"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.

Wednesday, April 11, 2012

Red Metal Retrograde, Freeport (FCX) Revival? LME Moly Breaks $15

Lone Horse, Eureka & Palisade Train Depot, 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 = $1,657.7/oz (June contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 91.50 (gold value trending higher)
Value Adjusted Gold Price© (VAGP) = $1,513.8/oz
COMEX - VAGP = $143.9/oz; gold is trading at a premium to key commodities; the gold-to-copper ratio breaks its 3-month average to the upside (Cu bearish trend)



Wōdnesdæg
Morning Miners!

It is 6:00 AM. Old Miner Woden just filled my cup with Cold Reality and my ears are ringing from his tiresome I-told-you-sos. Our loveable market bear couldn't be more delighted that the broader markets took a beating yesterday. I reminded the break room curmudgeon that our moly benchmark miner Thompson Creek (TC) got a nice bounce on his delightfully bearish day. What about copper benchmark miner Freeport McMoRan (FCX)?

Red Metal Retrograde...Freeport (FCX) Revival?

WARNING: The following may be utter nonsense

The red metal may be following the red planet in retrograde motion - when planets appear to move in reverse from their normal orbit, bad things can happen. Mars went retrograde on the Colonel's birthday in January and won't return to direct motion until Saturday, April 14 - as any good astrologer worth his charts will warn, "Matters commenced while Mars is retrograde will be frustrated and plagued with disruptions until they finally fizzle out."

Sounds a little bit like the recent fate of copper & gold prices doesn't it?

On a more serious note, COMEX copper dropped out of its 3-month trading range yesterday and is perilously close to breaking below the key psychological level of $8,000/tonne ($3.63/lb vs 3.64/lb intraday low so far today). In my world, the gold-to-copper ratio also broke above its 3-month moving average with conviction - a notably bearish move after a steadfast bullish compression since early December (see Copper & Molybdenum Report below).

This morning there was an 8.6-magnitude earthquake in the proximity of Freeport-McMoRan's giant Grasberg copper mine in Indonesia. Although the early indications are that the impacts will be manageable, the earth from whence much copper comes did move:

Market Nuggets: Barclays: Indonesian Quake Far From Most Base-Metals Mining, But Some Impact Expected (Allen Sykora, Kitco News, 4/11/2012)

Can things get any worse for the red metal and copper miners? Our copper benchmark miner Freeport-McMoRan (FCX) is near the lows of November-December of last year:

This morning, FCX $36.59

Recent lows,

Dec. 29, 2011 closing price $36.54
Dec. 19, 2011 closing price $35.74
Nov. 25, 2011 intraday low $33.77

Here's a rosy contrarian prediction: If the red metal follows the red planet, things should improve after this weekend...

I threw a little FCX in the buckboard today at $36.76 with a stop limit just below the Dec. 19 closing price.

Please do your own research, the Colonel could be committed to the nuthouse for this call....

LME Moly Jumps

Not only is Thompson Creek's (TC) rally extending into its second day ($6.64 up 3.6%), yesterday's London Metal Exchange 3-month seller's contract broke $15/lb up 8% Tuesday at $15.20 per pound ($33,500/metric ton, see Copper & Molybdenum Report below).

Daily Market Roundup


Mining Report

This morning's mining stocks...

Barrick (ABX) $41.27 down 0.51%
Newmont (NEM) $48.47 down 1.07%
McEwen Mining (MUX) 4.13 up 1.98% (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $3.12 up 2.30%
Thompson Creek (TC) $6.64 up 3.59%
Freeport-McMoRan (FCX) $36.59 up 0.77% (a bellwether mining stock spanning copper, gold & molybdenum)
Timberline Resources (TLR) $0.52 up 1.96%

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

ArcelorMittal (MT) $17.55 up 4.28% - global steel producer
POSCO (PKX) $81.79 up 2.14% - 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 124.99, up from last report's 124.90 and below the 1-month moving average of 176.03. 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 $3.0/oz at $1,657.7/oz (June contract, most active)

COMEX silver is down $0.074/oz at $31.605/oz (May contract, most active)

The gold-to-silver ratio (Au:Ag) is 52.451 oz/oz

Silver 1-month CRS© is 1.12% (bullish level); very stable ratio; 1-month & 3-month < 3% (Ag bullish)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 91.50, up from last report's 89.78 and above its 1-month average of 88.21. 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 down $0.0115/lb at $3.6385/lb (May contract, most active)

The gold-to-copper ratio is 455.60 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels"; the ratio has broken its 3-month moving average of 443.81 (a Cu bearish trend in bearishPrice Domain B)

Copper 1-month CRS© is 1.78% (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$14.175
As of April 9, 2012
(updated weekly)

Ryan's Notes Average:
US$14.20
As of April 10, 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$15.20/lb (US$33,500/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 $101.36
ICE North Sea Brent crude $119.52
Spread (ICE- NYMEX) = $18.16 (last report, $19.54)

Here are the July contracts* with a narrower spread:

NYMEX light sweet crude $102.44
ICE North Sea Brent crude $118.74
Spread (ICE- NYMEX) = $16.30 (last report, $17.47)

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

NYMEX WTI 1-month CRS© is 1.84% (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 just below, 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 82.9 down from last report's 83.5. 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 123.86 points to 12,839.79; the S&P 500 is up 15.77 points at 1,374.36

The Eureka Miner's Grubstake Portfolio is up 0.88% at $1,384,579.25 (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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