"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.

Tuesday, April 24, 2012

Moly Miners Stumble; Moly Prices Steady

Close the door when you leave..., Eureka, Nevada

*** BREAKING NEWS *** General Moly (GMO) got a nice mid-morning pop, presently up 4.4% to $3.09/share; moly benchmark miner Thompson Creek (TC) is down 1.3% at $5.92/share (9:31 AM PDT)

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 = $1,645.2/oz (June contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 90.21 (gold value moving sideways)
Value Adjusted Gold Price© (VAGP) = $1,523.8/oz
COMEX - VAGP = $121.4/oz; gold is trading at a premium to key commodities; the gold-to-copper ratio remains just above its 3-month average (Cu bearish trend)

Morning Miners!

It is 6:07 AM. Have a cup of Ruby T's famous "Blue Sky" - it's a little cold, Old Miner Woden tip-toed in this morning and pulled the plug. Our market bull will have his hide when she gets a chance. Ruby is at least a happy to see copper up a 4 cents today and Woden would be pleased that gold bounced 13 bucks in morning trading from yesterday's close. On days when the dollar is down, my break room bull and bear can at least have something to cheer but what about the poor moly miners?

Moly Miners Stumble; Moly Prices Steady

It's been a rough spring for miners and moly miners in particular. The irony is that moly prices have been pretty steady out west and across the pond. Western moly oxide is in a range of $14.20 to $14.225 per pound compared to euro-moly oxide at $14.25 per pound. The London Metal Exchange (LME) 3-month seller's contract even ticked up $250 per metric ton yesterday to $31,750 ($14.40 per pound). Not too bad given today's downbeat macroeconomic environment (see Copper & Molybdenum Report below).

A look at the fate of our benchmark miner Thompson Creek (TC) appears to tell a different story. Here is a 6-month chart of share price (candlestick plot) versus the important 200-day moving average (green line):

A nice rally from late-November pushed $9.5 prices in early-February and it's been pretty much downhill ever since. This morning TC is trading below $6 and its 200-day average of $7.50 at $5.98/share. Ouch.

Thompson Creek is a small-cap senior miner and General Moly is a junior undergoing prolonged agony starting the local molybdenum-rich Mt. Hope Project. I'm sure the folks at Eureka Moly LLC (subsidiary of General Moly in Eureka County) would rather be gripping about the cost of diesel like Thompson Creek CEO Kevin Loughrey than waiting for yet another ruling on water rights (see Mt. Hope News sidebar in the upper right column).

Here's a six-month chart of General Moly (GMO):

GMO also enjoyed a robust rally in 2012 but it too faded like benchmark Thompson Creek (TC). GMO rose above $4.0 in early-February and this morning is trading below $3 and its 200-day average of $3.50 at $2.98/share. Nuts.

One glimmer of good news is that even with all the water rights issues, General Moly still beats the benchmark moly miner on a six-month basis. Here's a percent comparison chart of GMO (blue) and TC (green):

Although TC rallied a little stronger compared to GMO early in the year (32% versus 25%), it is presently down 7.5% to Thompson Creek's 16% over the entire period.

Hang in there, pardner.

As we've said before - The Eureka Miner respects the views of all miners, farmers and ranchers and their valuable contribution to Eureka County and looks forward to a resolution of the Mt. Hope water rights issue that provides an equitable solution for all concerned.

Daily Market Roundup

Mining Report

This morning's mining stocks...

Barrick (ABX) $39.82 up 0.33%
Newmont (NEM) $46.51 up 0.45%
McEwen Mining (MUX) 3.38 up 0.30% (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $2.98 up 0.68%
Thompson Creek (TC) $5.94 down 1.00%
Freeport-McMoRan (FCX) $37.08 down 0.22% (a bellwether mining stock spanning copper, gold & molybdenum)
Timberline Resources (TLR) $0.45 down 2.17%

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

ArcelorMittal (MT) $16.46 up 1.11% - global steel producer
POSCO (PKX) $83.91 up 0.23% - 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 below-par at 106.75, up from last report's 96.89 and below the 1-month moving average of 145.71. 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 $12.6/oz at $1,645.2/oz (June contract, most active)

COMEX silver is up $0.444/oz at $30.975/oz (May contract, most active)

The gold-to-silver ratio (Au:Ag) is 53.114 oz/oz

Silver 1-month CRS© is 1.12% (bullish stability level); very stable ratio; 1-month & 3-month < 3% (Ag bullish mid-term stability, overall indicators bearish)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 90.21, down from last report's 90.57 and above its 1-month average of 89.49. Gold value is oscillating about its average. The record high for 2010-2012 is 109.97 set on Oct. 4, 2011.

The Value Adjusted Gold Price© (VAGP) is $1,523.8/oz which is $121.4/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 $0.0390/lb at $3.6650/lb (May contract, most active)

The gold-to-copper ratio is 448.89 lb/oz; ratios in excess of 400 lb/oz are indicative of a bearish price domian; the ratio is above its 3-month moving average of 444.93 (Cu bearish trend in a bearishPrice Domain B)

Copper 1-month CRS© is 2.32% (bullish stability level); very stable ratio; 1-month & 3-month < 3% (Cu mid-term stability bullish, overall indicators bearish)

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

Metals Week Average:
As of April 23, 2012
(updated weekly)

Ryan's Notes Average:
As of April 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$14.40/lb (US$31,750/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 $103.86
ICE North Sea Brent crude $118.57
Spread (ICE- NYMEX) = $14.71 (last report, $15.23)

Here are the August contracts* with a narrower spread:

NYMEX light sweet crude $104.58
ICE North Sea Brent crude $117.95
Spread (ICE- NYMEX) = $13.37 (last report, $13.91)

* NYMEX futures contracts have rolled forward, we now show June and August.

NYMEX WTI 1-month CRS© is 1.37% (bullish stability 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 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 82.5 down from last report's 87.8. 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 up 73.49 points to 13,000.66; the S&P 500 is up 4.01 points at 1,370.95

The Eureka Miner's Grubstake Portfolio is up 0.31% at $1,340,647.79 (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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