEX copper is trading up $2.8 cents at $3.7950 per pound. Here's how London Reuters saw the morning:

METALS-Copper rises on Greek debt deal hopes, weaker dollar (Silvia Antonioli, London reuters, Thu Mar 8, 2012 1:18pm GMT)

Euro-moly notched down 2% to $14.52 per pound putting it exactly at the LME 3-month seller contract. Western moly oxide is presently selling at $14.45-$14.70 per pound. Not great but stable and that's good enough for me (full reports below).

Looks like the miners, except for Newmont, are having a good Thursday morning...

Daily Market Roundup

Mining Report

This morning's mining stocks...

Barrick (ABX) $45.96 up 0.35%
Newmont (NEM) $56.26 down 0.74%
McEwen Mining (MUX) 4.88 up 2.09% (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $3.30 up 1.54%
Thompson Creek (TC) $7.02 up 1.59%
Freeport-McMoRan (FCX) $39.47 up 1.23% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $n/a
Timberline Resources (TLR) $0.54 down 1.82%

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

ArcelorMittal (MT) $19.62 up 2.83% - global steel producer
POSCO (PKX) $89.15 up 0.07% - 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 168.03, down from last report's 153.07 and below the 1-month moving average of 225.02. 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

This morning's...

COMEX gold is up $11.1/oz at $1,695.0/oz (April contract, most active)

COMEX silver is up $0.145/oz at $33.730/oz (May contract, most active)

The gold-to-silver ratio (Au:Ag) is 50.252 oz/oz

Silver 1-month CRS© is 2.01% (bullish level); CRS© divergent, ratio compression in question again (Ag neutral)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 89.03, down from last report's 89.04 and below its 1-month average of 91.00. Gold value is now trending down after briefly trending up mid-month. The record high for 2010-2012 is 109.97 set on Oct. 4, 2011.

The Value Adjusted Gold Price© (VAGP) is $1,590.9/oz which is only $104.1/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

This morning's...

COMEX copper is up 0.0280/lb at $3.7950/lb (May contract, most active)

The gold-to-copper ratio is 446.64 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels"; the ratio is below its 3-month moving average of 457.72 (Cu neutral in Price Domain B)

Copper 1-month CRS© is 2.02% (bullish level); CRS© convergence(Cu bullish)

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

Metals Week Average:
As of March 5, 2012
(updated weekly)

Ryan's Notes Average:
As of March 6, 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 $106.39
ICE North Sea Brent crude $125.36
Spread (ICE- NYMEX) = $18.79 (last report, $17.06)

Here are the June contracts* with a narrower spread:

NYMEX light sweet crude $107.36
ICE North Sea Brent crude $123.91
Spread (ICE- NYMEX) = $16.55 (last report, $14.36)

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

NYMEX WTI 1-month CRS© is 3.64% (neutral 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 between Brent and WTI >$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 82.6 down from last report's 87.9. 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 74.8 on Mar. 2, 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 up 35.23 to 12,872.56; the S&P 500 is up 6.01 points at 1,358.64

The Eureka Miner's Grubstake Portfolio is up 0.77% at $1,494,470.35 (what's this?).


Colonel Possum

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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