"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.

Tuesday, April 10, 2012

Thompson Creek (TC) Bounce; Moly Prices Steady, Copper Scary

Survey Marker - Triangle Mill Site, Eureka, Nevada

*** BREAKING NEWS *** COMEX copper plumbed $3.6540/lb at 8:00 AM PDT breaking the lower end of its trading range set Feb. 17 at $3.7025/lb - a decidedly bearish development for the red metal. Presently, COMEX copper is trading at $3.6540/lb and COMEX gold at $1,634.9/oz for a gold-to-copper ratio of 447.4 lb/oz breaking the 3-month average of 444.0 lb/oz - another bearish development.

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 = $1,645.5/oz (June contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 89.78 (gold value pause from trending down)
Value Adjusted Gold Price© (VAGP) = $1,513.4/oz
COMEX - VAGP = $114.1/oz; gold is trading at a premium to key commodities; the gold-to-copper ratio moves up to just below its 3-month average (Cu bearish trend)



Morning Miners!

It is 5:44 AM. Have a big mug of Ruby T's Silver Lining. Our favorite market bull somehow always finds something to be happy about - this morning it was a small chunk of news that came across the wires at 4:51 AM PDT, "Thompson Creek (TC) was upgraded to Hold from Sell at Deutsche Bank." Now that may not seem like much for this report's moly benchmark miner but it comes on a day when Spanish bond yields are soaring and the London Metal Exchange (LME) headline is, "Base metals bearish, economic stability questioned." We'll take any good news about miners in this break room.

Molybdenum is a minor metal but its price has held up pretty well too compared to big copper which is precariously teetering at the bottom of a nearly 3-month trading range. Let's dig a little deeper...

Thompson Creek (TC) Bounce; Moly Prices Steady, Copper Scary

The broader markets are now open and are in a sour mood as the European sovereign debt crisis returns from a brief hiatus of calm. Presently the S&P 500 is down only a few points from yesterday but in concert with 15 of 19 other global markets in the red. Ruby is quick to point out that Thompson Creek (TC) is up over 3% at $6.40/share, always a good sign to be up on a down day.

Deutsche Bank maintains their 12-month price target at $7.50. Yesterday shares closed at $6.21, with a 52-week range of $5.44 - $13.63. In the first 10 minutes 190,000 shares traded on a rising price - not bad for a small cap senior miner. General Moly (GMO) appeared to move in sympathy with its benchmark, presently up 1.3% at $3.17/share.

With a background of global uncertainty, moly prices have held pretty steady above $14/lb. In the west, spot moly oxide prices are in range of $14.18-$14.20 per pound; euro-moly is averaging out at $14.13 per pound. The LME 3-month seller's contract has been sitting at $14.06 per pound ($31,000 per metric ton) for quite a while (see Copper & Molybdenum Report below).

In contrast, COMEX copper is trading at $3.7225 per pound perilously close to the $3.7025 per pound low of Feb. 17 and a long way from the intraday high of $3.9950 per pound reached earlier on Feb. 9. If COMEX copper closes below its trading range today there could be some tougher times ahead for all miners.

Ruby is putting on a third copper bracelet for luck...we may need it, pardner.

Daily Market Roundup


Mining Report

This morning's mining stocks...

Barrick (ABX) $41.03 up 0.24%
Newmont (NEM) $48.08 up 0.17%
McEwen Mining (MUX) 4.05 up 0.25% (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $3.17 up 1.28%
Thompson Creek (TC) $6.40 up 3.06%
Freeport-McMoRan (FCX) $37.55 up 0.11% (a bellwether mining stock spanning copper, gold & molybdenum)
Timberline Resources (TLR) $0.51 up 2.00%

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

ArcelorMittal (MT) $17.51 down 1.19% - global steel producer
POSCO (PKX) $81.28 down 0.15% - 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 124.90, up from last report's 123.47 and below the 1-month moving average of 178.85. 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 $1.6/oz at $1,645.5/oz (June contract, most active)

COMEX silver is up $0.066/oz at $31.590/oz (May contract, most active)

The gold-to-silver ratio (Au:Ag) is 52.089 oz/oz

Silver 1-month CRS© is 1.14% (bullish level); very stable ratio; 1-month & 3-month < 3% (Ag bullish)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 89.78, down from last report's 89.99 and just above its 1-month average of 88.09. 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 $1,531.4/oz which is $114.1/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 $0.0025/lb at $3.7225/lb (May contract, most active)

The gold-to-copper ratio is 442.04 lb/oz; ratios in excess of 400 lb/oz are considered "recession levels"; the ratio is below its 3-month moving average of 444.02 (a Cu bullish trend has stalled in bearishPrice Domain B)

Copper 1-month CRS© is 1.49% (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$14.175
As of April 9, 2012
(updated weekly)

Ryan's Notes Average:
US$14.20
As of April 3, 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 $102.05
ICE North Sea Brent crude $121.59
Spread (ICE- NYMEX) = $19.54 (last report, $20.22)

Here are the July contracts* with a narrower spread:

NYMEX light sweet crude $103.14
ICE North Sea Brent crude $120.61
Spread (ICE- NYMEX) = $17.47 (last report, $18.06)

* 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 $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; we're just below, spread today may be more about domestic oversupply than new 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 83.5 up from last report's 83.0. 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 33.76 points to 12,895.83; the S&P 500 is down 2.34 points at 1,379.86

The Eureka Miner's Grubstake Portfolio is up 0.32% at $1,384,993.02 (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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