"The history of Eureka lies in its future." - Lambert Molinelli, 1878

DISCLOSURE

The author/editor of the Eureka Miner owns common shares of local mining stocks, General Moly (GMO), McEwen Ming (MUX) 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.

Monday, April 16, 2012

All Eyes on Copper & Freeport-McMoRan (FCX)

Eureka Opera House, Eureka, Nevada

Latest Nevada Gas 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: The 2012 Copper & Gold Conundrum (4/02/2012)

My Latest International Business Times commentary: Silver & Gold, “Situation Normal…” (03/26/2012)

This morning's...
COMEX Gold price = $1,653.8/oz (June contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 90.90 (gold value trending higher)
Value Adjusted Gold Price© (VAGP) = $1,520.2/oz
COMEX - VAGP = $133.6/oz; gold is trading at a premium to key commodities; the gold-to-copper ratio remains above its 3-month average (Cu bearish trend)


Morning Miners!

It is 5:58 AM. Have a Monday cup of Gee-I-Wish-My-Taxes-Were-Done. No worry, they're due tomorrow and that's still lots of hours away. Let's see what's happening to copper and a big copper miner before you go back to TurboTax...

All Eyes on Copper & Freeport-McMoRan (FCX)

Last week was rough for the miners and especially the red metal. Copper prices plunged to 3-month lows and dipped perilously below the psychologically important $8,000 per metric ton ($3.63 per pound). This morning COMEX copper is thankfully up a bit at $3.6305 per pound, right at the brink. Kitco News just posted my latest commentary on why I don't think we are headed for a crash in copper prices as in late-2011.

2012 Copper and Gold - Is a Red Metal Crash Next? (Kitco News, 04/16/20120)

Copper giant and bellwether miner Freeport-McMoRan (FCX) has had a horrible year but share price may be bottoming. It certainly has the attention of investors this morning. Here is a sample of what was on the newswires minutes before the broader markets opened in the U.S.:

09:27 AM EDT, 04/16/2012 Freeport McMoRan is testing its 10-day MA, resistance above at $38.01
09:08 AM EDT, 04/16/2012 (MidnightTrader) -- Freeport McMoRan (FCX) was upgraded to Buy from Neutral at Citigroup


FCX opened with some solid upside from Friday' close, presently trading at $37.24 up 0.8%. On Thursday, April 19, Freeport will webcast a conference call at 7 AM PDT to discuss their first quarter earnings - the ole Colonel will be listening.

Freeport is one of the benchmark miners in the Eureka Miner's Index© (EMI) so its future has a lot do with where the index heads next. Lately the EMI has been plummeting towards the 100-level, a very bearish development for the mining sector. Here's the latest plot of the EMI through Friday's close (a larger and more readable plot can be found at the bottom of this blog page):


This morning the EMI is 116.2 just a thin flat washer below Friday's 116.9 (see mining Report below).

In my world, as copper goes; so go the Metals & Miners; so go the broader markets.

We're at a tough cross-road for all, pardner. Check this Reuter's article for a quick update on some of the drivers:

METALS-Copper above $8,000 on U.S. data; euro zone, China weigh (By Veronica Brown and Harpreet Bhal, Reuters, Mon Apr 16, 2012 1:48pm GMT)

Daily Market Roundup


Mining Report

This morning's mining stocks...

Barrick (ABX) $41.22 down 0.94%
Newmont (NEM) $48.45 down 0.47%
McEwen Mining (MUX) 3.93 up 0.51% (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $3.05 up 0.99%
Thompson Creek (TC) $6.49 down 0.15%
Freeport-McMoRan (FCX) $37.24 up 0.81% (a bellwether mining stock spanning copper, gold & molybdenum)
Timberline Resources (TLR) $0.49 unchanged

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

ArcelorMittal (MT) $17.43 up 0.87% - global steel producer
POSCO (PKX) $83.66 up 0.35% - 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 116.16, down from last report's 116.89 and below the 1-month moving average of 164.79. 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 down $6.4/oz at $1,653.8/oz (June contract, most active)

COMEX silver is up $0.195/oz at $31.585/oz (May contract, most active)

The gold-to-silver ratio (Au:Ag) is 52.360 oz/oz

Silver 1-month CRS© is 1.07% (bullish level); very stable ratio; 1-month & 3-month < 3% (Ag bullish)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 90.90, down from last report's 90.90 and above its 1-month average of 88.63. Gold value may return to trending up. The record high for 2010-2012 is 109.97 set on Oct. 4, 2011.

The Value Adjusted Gold Price© (VAGP) is $1,520.2/oz which is $133.6/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

This morning's...

COMEX copper is up $0.0035/lb at $3.6305/lb (May contract, most active)

The gold-to-copper ratio is 455.53 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels"; the ratio is above its 3-month moving average of 444.06 (a Cu bearish trend forming in bearishPrice Domain B)

Copper 1-month CRS© is 2.33% (bullish stability level); very stable ratio; 1-month & 3-month < 3% (Cu bullish)

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

Metals Week Average:
US$14.225
As of April 16, 2012
(updated weekly)

Ryan's Notes Average:
US$14.20
As of April 13, 2012
(updated twice weekly)

European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday):
US$14.27/lb

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

US$14.52/lb (US$32,000/metric ton)

Daily Oil Watch

Latest Nevada Gas Prices (click this link)

Understanding the Price of Oil (click this link for a quick overview on crude oil prices)

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 $115/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 $102.90
ICE North Sea Brent crude $119.82
Spread (ICE- NYMEX) = $16.92 (last report, $17.85)

Here are the July contracts* with a narrower spread:

NYMEX light sweet crude $103.85
ICE North Sea Brent crude $119.51
Spread (ICE- NYMEX) = $15.66 (last report, $16.56)

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

NYMEX WTI 1-month CRS© is 2.00% (bullish level); CRS© weak divergence (Oil neutral)

Prices are near highs for 2012, we have $115+ Brent and $100+ 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; we're falling away from that now; latest spread is a mix of domestic oversupply and persistent Iran concerns.

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 88.7 up 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 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 up 87.26 points to 12,936.85; the S&P 500 is up 0.83 points at 1,371.09

The Eureka Miner's Grubstake Portfolio is up 0.39% at $1,385,610.98 (what's this?).

Cheers,

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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