"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 2, 2012

Miners 2012 - First Quarter Ups & Downs; McEwen, General Moly Beat

Bow tie windshield

*** BREAKING NEWS *** COMEX gold touched $1,685.4/oz at 11:10 PM ET

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

My latest Kitco commentary: Copper Bids Adieu to Gold and Silver (3/19/2012)

This morning's...
COMEX Gold price = $1,668.3/oz (June contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 89.19 (gold value pause from trending down)
Value Adjusted Gold Price© (VAGP) = $1,562.9/oz
COMEX - VAGP = $105.4/oz; gold is trading at a premium to key commodities; the gold-to-copper ratio remains below its 3-month average, compression resuming (Cu bullish)


Morning Miners!

It is 5:51 AM. Have a hot cup of Monday Dragon Breath. Let's kickoff a new quarter with a little blue sky for miners...



Miners 2012 - First Quarter Ups & Downs; McEwen, General Moly Beat

As another leg in this report's ongoing "Miners 2012" series, the Colonel thought it would be good to look at the end-of-quarter performance for some key mining equities and Eureka Miner indices. In my latest Kitco commentary, which should be posted later today, I said,

The first quarter of 2012 witnessed some chilling downdrafts for gold and considerable price resilience for copper. Precious and base metals are undergoing a major but relatively stable re-pricing exercise given an emerging change in global outlook: better-than expected U.S. recovery, lower-than-expected Chinese demand for raw materials and a Europe that has stabilized but moves forward with serious challenges. By Friday, COMEX gold closed at $1,671.9 per ounce up 7% for the year; COMEX copper, at $3.8250 per pound up 11%. Not a bad showing for the two metals given the shifting sentiment from hard asserts to the exuberance that pushed the S&P 500 up an impressive 12% so far for 2012.

Given the gains in gold, copper and the S&P 500 here's how some of our benchmark and local miners did:

Benchmarks for copper, gold & molybdenum

Freeport-McMoRan (FCX) $36.79 (12/30/11) 38.04 (3/30/120) up 3.4%
Barrick gold (ABX) $45.25 (12/30/11) 43.48 (3/30/120) down 3.9%
Thompson creek (TC) $6.96 (12/30/11) 6.76 (3/30/120) down 2.9%

Local Miners

General Moly (GMO) $3.09 (12/30/11) 3.35 (3/30/120) up 8.4%
Newmont (NEM) $60.1 (12/30/11) 51.27 (3/30/120) down 14.7%
McEwen (MUX) $3.36 (12/30/11) 4.44 (3/30/120) up 32.1%
Timberline (TLR) $0.5699 (12/30/11) $0.51 (3/30/120) down 10.5%

The junior (but more volatile) miners beat the pack with McEwen posting an impressive 32% and General Moly 8%. Newmont trailed everyone at a dismal 14.7% down to Barrick's fall of 3.9%; not very terrific considering gold did register a 7% gain. Molybdenum oxide is up roughly 5% which makes Thompson Creek's negative 2.9% look pretty rocky and General Moly's positive 8.4% pretty solid - of course, the former actually produces moly and the latter presently produces hope for Mt. Hope.

Speaking of Mt. Hope, South Korean steelmaker POSCO (sticker PKX and 20% owner of that mountain 22 miles north of town) posted a respectable 2% gain, at least relative to 10-year Treasurys.

All-in-all a pretty shaky quarter for the mining sector which fell in the shadows of the S&P 500's sterling 12% performance. Let's hope for Mt. Hope and a much better quarter going forward for the local and benchmark miners.

Here's how this report's three indices fared:

EMI 77.61 (12/30/11) 178.47 (3/30/120) above 100 is better times for miners
GVI 92.16 (12/30/11) 89.33 (3/30/120) below 100 indicates declining gold value, typically positive for miners
DCI 105.1 (12/30/11) 72.9 (3/30/120) below 100 indicates less worry about the sovereign debt issues that weigh on all the markets

The Colonel did light a warning flare on the EMI last week as it broke a lower trend line but thankfully it has recovered some today posting 183.7.

To end on a positive, the Eureka Miner's Grubstake Portfolio which includes the above miners had a decent 7.8% for the first quarter boosted by the junior miner's solid gains.

Daily Market Roundup


Mining Report

This morning's mining stocks...

Barrick (ABX) $43.94 up 1.06%
Newmont (NEM) $51.94 up 1.31%
McEwen Mining (MUX) 4.48 up 0.90% (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $3.43 up 2.39%
Thompson Creek (TC) $6.85 up 1.48%
Freeport-McMoRan (FCX) $38.49 up 1.21% (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) $18.78 down 1.83% - global steel producer
POSCO (PKX) $84.56 up 1.03% - 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 183.74, up from last report's 178.47 and below the 1-month moving average of 184.86. 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 $3.6/oz at $1,668.3/oz (June contract, most active)

COMEX silver is down $0.044/oz at $32.520/oz (May contract, most active)

The gold-to-silver ratio (Au:Ag) is 51.306 oz/oz

Silver 1-month CRS© is 1.32% (bullish level); convergence (Ag neutral)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 89.19, up from last report's 89.33 and just above its 1-month average of 88.13. Gold value is taking a pause from trending down. The record high for 2010-2012 is 109.97 set on Oct. 4, 2011.

The Value Adjusted Gold Price© (VAGP) is $1,562.9/oz which is $105.4/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 $0.0.0270/lb at $3.8520/lb (May contract, most active)

The gold-to-copper ratio is 433.10 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels"; the ratio is below its 3-month moving average of 446.89 (a Cu bullish trend has resumed Price Domain B)

Copper 1-month CRS© is 1.59% (bullish 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$14.10
As of April 2, 2012
(updated weekly)

Ryan's Notes Average:
US$14.10
As of Mar 30, 2012
(updated twice weekly)

European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday):
US$14.13/lb

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

US$14.06/lb (US$31,000/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 $102.19
ICE North Sea Brent crude $121.79
Spread (ICE- NYMEX) = $18.24 (last report, $19.89)

Here are the July contracts* with a narrower spread:

NYMEX light sweet crude $104.47
ICE North Sea Brent crude $121.79
Spread (ICE- NYMEX) = $17.24 (last report, $17.32)

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

NYMEX WTI 1-month CRS© is 1.50% (bullish level); CRS© weak convergence (Oil neutral)

Prices are near highs for 2012, we have $120+ 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, backing off from scary.

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 73.0 up from last report's 72.9. 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 down 18.58 to 13,193.46; the S&P 500 is up 1.76 points at 1,410.23

The Eureka Miner's Grubstake Portfolio is up 0.60% at $1,448,352.10 (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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