"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.

Friday, March 29, 2013

General Moly (GMO) Update, Liu Han Saga Continues; The Colonel's Gold Price for Next Week

Eureka stories, old building glories, Eureka, Nevada

*** BREAKING NEWS ***

Last week a $665 million loan was suspended for the General Moly Mt. Hope molybdenum project. Below is a chronology of related articles that came to the attention of the Eureka Miner this week (newest to oldest, click here for earlier articles):

(1518 PT Mar 28, 2013)

Missing Tycoon Mars Overseas Push of China’s Private Businesses (Michael Wei in Shanghai, By Bloomberg News - Mar 28, 2013 9:00 AM PT)

This report is presently trying to contact Michael Wei

Tuesday's market mover:

Hanlong Misses Deadline for $1.19 Billion Sundance Iron Bid (Elisabeth Behrmann, Soraya Permatasari, Henry Sanderson and Helen Yuan, Bloomberg News Mar 25, 2013 9:43 pm ET)

(1041 PT Mar 24, 2013, note that Australia is one day ahead)

Murder claims hit Sundance takeover (SARAH-JANE TASKER From: The Australian March 25, 2013 12:00AM) 

(0822 PT Mar 23, 2013)

Firms Try to Get Fix On Chinese Tycoon (with Liu Han video) (By JAMES T. AREDDY in Shanghai and GILLIAN TAN in Sydney, Wall Street Journal, Updated March 20, 2013, 5:34 p.m. ET)

James Areddy is the lead WSJ correspondent in Shanghai and contacted this report in 2012 to check on how things were going with the Mt. Hope project.

Source article on Liu Han & Mt. Hope (reported by the Eureka Miner Dec 28, 2012):

In Nevada, a Chinese King of the Hill (James T. Areddy, WSJ, Dec 28, 2012)


Latest Nevada Gas Prices (click this link)

My latest Kitco commentary:  Copper & Gold Weather Report (03/25/2013)

Paintings by Mariana Titus, The Three Anas, are presently being featured at Lafitte Guest House & Gallery, New Orleans

Friday's morning prices...

Below are the closing prices for yesterday, the last market day of this shortened holiday week:

COMEX Gold price = $1,595.7/oz (April contract most active)

COMEX Silver = $28.323/oz (May)
COMEX Copper = $3.4020/lb (May)
NYMEX WTI crude = $97.23 (May)
ICE Brent crude = $110.02/bbl (May)
Eureka Miner’s Gold Value Index© (GVI) = 94.35 (gold value is elevated with respect to key commodities oil & copper given historical norms)
Value Adjusted Gold Price© (VAGP) = $1,413.2/oz
COMEX - VAGP = $182.5/oz; gold is trading at a premium to key commodities.



Happy Easter Miners!

The Mt. Hope and Liu Han saga rolled into this week with more details emerging about Mr. Liu's errant brother, an alleged triple murder and politics of doing business with China's new leaders. This would be a terrific mystery thriller if Eureka County weren't one of the set props in the unfolding drama. Links to the latest articles are given below today's headline photo including a Liu Han video.

Here is a quote from Chairman Liu Han taken from his website: www.hanlonggroup.com

Mountains stand tall and high, and our ambitions stand higher than the sky. Looking into the future, with the preeminent management and innovation capabilities, Hanlong Group shall devote its efforts to providing the society with richer and better life choices and jointly creates a better future to make contributions for the country and society in accordance with credible and sound management style.

Early in the week Mr. Liu's Sichuan Hanlong Group faced the collapse of their $1.19 billion takeover of Australia’s Sundance Resources Ltd. after missing a term-sheet deadline. This news hit our markets Tuesday morning and took General Moly (GMO) stock down another leg. Last week Hanlong had suspended a $665 million loan for General Moly's Mt. Hope molybdenum project. Here's a quick replay of closing and intraday low share prices:

Friday (3/22) close $2.43
Monday (3/25) close $2.32 ($2.23 low)
Tuesday (3/26) close $2.17 ($2.12 low)
Wednesday (3/25) close $2.25 ($2.10 low)
Thursday (3/25) close $2.21 ($2.16 low)

A rough slide considering that GMO share price touched $4.25 on January 3 and yesterday the S&P 500 set an all time new record closing at 1,569.19 - Ouch.

On the positive side, share price still remains above $2 indicating that the markets have not lost faith in General Moly's resourceful management team to turn Mt. Hope around with an alternate financing plan(s). I believe mine pre-construction activities are funded and will continue. Remember, pardner, Mt. Hope remains a world class asset of strategic and critical minerals with a lot of hard work already done.

A faithful follower of the Eureka Miner recently took this photo of Mt. Hope as viewed from Diamond Valley near 10th Street. You can see some of the clearing and grubbing that has occurred as part of the mine pre-construction phase.



Molybdenum Prices

Spot moly oxide prices are below the key-$11 per pound level. Here are the latest numbers compliments of moly benchmark miner  Thompson Creek (TC):

Metals Week Weekly Average: US$10.75 As of March 25, 2013 (updated weekly)

Ryan's Notes Average: US$10.75 As of March 26, 2013 (updated twice weekly)

The London Metal Exchange (LME) futures contracts are above $11 per pound this week which is encouraging. Remember that this is a thinly traded futures market and contract prices reflect developments in Europe probably more than the global spot price averages above.

3-month seller's contract $24,500 per metric ton ($11.11 per pound)

15-month seller's contract $25,185 per metric ton ($11.42 per pound)

The Colonel's Gold, Silver & Copper Prices for Next Week




My weekly input to Kitco Gold Survey was a target price for gold without the usual in-depth analysis on this shortened holiday week and no targets for silver or copper price.

Here is my e-mail survey input to the Kitco News Global Editor Debbie Carlson:

Just under the wire "Up, $1,610 per ounce target" 

Technical analysis: Positive bias above March lows & highs ($1,588.9 geometric mean) + yesterday's quiz question and answers (strange correlation landscape for the yellow metal)

Headline analysis: If Cyprus crisis grows worse, gold up: if not, sideways to down.

The strange "correlation landscape" is a reference to a quiz the ole Colonel put together on gold's curious relation to other market parameters. Admittedly, this is a quiz for market nerds; if you are so inclined have fun:

Crazy Market Quiz

On a one month basis...

1) Comex gold is positively correlated with the S&P VIX     T or F

2) Comex gold is positively correlated with Nymex WTI & Brent crude  T or F

3) At least gold has a friend in silver, both are still highly correlated  T or F

For the last 3 months...

4) Oil prices have been more volatile than gold  T or F

Answers:

1) False, gold has zero correlation with the so-called "fear index" (rolling correlation -= -0.06)
2) False, gold is positively correlated with WTI and negatively correlated with Brent (+0.64 & -0.37 with WTI-Brent spread collapsing)
3) False, gold is gaining value on the white metal and the correlation is a paltry +0.25
4) False, WTI has been 0.9X less volatile than gold on a relative basis over the last three months

If you got all four answers correct, I'll buy you a beer at the Keyhole. Have a good'un.

Cheers,

Colonel Possum

Inset painting and headline photo by Mariana Titus

Please checkout bayoutales.com for books and book orders


Paintings by Mariana Titus, The Three Anas, are presently being featured at Lafitte Guest House & Gallery, New Orleans
 

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Friday, March 22, 2013

General Moly (GMO) Loan Suspended; Unfolding Saga of Liu Han, Hanlong & Mt. Hope

Liu Han, right, Chairman of Sichuan Hanlong Group, has been reportedly detained in China, image from news.com.au  (Australia) & Associated Press

*** BREAKING NEWS ***

$665 million Chinese sourced Hanlong loan for Mt. Hope suspended:

General Moly Announces Financing Update (Press Release, Mar 20, 2013)

Chronology of related articles that came to the attention of the Eureka Miner throughout the week (most recent to first news break):

(0833 PT Mar 22, 2013)

Sundance suitor's chairman Liu Han detained for harbouring fugitive brother (news.au.com & AP March 21, 2013 11:37 PM)

(1426 PT Mar 21, 2013)

Sundance poised to pull plug on Hanlong (Philip Wren, Business day (Australia), March 22, 2013)

(1251 PT Mar 20, 2013)

Latest update on the Liu Han Saga (note co-author and source article from last December below). The Fox News (via WSJ) article mentions Mt. Hope and General Moly directly. 

Firms Struggle to Locate Chinese Tycoon (Fox News: Gillian Tan, James T. Areddy, WSJ, Mar 20, 2013) 
 

(0827 PT Mar 20, 2013)

Sundance Seeks Information From Hanlong After Detention Report (By Soraya Permatasari & Janet Ong, Bloomberg - Mar 19, 2013 11:28 PM PT)

China detains Hanlong founder (Philip Wen, Mar 21, 2013 (Australia time), The Sidney Morning Herald) 

Source article on Liu Han & Mt. Hope (reported by the Eureka Miner Dec 28, 2012):

In Nevada, a Chinese King of the Hill (James Areddy, WSJ, Dec 28, 2012)


James Areddy is the lead WSJ correspondent in Shanghai and contacted this report in 2012 to check on how things were going with the Mt. Hope project.



Latest Nevada Gas Prices (click this link)

My latest Kitco commentary:  Copper & Gold Weather Report (03/25/2013)

Paintings by Mariana Titus, The Three Anas, are presently being featured at Lafitte Guest House & Gallery, New Orleans

Friday's morning prices...

Below are the prices used for this morning's analysis. Since then COMEX gold is up a tad at 1,607.1/oz (0948 PT):

COMEX Gold price = $1,606.2/oz (April contract most active)

COMEX Silver = $28.665/oz (May)
COMEX Copper = $3.4670/lb (May)
NYMEX WTI crude = $93.13 (May)
ICE Brent crude = $107.62/bbl (May)
Eureka Miner’s Gold Value Index© (GVI) = 95.39 (gold value is elevated with respect to key commodities oil & copper given historical norms)
Value Adjusted Gold Price© (VAGP) = $1,406.9/oz
COMEX - VAGP = $199.3/oz; gold is trading at a premium to key commodities.



Morning Miners!

A rough way to start the spring for the General Moly team...and Eureka County.

Just before the Equinox, news started to break that Liu Han, the Chairman and founder of  Hanlong Sichuan, together with members of his family had been mysteriously detained in China. General Moly has been waiting for a $655 million loan from Hanlong to begin Mt. Hope mine construction in earnest this spring. Pre-construction activities are presently underway to clear and grub the Mt. Hope site together with associated waterworks for the construction effort.

Below the headline AP photo is a chronology of the news as it came to the attention of this report. The ole Colonel updated last Friday's Eureka Miner with these links but waited to hear from General Moly (GMO) before publishing Thursday's Special Report. The really bad news came with a GMO press release after the market close Thursday.

General Moly Announces Financing Update (Press Release, Mar 20, 2013)

It states:

 "[General Moly] has been informed that legal counsel has suspended work on the $665 million Chinese sourced Term Loan that is currently being negotiated with China Development Bank (“CDB”) for the development of the Mt. Hope Project until further notice. This suspension of activities relates to media reports that Mr. Liu Han, Chairman of Sichuan Hanlong Group (“Hanlong”) has reportedly been detained by Chinese authorities. Hanlong or an affiliate is obligated to arrange and guarantee the Term Loan, throughout its life."

I first learned of Liu Han last year from the Wall Street Journal source report by James Areddy, their correspondent in Shanghai:

In Nevada, a Chinese King of the Hill (James Areddy, WSJ, Dec 28, 2012)

James Areddy had interviewed a number of Eureka residents including this report in the preparation of this article. Ironically, the Eureka Miner e-mailed James on an unrelated topic this Monday before the recent stories broke. In closing, I joked that construction of Eureka's Liu Han Casino hadn't started yet. He didn't reply to my humor and now I know why!

Truth is stranger than fiction (and jokes) with the Australian press citing Mr. Han's shady ties to Macau casinos, suspected money laundering and most recently, hiding his brother who is suspected of murder. Australia is keen to find out more about the Chinese tycoon because they have two mines whose future hangs in the balance of Hanlong loans. General Moly is as anxious to sort out the latest dust-up and to seek financing alternatives. A trusted source informed me several minutes ago that it is likely that Ames will be allowed to continue their present work and that General Moly should have plenty of cash on hand after the winter Mt. Hope activities are tallied.

The markets seem to agree that there is still a lot of hope for Mt. Hope. After closing at $2.77 a share Wednesday, General Moly stock plummeted to an intraday low of $2.04 Thursday (-26%) but then recovered to close at $2.31 followed by this morning's trading at $2.32. We'd be well south of $2 by now if the investment community was heading for sunlight in this moly mine.

As a point of disclosure, I lost 1/4 of my position in GMO by stop loss but have decided to tough it out with the remaining 3/4 position until dust clears on that mountain top 21 miles north of town. General Moly has a strong management team and have climbed a lot of other mountains in the past - after all, one of the world's largest molybdenum reserves hasn't left Eureka County!

The best of luck to the entire General Moly team!

Please do your own research, pardner. As I warned last week "markets can turn on you faster than a feral cat."

Molybdenum Prices

Spot moly oxide prices are now below the key-$11 per pound level. Here are the latest numbers compliments of moly benchmark miner  Thompson Creek (TC):

Metals Week Weekly Average: US$10.98 As of March 18, 2013 (updated weekly)

Ryan's Notes Average: US$10.90 As of March 19, 2013 (updated twice weekly)

The London Metal Exchange (LME) futures contracts are below $12, and the 3-month contact has dipped below $11. Remember that this is a thinly traded futures market and contract prices reflect developments in Europe probably more than the global spot price averages above.

3-month seller's contract $24,200 per metric ton ($10.98 per pound)

15-month seller's contract $25,210 per metric ton ($11.44 per pound)

The Colonel's Gold, Silver & Copper Prices for Next Week




Here is my weekly input to Kitco Gold Survey:


03/22/2013 (10:25 AM CT)

Q. Where do you see gold’s price headed next week, up, down or unchanged?

A. Up, $1,620 per ounce target.

Q. Why?

A. Gold is quickly moving away from the commodity camp as safe-haven status reemerges in response to the Cyprus debacle. Only last week, the yellow metal was strongly correlated with global commodities copper and oil on a 1-month basis (+0.89 & +0.81, respectively); today, the correlation is negative for copper and falling for oil (-0.49 & +0.55). This is a bearish sign for metals but bullish for gold.

However, opposing forces may cap gold’s advance below solid resistance at the $1,630 per ounce level. Assuming the Cyprus situation continues into next week without satisfactory resolution, gold should get another boost higher but may be limited by liquidations to raise capital for damage control in the euro-zone. My target of $1,620 is a positive bias above March’s highs, challenges the February high ($1,619.7) but is below $1,630 resistance.

For $1,620 per ounce gold we can expect to see silver in a range of $28.8-$29.6 per ounce; and copper in a range of $3.39-$3.58 per pound. Silver is expected to have a neutral bias with respect a range mean of $29.200 per ounce; copper, a neutral bias with respect to a mean of $3.4807 per pound between the intraday high and low for March.

Although the yellow metal has lost considerable value relative to global commodities oil and copper since mid-November, this trend has now reversed to the upside for gold.
If the long-term gold value uptrend relative to oil and copper remains intact, the longer term prospects for gold priced in dollars are good. The data suggest that this is still the case (Note 6, Ref 5)

As measured by the Eureka Miner’s Gold Value Index (GVI, Ref 1), the value of gold relative to global commodities copper and oil and companion metal silver is 95.39, below the key-100 level but above the 1-month moving average of 94.07. The 2012 high was 103.73 on Nov. 13.

The ratio of gold-to-the S&P 500 (AUSP) is off its low for the year, but still 18.8% below its 2012 high (1.2710, Nov.15) at 1.0362 (2013 low = 1.0166). The latest price action indicates gold has lost significant value relative to the broader market but has bottomed and is now regaining ground.

Background Notes:
  1. My gold target price of $1,620 per ounce challenges the February intraday high of $1,619.7 (2/26/2013).
  2. Given the target gold price, the silver price ranges are derived from the 1-month gold ratio mean (GSR) and its respective ratio stability (CRS©). A different technique was used to predict the price range for copper given its present negative correlation with gold.
  3. My Gold Value Index© (GVI) equals 95.39 or 8.0% below the 2012 high of 103.73. Today gold value is above its 1-month moving average of 94.07; a value of 100 represents a historically high-value of gold relative to key commodities oil, copper and silver.
  4. The gold-to-copper ratio today is 463.28 pounds per ounce and now above its 3-month moving average of 452.05 but below its 6-1/2 year trend of 488.88. The 1-month gold-to-copper ratio stability is a low 1.82%. The 1-month rolling correlation is -0.48; 3-month is +0.71. 3-month relative volatility is 0.1.12X gold and price sensitivity (beta) is +0.80.
  5. The gold-to-silver ratio (GSR) is above its historical norm at 56.033; the 3-month rolling correlation is +0.92, relative volatility is 1.62X gold and price sensitivity (beta) is +1.49. The GSR is above its 3-month average of 54.22; the 1-month gold-to-silver ratio stability is a very low 0.77%.
  6. Although gold has lost considerable value relative to oil and copper since early November, the uptrend in gold value relative to these global commodities remains on solid footing (mid-2006 to the present). If this relation gives way, gold is probably in a world of hurt. Also, 1-month gold ratios relative to WTI & Cu remain quite stable* unlike the early-October 2011 commodity debacle following the U.S. debt downgrade (Ref 4):
    1. Au:WTI -0.65 sigma below 6-1/2 year trend line; Au:Cu -0.41 sigma below trend - I consider > a negative 2-sigma indicative of a potential breakdown
    2. Au:WTI 1-month stability* 1.0% (3.2% 10/6/11); Au:Cu 1.8% (5.7% 10/3/11) - I consider ratio stability > 3% to be divergent & worrisome
(* stability defined as the standard deviation of the gold ratio normalized by its mean over 1-month)
Ref 2: Oil, Copper & Gold – All in the Family (Kitco News, 01/22/2013)
Ref 3: Oil, Copper & Gold – Beware the Snake? (Kitco News, 02/11/2013)
Ref 4: Oil, Copper & Gold – Don’t Worry (Kitco News, 02/25/2013)
Ref 5: The Emperor of Metals Heeds a Warning from Copper (Kitco News, 03/11/2013)


Cheers,

Colonel Possum


Inset painting by Mariana Titus

Please checkout bayoutales.com for books and book orders


Paintings by Mariana Titus, The Three Anas, are presently being featured at Lafitte Guest House & Gallery, New Orleans
 

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Wednesday, March 20, 2013

SPECIAL REPORT: Chinese Loan for General Moly (GMO) Mt. Hope Suspended



*** BREAKING NEWS ***


The $665 million Chinese sourced term loan for Mt. Hope has been suspended:

General Moly Announces Financing Update (Press Release, Mar 20, 2013)

Related news received throughout the day - Wednesday Mar 20, 2013: 

Latest update on the Liu Han Saga (note co-author and source article from last December below). The Fox News (via WSJ) article mentions Mt. Hope and General Moly directly. 

(1251 PT Mar 20, 2013)  

Firms Struggle to Locate Chinese Tycoon (Fox News: Gillian Tan, James T. Areddy, WSJ, Mar 20, 2013) 
 
I just received these two links early Wednesday:

(0827 PT Mar 20, 2013)

Sundance Seeks Information From Hanlong After Detention Report (By Soraya Permatasari & Janet Ong, Bloomberg - Mar 19, 2013 11:28 PM PT)

China detains Hanlong founder (Philip Wen, Mar 21, 2013 (Australia time), The Sidney Morning Herald) 

Source article on Liu Han & Mt. Hope (reported by the Eureka Miner Dec 28, 2012):

In Nevada, a Chinese King of the Hill (James Areddy, WSJ, Dec 28, 2012)


James Areddy is the lead WSJ correspondent in Shanghai and contacted this report in 2012 to check on how things were going with the Mt. Hope project.

These events will have a material impact on Eureka County, at least in the near-term.

Take heart,

Colonel Possum

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Friday, March 15, 2013

The Ides of March - Bullish Metals & Miners? The Colonel's Metal Prices for Next Week

Street Muscians, Eureka, Nevada

*** BREAKING NEWS ***

$665 million Chinese sourced Term Loan for Mt. Hope suspended:

General Moly Announces Financing Update (Press Release, Mar 20, 2013)

Related news received throughout the day: 

Latest update on the Liu Han Saga (note co-author and source article from last December below). The Fox News (via WSJ) article mentions Mt. Hope and General Moly directly. 

(1251 PT Mar 20, 2013)  

Firms Struggle to Locate Chinese Tycoon (Fox News: Gillian Tan, James T. Areddy, WSJ, Mar 20, 2013) 
 
I just received these two links and am doing some digging...

(0827 PT Mar 20, 2013)

Sundance Seeks Information From Hanlong After Detention Report (By Soraya Permatasari & Janet Ong, Bloomberg - Mar 19, 2013 11:28 PM PT)

China detains Hanlong founder (Philip Wen, Mar 21, 2013 (Australia time), The Sidney Morning Herald) 

Source article on Liu Han & Mt. Hope (reported by the Eureka Miner Dec 28, 2012):

In Nevada, a Chinese King of the Hill (James Areddy, WSJ, Dec 28, 2012)

James Areddy is the lead WSJ correspondent in Shanghai and contacted this report in 2012 to check on how things were going with the Mt. Hope project.



Latest Nevada Gas Prices (click this link)

My latest Kitco commentary:  The Emperor of Metals Heeds a Warning from Copper (03/11/2013)

News:

General Moly Announces Fourth Quarter and Full Year 2012 Results (03/08/2013)

Paintings by Mariana Titus, The Three Anas, are presently being featured at Lafitte Guest House & Gallery, New Orleans

Friday's morning prices...

Below are the prices used for this morning's analysis. Since then COMEX gold has pulled back a thin flat washer to $1,591.9/oz (1100 PT):

COMEX Gold price = $1,596.7/oz (April contract most active)

COMEX Silver = $28.975/oz (May)
COMEX Copper = $3.5210/lb (May)
NYMEX WTI crude = $93.40 (April)
ICE Brent crude = $110.06/bbl (May)
Eureka Miner’s Gold Value Index© (GVI) = 93.91 (gold value is elevated with respect to key commodities oil & copper given historical norms)
Value Adjusted Gold Price© (VAGP) = $1,420.6/oz
COMEX - VAGP = $176.1/oz; gold is trading at a premium to key commodities.


Mr. Paul & La Loquita

Morning Miners!

Today is the ides of March - watch your step...or is it time to leap?

There isn't a sadder lot than miners lately as the broader markets seek new highs on a nearly daily basis and miners head further down the mineshaft. Yesterday the S&P 500 almost closed at all time highs, the DOW Jones has already been there - both are at levels at or above the heady days of October, 2007.

Barrick Gold (ABX) has been one of the worst performers this year. Since a closing high of $42.86 on Sept. 21, Barrick has fallen 33% to this morning's price of $28.73. It's easy to blame falling gold prices but gold is only down 10% over the same period.  For me, yesterday's news that Barrick couldn't even get a gold shipment out of the Dominion Republic was a low point. Here's the news feed:

03/14/2013, 2:56 PM Barrick Gold (ABX) says customs authorities in the Dominican Republic halted a shipment of gold from the recently-opened Pueblo Viejo mine. There is no explanation for the action, but Pueblo Viejo has been under pressure from local politicians seeking a more favorable contract. A local report suggests the Dominican president told customs to halt the shipment pending a new agreement.

Is that a stagecoach robbery or what? Of course, Barrick is not the only miner facing tough times. Dodgy governments, rising costs, lower grade ores and lengthy permitting cycles are pretty common beefs across the sector. Add falling metal prices on a stronger U.S. dollar with uncertain global demand and you don't have much to attract new investment dollars - or to even keep the old investors!

Nuts.

Every low point is followed by a high point. This morning, Goldman Sachs upgraded copper giant Freeport-McMoran (FCX) to a "buy" rating:

03/15/2013, 6:46 AM Goldman Sachs upgrades Freeport McMoran (FCX) to a Buy rating and raises its price target to $42. The firm stands more positive on copper and sees the M& A overhang on Freeport diminishing.

Freeport has fared much better than Barrick bouncing 2% to $33.86 this morning on the Goldman thumbs up but is still down 20% from its Oct. 18 closing high of $42.43 - hey, that's the new target! Maybe things are getting better. Barrick is up a nudge too on an uptick in gold prices and General Moly (GMO) is pretty flat at $2.88.

Nuts, this might take some time - be patient.

As I explain in the Kitco weekly survey input below, the yellow metal has faced a lot of challenges in 2013 but is showing a few signs of turning up. It is highly correlated with copper price and both are due for some recovery in the coming weeks. As for the General, I believe once the Hanlong loan clears its last paper work cycle and Mt. Hope mine construction ramps up this spring, GMO should have a nice step up in share price too. TIC will soon begin the installation of seven miles of electrical power lines and will install the pumping stations to support the approximately 2,000 gallons per minute of construction water in preparation for heavy earthworks - that's commitment.

I added to my Freeport position yesterday ahead of the Goldman upgrade and a few more shares of General Moly today. GMO put in a double-bottom this month and technically is due for a little levitation north in my view. Price support is at $2.74 per share (March 4, 2013).

Please do your own research, pardner - the ole Colonel has been wrong in the past and markets can turn on you faster than a feral cat.

Molybdenum Prices

Spot moly oxide prices are still below $12 per pound level and drifting down from the last week. Here are the latest numbers:

Metals Week Weekly Average:
US$11.14

As of March 11, 2013
(updated weekly)

Ryan's Notes Average:
US$11.075

As of March 12, 2013
(updated twice weekly)

The London Metal Exchange (LME) futures contracts are also below $12, and the 3-month contact has ominously dipped below $11. Remember that this is a thinly traded futures market and contract prices reflect developments in Europe probably more than the global spot price averages above.

3-month seller's contract $24,200 per metric ton ($10.98 per pound)

15-month seller's contract $25,230 per metric ton ($11.44 per pound)

The Colonel's Gold, Silver & Copper Prices for Next Week




Here is my weekly input to the  Kitco Gold Survey:
 
03/15/2013 (10:46 AM CT)

Q. Where do you see gold’s price headed next week, up, down or unchanged?

A. Up, $1,605 per ounce target.

Q. Why?

A. Gold has returned to the commodity camp with conviction, strongly correlated with global commodities copper and oil on a 1-month basis (+0.89 & +0.81, respectively). Although all three have been under pressure since the beginning of Chinese Lunar New Year, increasingly positive correlations are a bullish sign for metals going forward.

Reuters reported yesterday that Gianclaudio Torlizzi, a partner at metals consultancy T-Commodity, said, “Metals have already incorporated a lot of bad news out of China. In my view, March and April data will be much better.”  This morning, Goldman Sachs upgraded copper giant Freeport McMoran (FCX) to a “buy.”

Gold will follow copper higher and perhaps at a faster pace as it recovers a loss of value since November (Ref 5). My target of $1,605 per ounce is a breakout above the key $1,600 level above March’s intraday high ($1,598.8, Mar.13). There remains significant resistance at the $1,630 level.

Although the yellow metal has lost considerable value relative to global commodities oil and copper there are signs that this erosion has halted and may soon reverse to the upside for gold.

For $1,605 per ounce gold we can expect to see silver in a range of $29.0-$30.3 per ounce; and copper in a range of $3.51-$3.69 per pound. Silver is expected to have a neutral bias with respect a range mean of $29.663 per ounce; copper, a negative bias below a mean of $3.5978 per pound.

If the long-term gold value uptrend relative to oil and copper remains intact, the longer term prospects for gold priced in dollars are good. The data suggest that this is still the case (Note 6, Ref 5)

As measured by the Eureka Miner’s Gold Value Index (GVI, Ref 1), the value of gold relative to global commodities copper and oil and companion metal silver is 93.91, below the key-100 level but above the 1-month moving average of 93.09. The 2012 high was 103.73 on Nov. 13.

The ratio of gold-to-the S&P 500 (AUSP) is off its low for the year, but still 19.3% below its 2012 high (1.2710, Nov.15) at 1.02552 (2012 low = 1.0142). The latest price action indicates gold has lost significant value relative to the broader market but may have bottomed.

Background Notes:
  1. My gold target price of $1,605 per ounce is a breakout above the psychologically important $1,600-level.
  2. Given the target gold price, the silver price ranges are derived from the 1-month gold ratio mean (GSR) and its respective ratio stability (CRS©). The same technique was used to predict the price range for copper.
  3. My Gold Value Index© (GVI) equals 93.91 or 9.5% below the 2012 high of 103.73. Today gold value is above its 1-month moving average of 93.10; a value of 100 represents a historically high-value of gold relative to key commodities oil, copper and silver.
  4. The gold-to-copper ratio today is 453.48 pounds per ounce and now above its 3-month moving average of 451.68 but below its 6-1/2 year trend of 488.49. The 1-month gold-to-copper ratio stability is a very low 1.23%. The 1-month rolling correlation is +0.89; 3-month is +0.71. 3-month relative volatility is 0.94X gold and price sensitivity (beta) is +0.67.
  5. The gold-to-silver ratio (GSR) is above its historical norm at 55.106; the 3-month rolling correlation is +0.93, relative volatility is 1.58X gold and price sensitivity (beta) is +1.47. The GSR is above its 3-month average of 54.04; the 1-month gold-to-silver ratio stability is a very low 1.11%.
  6. On a positive note, it is interesting that although gold has lost considerable value relative to oil and copper since early November, the uptrend in gold value relative to these global commodities remains on solid footing (mid-2006 to the present). If this relation gives way, gold is probably in a world of hurt. Also, 1-month gold ratios relative to WTI & Cu remain quite stable* unlike the early-October 2011 commodity debacle following the U.S. debt downgrade (Ref 4):
    1. Au:WTI -0.70 sigma below 6-1/2 year trend line; Au:Cu -0.56 sigma below trend - I consider > a negative 2-sigma indicative of a potential breakdown
    2. Au:WTI 1-month stability* 1.6% (3.2% 10/6/11); Au:Cu 1.2% (5.7% 10/3/11) - I consider ratio stability > 3% to be divergent & worrisome
(* stability defined as the standard deviation of the gold ratio normalized by its mean over 1-month)
Ref 2: Oil, Copper & Gold – All in the Family (Kitco News, 01/22/2013)
Ref 3: Oil, Copper & Gold – Beware the Snake? (Kitco News, 02/11/2013)
Ref 4: Oil, Copper & Gold – Don’t Worry (Kitco News, 02/25/2013)
Ref 5: The Emperor of Metals Heeds a Warning from Copper (Kitco News, 03/11/2013)

Cheers,

Colonel Possum


Headline photograph by Mariana Titus

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Friday, March 8, 2013

Gold & GMO Resilient; The Colonel's Metal Prices for Next Week

Bricks and Arches, Eureka, Nevada

Latest Nevada Gas Prices (click this link)

My latest Kitco commentary:  The Emperor of Metals Heeds a Warning from Copper (03/11/2013)

General Moly Announces Fourth Quarter and Full Year 2012 Results (03/08/2013)

Friday's morning prices...

Below are the prices used for this morning's analysis. Since then COMEX gold has recovered some gorund at $1,577.6/oz (1203 PT):

COMEX Gold price = $1.567.4/oz (April contract most active)

COMEX Silver = $28.560/oz (May)
COMEX Copper = $3.5100/lb (May)
NYMEX WTI crude = $91.38/bbl (April)
ICE Brent crude = $109.98/bbl (April)
Eureka Miner’s Gold Value Index© (GVI) = 93.38 (gold value is elevated with respect to key commodities oil & copper given historical norms)
Value Adjusted Gold Price© (VAGP) = $1,402.5/oz
COMEX - VAGP = $164.9/oz; gold is trading at a premium to key commodities.



Morning Miners!

Be sure to checkout the Spring 2013 edition of the Mining Quarterly - it's a dandy! You can access the online version with the link on the sidebar to your right.

I started an early morning with better-than-expected monthly jobs numbers. The Labor Department reported employers added 236,000 jobs for February. The unemployment rate, obtained by a separate survey of U.S. households, fell 0.2% point to 7.7%, the lowest level since the end of 2008.

As I explain in the Kitco weekly survey input below, the yellow metal faced a lot of challenges going into the numbers with a U.S. dollar that was expected to gain on either a good or bad report; good implying the Fed may ease quantitative easing sooner than expected, bad reinforcing the U.S dollar's revived role as a safe-haven currency.

The numbers were so good that the U.S. dollar index (.DXY) made a 6-month high and predictably gold plunged to $1,560.4 per ounce by 0545 PT - but not for long. Up prices shot to $1,583.1 by 0700 PT then settled in just a few dollars up from yesterday's close at $1,577.4 per ounce.

If anything, gold price has been resilient lately. The same can be said for General Moly (GMO) share price which received a chilling downdraft last week on news that the Great Basin Resource Watch (GBRW) and the Western Shoshone Defense Project filed a complaint against the Bureau of Land Management challenging the BLM's issuance of the Record of Decision (ROD) for the company's Mt. Hope project. Monday, Feb. 25, GMO closed at $3.11. When the GBRW news broke Tuesday, Feb. 26, share price dopped 10% and registered a low of $2.77 Monday before regaining ground throughout the week to trade this morning at $2.93. In fairness, some of the downward pressure on General Moly and other miners was due to some gloomy global assessments during the week too.

I talked with General Moly Investor Relations Director Scott Kozak yesterday to see if there were any new developments regarding the complaint. Scott told this report that he couldn't comment directly on a pending legal matter but what was published in the news was a reasonable assessment.

Last week the Eureka Miner reported the following from the Midnight Trader:

The company has not been named as a defendant in the suit but will closely monitor the litigation and at the appropriate time will seek to intervene in the suit. The company says it cannot reasonably predict the final outcome of this complaint, and an unfavorable outcome could result in additional conditions on operations that could have a material adverse effect on the company's financial position or results of operations.(08:44 AM EST, 02/26/2013, Midnight Trader)

Scott told me that Mt. Hope was a multi-generational mine and that the project has made every attempt to be "good neighbors" and has followed an environmentally and socially responsible path in the development. The EIS process has been lengthy with considerable opportunity for public input and General Moly believes they have established a very positive relationship with the local Shoshone tribe at Duckwater.

A faithful follower of this report did an extensive dig on the GBRW, their lawyer and previous complaints. Here is one of the most detailed articles found which reveals the strategy for their case:

Western Shoshone fighting new mining near Eureka, Nevada (Lisa J. Wolf, CENSORED NEWS, 2/24/2013)

GBRW is a non-profit as is their lawyer Roger Flynn’s organization, the Western Mining Action Project. Western Mining is partially funded by grants. John Hadder of GBRW says, “...he’s [Roger Flynn's] independently funded and he’s essentially pro bono" and “we wouldn’t be able to do these cases without him.” The Western Mining Action Project “can only represent public interest organizations. When I’ve spoken to some of the people, especially the growers, they felt it was so expensive to try to do anything legally. It seemed like there was no easy way; so this process that we have with Roger is really the only way we have to challenge these projects. It’s really the only way, in our view, that that people’s voice gets out there through this mechanism. It is ridiculously expensive; no doubt about it.”

Hadder expects the case to be heard in the next month. The article reports him saying, “There will probably be a hearing on it. Roger [Flynn] will come and argue on it” and “we may have some witnesses, one of the people in Diamond Valley agreed to come and be a witness. It will kind of follow that process, the court gives its ruling. Since we’re asking for injunctive relief hopefully they’ll move pretty quickly on it and then if we don’t have satisfaction on it we’ll appeal to the 9th Circuit. It all depends on what comes out of the ruling.”

Here is some background on their lawyer, Roger Flynn:

Roger Flynn, Colorado

The same source that provided these links contacted Gloria Tibbits, the main contact for Mt. Hope at the BLM office in Battle Mountain. The BLM is apparently preparing a vigorous defense; the same team that represented Mt. Tenabo will be on the Mt. Hope response - they have gained a lot of experience with GBRW et al from past complaints. Also, the BLM in Nevada has been served but not the BLM in Washington, DC. A 14 day response clock starts after that. There has never been a preliminary injunction granted by Nevada Courts in the past for similar matters.

Here is the Mt. Hope ROD and contact information for Ms. Tibbits:

BLM Approves the Mount Hope Moly Mine Project in Central Nevada (BLM News Release No. 2013-02, 11/23/2012)

I believe the markets reacted negatively at first to the GBRW news and then quickly discounted the impact of this latest legal dust up. Do your own research pardner but the ole Colonel isn't going to lose any sleep on the GBRW for now.

A special thanks to our unnamed contributor for some terrific background research.

Have a great weekend!

Molybdenum Prices

Spot moly oxide prices are still below $12 per pound level and again changed only pennies from the previous week - very stable price action. Here are the latest numbers:

Metals Week Weekly Average:
US$11.20

As of March 4, 2013
(updated weekly)

Ryan's Notes Average:
US$11.25

As of March 5, 2013
(updated twice weekly)

The London Metal Exchange (LME) futures contracts also remains below $12, and the 3-month contact remains aligned with spot prices.

3-month seller's contract $24,700 per metric ton ($11.20 per pound)

15-month seller's contract $25,435 per metric ton ($11.53 per pound)

The Colonel's Gold, Silver & Copper Prices for Next Week




Here is my weekly input to Kitco Gold Survey:
 
03/08/2013 (10:44 AM CT)

Q. Where do you see gold’s price headed next week, up, down or unchanged?

A. Down, $1,570 per ounce target.

Q. Why?

Gold price confronted a polylemma on a better-than-expected U.S. jobs report this morning: a growing number of reasons for heading lower including a U.S. dollar index at 6-month highs, loss of value to base commodities and a new value low compared to the broader markets as money continues to abandon the yellow metal for greener pastures in stocks. Although, initially heading lower after the report, gold chose to move off its $1,560.4 low per ounce to reach a $1,560.4 high only to fall back to $1,577.4 presently, several dollars higher than yesterday.

So is the fate of gold lately, lack luster but resilient.

The best clue for where gold heads next week may come from copper. Facing downward pressure with lowered expectations of Chinese demand, the red metal has an unusually high 1-month correlation with the Lustrous one (+.93) and a very stable gold ratio (~1% 1-month standard deviation*). My copper target is at the mean of its present trading range or $3.51 per pound suggesting a gold price of $1,570 per ounce. This may change to the upside soon for both metals with Goldman Sach’s upbeat estimate for 3-month copper prices following the upcoming March numbers on Chinese demand. Gold should also find support from decent Asian physical demand.

My target of $1,570 per ounce is a negative bias below the mean of February’s high ($1,619.7, Feb. 26) and low ($1,554.3, Feb. 21) representing a a slight drop from current levels.

Since November, the yellow metal has lost considerable value relative to global commodities oil and copper. Recently, gold recovered some ground from mid-February value lows but is presently moving sideways to down.

If the long-term gold value uptrend relative to oil and copper remains intact, the longer term prospects for gold priced in dollars are good. The data suggest that this is still the case (Note 6, Ref 4)

For $1,570 per ounce gold we can expect to see silver in a range of $28.2-$30.1 per ounce; and copper in a range of $3.43-$3.59 per pound. Silver and copper are expected to have a neutral bias with respect to their range means of $29.159 per ounce and $3.5099 per pound respectively.

As measured by the Eureka Miner’s Gold Value Index (GVI, Ref 1), the value of gold relative to global commodities copper and oil and companion metal silver is 93.38, below the key-100 level but above the 1-month moving average of 92.87. The 2012 high was 103.73 on Nov. 13.

The ratio of gold-to-the S&P 500 (AUSP) is at a new low for the year, 20.2% below its 2012 high (1.2710, Nov.15) at 1.0142. The latest price action indicates gold is losing significant value relative to the broader market.

Background Notes:
  1. My gold target price of $1,570 per ounce is a negative bias above the geometric mean of $1,586.7 per ounce given the stated range highs and lows
  2. Given the target gold price, the silver price ranges are derived from the 1-month gold ratio mean (GSR) and its respective ratio stability (CRS©). The same technique was used to predict the price range for copper.
  3. My Gold Value Index© (GVI) equals 93.38 or 10.0% below the 2012 high of 103.73. Today gold value is above its 1-month moving average of 92.87; a value of 100 represents a historically high-value of gold relative to key commodities oil, copper and silver.
  4. The gold-to-copper ratio today is 446.55 pounds per ounce and below its 3-month moving average of 452.68 and 6-1/2 year trend of 488.12. The 1-month gold-to-copper ratio stability is a very low 1.12%. The 1-month rolling correlation is +0.93; 3-month is +0.60. 3-month relative volatility is 0.86X gold and price sensitivity (beta) is +0.5160
  5. The gold-to-silver ratio (GSR) is above its historical norm at 54.881; the 3-month rolling correlation is +0.92, relative volatility is 1.81X gold and price sensitivity (beta) is +1.67. The GSR is above its 3-month average of 53.78; the 1-month gold-to-silver ratio stability is a very low 1.65%.
  6. On a positive note, it is interesting that although gold has lost considerable value relative to oil and copper since early November, the uptrend in gold value relative to these global commodities remains on solid footing (mid-2006 to the present). If this relation gives way, gold is probably in a world of hurt. Also, 1-month gold ratios relative to WTI & Cu remain quite stable* unlike the early-October 2011 commodity debacle following the U.S. debt downgrade (Ref 4):
    1. Au:WTI -0.68 sigma below 6-1/2 year trend line; Au:Cu -0.66 sigma below trend - I consider > 2-sigma indicative of a potential breakdown
    2. Au:WTI 1-month stability* 1.8% (3.2% 10/6/11); Au:Cu 1.1% (5.7% 10/3/11) - I consider ratio stability > 3% to be divergent & worrisome
(* stability defined as the standard deviation of the gold ratio normalized by its mean over 1-month)
Ref 2: Oil, Copper & Gold – All in the Family (Kitco News, 01/22/2013)
Ref 3: Oil, Copper & Gold – Beware the Snake? (Kitco News, 02/11/2013)
Ref 4: Oil, Copper & Gold – Don’t Worry (Kitco News, 02/25/2013)

Cheers,

Colonel Possum


Headline photograph by Mariana Titus

Please checkout bayoutales.com for books and book orders

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market