"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.

Thursday, May 10, 2012

Markets Take a Breather; GMO & TC vs FCX

Bottle Tree, 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: Are Gold and Silver Parting Ways? (5/07/2012)

This morning's...
COMEX Gold price = $1,598.1/oz (June contract most active)
Eureka Miner’s Gold Value Index© (GVI) = 90.50 (gold value gaps up, 5/4)
Value Adjusted Gold Price© (VAGP) = $1,475.5/oz
COMEX - VAGP = $122.6/oz; gold is trading at a premium to key commodities; the gold-to-copper ratio remains below its 3-month average (weakly bullish condition, Cu overall neutral)



Þūnresdæg
Morning Miners!

It is 5:48 AM. Have a hot cup of Thor's Day Snoozer. Our favorite Norseman is taking a nap, not much caffeine in his brew this morning. Looks like the markets are taking a breather too...

Markets Take a Breather; GMO & TC vs FCX

After several terrifying days for the metals & miners, Thursday appears to offer a sigh of relief. Gold, silver and copper are off their lows, Europe hasn't imploded and China is still consuming natural resources. As reported by the Wall Street Journal the U.S. continues to be a mixed bag of economic news, "...initial jobless claims fell slightly more than expected, while a reading on the previous week was revised slightly higher. Separately, the U.S. trade deficit widened in March, as a wave of oil imports and Chinese goods overwhelmed record exports. The cost of goods imported into the U.S. fell for the first time since last fall." (WSJ, 05/10/2012)

Ho-hum.

Let's take this moment of rest to reflect on just how devastating the last 6-months have been for three of our favorite miners. Here is a chart of General Moly (GMO, orange line), moly benchmark miner Thompson Creek (TC, green line) and bellwether miner Freeport-McMoRan (FCX, blue line) over that period:

Thompson Creek is the fallen hero of the three rising nearly 45% or roughly twice as much as either GMO or FCX in the exuberance of the new year. After Chinese New Year, fortunes reversed for all three and poor TC is now down 32% over 6-months compared to FCX, down 9%, and GMO, down 10%.

The Eureka Miner's Index© (EMI) posted its low for 2012 yesterday at 59.74; today it is thankfully up to 74.05 but an EMI less than 100 is definitely bear country for miners (see Miner's Report below).

One sign of encouragement is that General Moly has kept pace with Freeport share price on a percentage basis. Moly prices are stable, copper is looking better in the second half of this year and hopefully investors will think more highly of Thompson Creek so it can close the gap with its other two buddies.

All-in-all a tough spring for miners, pardner.

Daily Market Roundup


Mining Report

This morning's mining stocks...

Barrick (ABX) $37.78 up 0.43%
Newmont (NEM) $46.85 up 0.67%
McEwen Mining (MUX) 3.15 up 3.28% (formerly US Gold, UXG)
General Moly (Eureka Moly, LLC) (GMO) $2.97 down 1.33%
Thompson Creek (TC) $4.38 up 0.23%
Freeport-McMoRan (FCX) $35.82 up 0.82% (a bellwether mining stock spanning copper, gold & molybdenum)
Timberline Resources (TLR) $0.39 unchanged

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

ArcelorMittal (MT) $16.71 up 3.72% - global steel producer
POSCO (PKX) $83.69 down 0.41% - 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 74.05, up from last report's 59.74 and below the 1-month moving average of 111.01. 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. The 2012 YTD low is 59.74 recorded 05/09/2012. 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 $3.9/oz at $1,598.1/oz (June contract, most active)

COMEX silver is up $0.069/oz at $29.310/oz (July contract, most active)

The gold-to-silver ratio (Au:Ag) is 54.524 oz/oz

Silver 1-month CRS© is 1.77% (bullish stability level); very stable ratio; 1-month & 3-month < 3% (Ag overall indicators bearish)

The Eureka Miner’s Gold Value Index© (GVI) is below-par at 90.50, down from last report's 91.40 and above its 1-month average of 90.38. Gold value gaped up Friday, 5/4/2012, which could be a bearish indication for key commodities. The record high for 2010-2012 is 109.97 set on Oct. 4, 2011.

The Value Adjusted Gold Price© (VAGP) is $1,475.5/oz which is $122.6/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 $0.0510/lb at $3.7105/lb (July contract, most active)

The gold-to-copper ratio is 430.70 lb/oz; ratios in excess of 400 lb/oz are indicative of a bearish price domain; the ratio is below its 3-month moving average of 442.89 (Cu weakly bullish condition in a bearishPrice Domain B)

Copper 1-month CRS© is 1.95% (bullish stability level); very stable ratio; 1-month & 3-month < 3% (overall indicators neutral)

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

Metals Week Average:
US$14.15
As of May 7, 2012
(updated weekly)

Ryan's Notes Average:
US$14.05
As of May 8, 2012
(updated twice weekly)

European Molybdenum Oxide (Bloomberg average price, updated Wednesday & Friday):
US$14.07/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 $110/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 $97.30
ICE North Sea Brent crude $113.14
Spread (ICE- NYMEX) = $15.84 (last report, $15.77)

Here are the August contracts* with a narrower spread:

NYMEX light sweet crude $97.87
ICE North Sea Brent crude $112.29
Spread (ICE- NYMEX) = $14.42 (last report, $14.43)

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

NYMEX WTI 1-month CRS© is 2.05% (bullish stability level); very stable ratio; 1-month & 3-month < 3% (overall indicators bearish)

Prices remain high for 2012 but have pulled back dramatically, we have $110+ Brent and $95+ NYMEX in August still favoring high oil prices this summer. A front-month spread between Brent and WTI >$20/bbl is a trouble sign.

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 78.5 down from last report's 82.5. 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 81.66 points to 12,916.72; the S&P 500 is up 9.08 points at 1,363.66

The Eureka Miner's Grubstake Portfolio is up 0.59% at $1,279,178.79 (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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