"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.

Thursday, April 19, 2012

Freeport Reports - Lifts General Moly and Thompson Creek

Main Street Late Afternoon, 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: 2012 Copper and Gold - Is a Red Metal Crash Next? (4/16/2012)

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

This morning's...
COMEX Gold price = $1,648.2/oz (June contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 90.66 (gold value trending higher)
Value Adjusted Gold Price© (VAGP) = $1,519.0/oz
COMEX - VAGP = $129.2/oz; gold is trading at a premium to key commodities; the gold-to-copper ratio remains above its 3-month average (Cu bearish trend)



Þūnresdæg
Morning Miners!

It is 5:48 AM. Let Thor pour you a wake-up cup of his notorious Thunder Dunder java. Our favorite Norseman has wheeled in his tower-of-power sound system so we can listen to the Freeport-McMoRan (FCX) webcast in stereo today at elevated volume - I have double-ear protection on. Thor always does things in the extreme, bless his pointed metallic head.

This webcast is important because Freeport mines not only copper but massive quantities of gold and molybdenum - all our favorite metals. It probably pleases our old friend of this report Tim Arnold that Freeport mines cobalt too, now that Tim mines that important strategic mineral (Tim was formerly the Mt. Hope molybdenum project General Manager).

Freeport Reports - Lifts General Moly and Thompson Creek

Before we listen to the webcast, the ole Colonel will make this point - if you want to see how the much anticipated Spanish debt auction fared today checkout any market report on copper prices.

As an example, Reuter's intrepid Veronica Brown wrote this piece today:

METALS-Copper slips toward 3-mth lows; Spain auction fails to impress (Veronica Brown, Reuters, Thu Apr 19, 2012 12:38pm GMT)

Now remember this report's creed: As copper goes: so go the Metals & Miners, so go the broader markets.

That's why are tracking the fortunes of the red metal with such attention. According to Ms Brown, "Copper fell on Thursday, closing in on recent three-month lows after Spain's keenly awaited bond auction failed to soothe worries on its long-term fiscal outlook."

We've been to this tragic play before when it had a cast of Greek actors, now they are Spanish - so it goes across the pond.

Personally, I'd rather listen to Freeport-McMoRan's CEO Richard Adkerson talk about the copper market on the webcast that started at 7:00 AM PDT. Thor first blew out the rear door window and I politely asked him to turn the volume down a notch - now Adkerson is coming in loud and clear:

"Europe is not as weak as some feared."

"China continues to spend on infrastructure...remains an important demand driver."

"Copper market is very positive."

"Copper deficit expected for 2012..."

"Moly prices are stable..."

"Gold prices are good..."

"Fundamentals of copper market are strong..."

Now a skeptical listener may say that this sounds like any other CEO trying to hype his company's share price. There is some truth to this - Freeport (FCX) is up more than 1% as Adkerson speaks on a morning when COMEX copper is down a penny and the DOW is off 50 points. His comments are no doubt lifting share price for General Moly (GMO) and moly benchmark miner Thompson Creek (TC) which are also enjoying a 1% bounce.

The important difference is to remember how candid Adkerson was in December of 2008 when the financial crisis drove copper prices below $2 per pound. He shut down mines and curtailed production saving Freeport much pain as things unraveled in 2009. When the S&P 500 bottomed in March of that year, Freeport stock was already trending up as many other companies fell down the mineshaft. A good mining CEO to listen to about the future, pardner.

Kitco's Allen Sykora prepared a nice summary of Freeport's complete quarterly report:

Freeport Reports Earnings, Copper And Gold Sales Decline In First Quarter (Allen Sykora, Kitco News, 19 April 2012, 9:22 a.m.)

According to Adkerson things will be on the mend now that the Grasberg mine labor situation has stabilized. The ole Colonel believes him but please form your own opinion. Here is the link to their quarterly report:

http://www.fcx.com/news/2012/041912.pdf

Daily Market Roundup


Mining Report

This morning's mining stocks...

Barrick (ABX) $41.26 up 0.41%
Newmont (NEM) $48.23 down 0.71%
McEwen Mining (MUX) 3.48 up 2.35% (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $3.12 up 1.30%
Thompson Creek (TC) $6.52 up 1.09%
Freeport-McMoRan (FCX) $38.73 up 1.15% (a bellwether mining stock spanning copper, gold & molybdenum)
Timberline Resources (TLR) $0.47 up 4.44%

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

ArcelorMittal (MT) $17.30 down 1.59% - global steel producer
POSCO (PKX) $83.61 up 0.28% - 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 131.37, up from last report's 128.79 and below the 1-month moving average of 155.35. 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 $8.6/oz at $1,648.2/oz (June contract, most active)

COMEX silver is up $0.293/oz at $31.780/oz (May contract, most active)

The gold-to-silver ratio (Au:Ag) is 51.863 oz/oz

Silver 1-month CRS© is 0.92% (bullish level); very stable ratio; 1-month & 3-month < 3% (Ag bullish)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 90.66, up from last report's 90.14 and above its 1-month average of 89.14. Gold value is weakly trending up. The record high for 2010-2012 is 109.97 set on Oct. 4, 2011.

The Value Adjusted Gold Price© (VAGP) is $1,519.0/oz which is $129.2/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 down $0.0115/lb at $3.6195/lb (May contract, most active)

The gold-to-copper ratio is 455.37 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels"; the ratio is above its 3-month moving average of 444.73 (a Cu bearish trend forming in bearishPrice Domain B)

Copper 1-month CRS© is 2.43% (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 17, 2012
(updated twice weekly)

European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday):
US$14.25/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 $102.61
ICE North Sea Brent crude $118.80
Spread (ICE- NYMEX) = $16.19 (last report, $14.02)

Here are the July contracts* with a narrower spread:

NYMEX light sweet crude $103.52
ICE North Sea Brent crude $118.66
Spread (ICE- NYMEX) = $15.14 (last report, $13.18)

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

NYMEX WTI 1-month CRS© is 1.72% (bullish level); CRS© stalled divergence (Oil neutral)

Prices remain high 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 pipeline bottlenecks and persistent but diminished 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 81.5 down from last report's 82.1. 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 54.61 points to 12,978.14; the S&P 500 is down 4.91 points at 1,380.23

The Eureka Miner's Grubstake Portfolio is up 0.84% at $1,376,491.76 (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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