"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, April 12, 2012

Freeport, Thompson Creek, POSCO Jump; General Moly Trips

Triangle Mill Site, 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 = $1,655.7/oz (June contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 90.50 (gold value trending higher)
Value Adjusted Gold Price© (VAGP) = $1,528.6/oz
COMEX - VAGP = $127.1/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 6:17 AM. Have a steaming cup of Thor's famousThunder Rumble. Our favorite Norseman is beating his war drum but one of our miners missed the call to arms this morning...

Freeport, Thompson Creek, POSCO Jump; General Moly Trips

Spot copper rose more than 1 percent this morning on a strengthening euro boosted by a European Central Bank official who suggested the bank was ready to purchase more debt from countries like troubled Spain. The comment eased worries about the ever-evolving crisis in Europe and gave base metal prices a needed lift. Chinese new loans data was also significantly better than expected as reported by Reuter's Silvia Antonioli this morning:

METALS-Copper up as ECB comments ease Euro debt worries (Silvia Antonioli, Reuters, Apr 12, 2012)

New applications for jobless benefits last week saw their biggest weekly rise in nearly a year putting a damper on some of this good news but not enough to stop a strong morning rally for bellwether miner Freeport-McMoRan (FCX), up 4.2%; moly benchmark miner Thompson Creek (TC), up 2.3%; and South Korean steelmaker POSCO (PKX), up 2.4%. Initial jobless claims rose by 13,000 to a seasonally adjusted 380,000. Economists surveyed by Dow Jones Newswires expected 358,000 claims - trending the wrong way, pardner.

Unfortunately, General Moly (GMO) headed the opposite direction from the pack; dropping 2 cents to $3.13/share. With no news on the wires to explain the pullback, it is not a good sign to see investors shy from our local moly miner as benchmarks get a welcome boost. The ongoing uncertainty about Mt. Hope water rights is taking its toll on market capitalization.

Nonetheless, a rally for the others is a positive sign as copper came perilously close to submerging below the key $8,000 per metric ton (3.629 per pound) threshold yesterday. LME moly futures pulled back some after an exuberant dash to $33,500 per metric ton ($15.20 per pound) trading back to $32,000 ($14.52). Euro-moly bounced 1% to $14.27 per pound. Here is a 3-month chart of the LME 3-month seller contract:

Daily Market Roundup

Mining Report

This morning's mining stocks...

Barrick (ABX) $41.89 up 2.07%
Newmont (NEM) $48.81 up 1.69%
McEwen Mining (MUX) 4.05 up 1.76% (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $3.13 down 0.63%
Thompson Creek (TC) $6.61 up 2.32%
Freeport-McMoRan (FCX) $37.28 up 4.19% (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) $17.87 up 2.41% - global steel producer
POSCO (PKX) $83.23 up 2.36% - 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 128.96, up from last report's 124.99 and below the 1-month moving average of 172.79. 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 $4.6/oz at $1,655.7/oz (June contract, most active)

COMEX silver is up $0.084/oz at $31.605/oz (May contract, most active)

The gold-to-silver ratio (Au:Ag) is 52.387 oz/oz

Silver 1-month CRS© is 1.10% (bullish level); very stable ratio; 1-month & 3-month < 3% (Ag bullish)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 90.50, down from last report's 91.50 and above its 1-month average of 88.28. 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 $1,513.8/oz which is $143.9/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 $0.0430/lb at $3.6825/lb (May contract, most active)

The gold-to-copper ratio is 449.61 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels"; the ratio is above its 3-month moving average of 443.75 (a Cu bearish trend forming in bearishPrice Domain B)

Copper 1-month CRS© is 1.87% (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:
As of April 9, 2012
(updated weekly)

Ryan's Notes Average:
As of April 10, 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 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 $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 $102.75
ICE North Sea Brent crude $119.43
Spread (ICE- NYMEX) = $16.68 (last report, $18.16)

Here are the July contracts* with a narrower spread:

NYMEX light sweet crude $103.75
ICE North Sea Brent crude $119.10
Spread (ICE- NYMEX) = $15.35 (last report, $16.30)

* 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 85.7 down from last report's 85.7. 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 60.81 points to 12,866.20; the S&P 500 is up 6.73 points at 1,375.44

The Eureka Miner's Grubstake Portfolio is up 1.41% at $1,393,852.92 (what's this?).


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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