Thursday, March 22, 2012
General Moly - A "No" to Good Neighbor; Lousy China PMI
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 = $1,635.5/oz (April contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 87.77 (gold value trending down)
Value Adjusted Gold Price© (VAGP) = $1,583.2/oz
COMEX - VAGP = $78.6/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 6:09 AM. Have a cup of Thor's Dragon Breath - it's a little cold, our favorite Norseman tripped on the power cord this morning as he went outside to chop firewood with his battle axe. It looks like the Chinese dragon is losing a little fire in its breath too...
General Moly - A "No" to Good Neighbor
Thanks to a vigilant reader of this report the following is actually old news. The Colonel posted this bulletin Tuesday:
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, 3/20/2012)
Yesterday at 1:51 PM, General Moly posted a formal press release with the details of the rejection of their Good Neighbor offer:
$12 Million Offer to Augment Existing Sustainability Trust Rejected (Press Release, 3/21/20120)
Chief Executive officer Bruce D. Hansen says in the release,
We reached out and made this offer to Eureka County and its residents as a Good Neighbor, with the goal of working together, to enhance the sustainability and properly manage water resources in both the Kobeh Valley and Diamond Valley water basins. Unfortunately, we are disappointed with the Eureka County commissioners’ decision to continue down the path of unnecessary spending on legal action which further deprives the community of an opportunity to positively impact a decades’ old severe over-pumping situation in the Diamond Valley water basin, which has no relationship to the Mt. Hope project. We are moving forward aggressively. As we have stated when the Good Neighbor Offer was presented on March 6th, we remain extremely confident the State Engineer's Ruling will be upheld. At the same time we will always discuss reasonable and rational concepts to resolve this situation.
The next step is the April 3rd hearing and subsequent ruling of the Nevada District Court with Judge Papas. His ruling could take several months.
A disappointing development for General Moly (GMO) investors and supporters indeed. However, General Moly share price has not been punished as much as one might expect. Today GMO is down 4% at $3.29 but most of the miners are down too on a lousy economic indicator from China (below). Investors throwing in the towel would have resulted in a much steeper sell-off Tuesday, Wednesday or today.
Keep hope alive for Mt. Hope.
Lousy China PMI
A lousy Chinese manufacturing survey has thrown a wrench at the metals & miners this morning. The preliminary HSBC purchasing managers index for March was 48.1, down from a final reading of 49.6 for February. Dennis Gartman of the respected Gartman Letter often wisely reminds his readers that the actual number is not as important as the fact that the index is below 50 (indicating contraction, not expansion).
Philosophically, I believe we are witnessing a major re-pricing exercise going on between precious and base metals to the emerging new-new realities: better-than expected domestic recovery, a slower-than-expected China and a Europe that has stabilized but moves forward with serious challenges ahead. I'm still bullish on copper (i.e copper price slowly transitioning from Price Domain B to Price Domain A) once the dust settles for reasons I'll elaborate on in tomorrow's gold, silver and copper report.
Keep the faith, pardner.
Daily Market Roundup
This morning's mining stocks...
Barrick (ABX) $43.17 down 1.05%
Newmont (NEM) $52.65 down 0.98%
McEwen Mining (MUX) 3.79 down 2.82% (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $3.29 down 4.08%
Thompson Creek (TC) $6.85 down 1.86%
Freeport-McMoRan (FCX) $38.72 down 2.71% (a bellwether mining stock spanning copper, gold & molybdenum)
Quadra FNX (TSE:QUX) $n/a
Timberline Resources (TLR) $0.50 down 1.96%
The Steels (a "tell" for General Moly & Thompson Creek):
ArcelorMittal (MT) $19.70 down 3.43% - global steel producer
POSCO (PKX) $84.32 down 2.20% - 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 170.24, down from last report's 201.39 and below the 1-month moving average of 201.39. 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 $14.8/oz at $1,635.5/oz (April contract, most active)
COMEX silver is down $0.607/oz at $31.620/oz (May contract, most active)
The gold-to-silver ratio (Au:Ag) is 51.724 oz/oz
Silver 1-month CRS© is 1.70% (bullish level); CRS© stalled convergence (Ag neutral)
The Eureka Miner’s Gold Value Index© (GVI) is below-par at 87.77, up from last report's 87.32 and below its 1-month average of 88.72. 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 $1,556.9/oz which is only $78.6/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 $0.0800/lb at $3.7655/lb (May contract, most active)
The gold-to-copper ratio is 434.34 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels"; the ratio is below its 3-month moving average of 449.71 (Cu bullish trend emerging in Price Domain B)
Copper 1-month CRS© is 2.89% (bullish level); convergence, compressing ratio (Cu bullish)
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 20, 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
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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 $105.48
ICE North Sea Brent crude $123.32
Spread (ICE- NYMEX) = $17.84 (last report, $17.69)
Here are the July contracts* with a narrower spread:
NYMEX light sweet crude $106.48
ICE North Sea Brent crude $122.21
Spread (ICE- NYMEX) = $15.73 (last report, $15.84)
* NYMEX futures contracts have rolled forward, we now show May and July for a 2-month look-ahead
NYMEX WTI 1-month CRS© is 2.53% (bullish level); CRS© divergent (Oil bearish)
Prices are near highs for 2012, we have $120+ Brent and $105+ NYMEX in July 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 is 76.3 up from last report's 70.8. 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 45.97 to 13,078.65; the S&P 500 is down 6.87 points at 1,396.02
The Eureka Miner's Grubstake Portfolio is down 1.99% at $1,411,381.57 (what's this?).
Headline photograph by Mariana Titus
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