"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, May 31, 2013

General Moly on a Roll; The Colonel's Metal Prices for Next Week

Mt. Hope, Eureka, Nevada

*** GENERAL MOLY NEWS ***

Mt. Hope construction continues despite financial issues (by Marianne Kobak McKnown, Elko Daily Free Press, 5/31/2013)
General Moly Provides Finance Update (5/15/2013)

General Moly Quarterly Report (Released 5/3/2013)

Here is a very detailed General Moly briefing for investors on the status of Mt. Hope molybdenum project:

General Moly Investor Presentation

See earlier March 22 and March 29 reports for a full chronology of the $665 million Hanlong loan suspension.

Latest Nevada Gas Prices (click this link)

My latest Kitco commentary:  Oil, Copper & $1,200 Gold – A Wild Ride Ahead (05/28/2013)

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

Friday's morning prices...

Below are the morning prices used for today's analysis. COMEX gold has since pulled back to $1,393.9 (9:14AM):

COMEX Gold price = $1,404.1/oz (August contract most active)

COMEX Silver = $22.310/oz (July)
COMEX Copper = $3.2890/lb (July)
NYMEX WTI crude = $92.62 (July)
ICE Brent crude = $101.37/bbl (July)

Eureka Miner’s Gold Value Index© (GVI) = 91.64 (gold value is elevated with respect to key commodities oil & copper given historical norms)
Value Adjusted Gold Price© (VAGP) = $1,280.2/oz
COMEX - VAGP = $123.9/oz; gold is trading at a declining premium to key commodities.




Morning Miners!

Fun stuff first. I plan to be at the Elko Mining Expo next Thursday early and stay until Riverton GMC fixes the 4-WD on my truck - might be at the Expo for a long, long time. Come by and say howdy to the ole Colonel and Mariana.

Gold prices have lately been riding a wave at the expense of the Japanese Nikkei which has seen a sharp correction from its meteoric rise. Unfortunately, the yellow metal is pulling back today on some better-than-expected U.S. economic news and, sadly, I've joined the gold bear camp as explained in my latest commentary and input to the weekly Kitco Gold Survey (below). $1,200 territory for the Lustrous One may be in the cards, pardner. Nuts.

General Moly (GMO) share price has been faring a lot better than gold futures lately. Since CEO Bruce Hansen added to his position in April 22 by buying 30,000 shares at $1.86, GMO has moved up to close at $2.24 yesterday - that's a gain of over 20%. Sure beats bank CD rates. Today GMO has pulled back a tad to $2.185 per share.

The really good news is that GMO appears to be in "accumulation mode" where institutional investors and perhaps hedge funds are slowly building positions in anticipation of a positive outcome to the Mt. Hope re-financing efforts of the General Moly management team (see last week's post). This is evidenced by a gradual uptrend supported by better-than-average volume. Tuesday traded 517,224 shares versus a 10-day average volume that presently sits at 239,348 shares - that's cooking along.

Please do your own research. As I warn on a regular basis, experts can be dead wrong and markets can turn on you faster than a feral cat. Nonetheless, I'm optimistic I'll see CAT 793 haul trucks on Mt. Hope before I get too much grayer!

Here is an excellent article that was posted this afternoon by Marianne Kobak McKnown of the Elko Daily Free Press on current progress at the Mt. Hope mine site:

Mt. Hope construction continues despite financial issues (by Marianne Kobak McKnown, Elko Daily Free Press, 5/31/2013)

Keep the faith!



Molybdenum Prices

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

Metals Week Weekly Average: US$10.82 as of May 27, 2013 (updated weekly)

Ryan's Notes Average: US$10.90 as of May 28, 2013 (updated twice weekly)

Thankfully, the London Metal Exchange (LME) futures contracts are still holding above $11 per pound this week. 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 $25,200 per metric ton ($11.43 per pound)

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



Here is my weekly input to the Kitco Gold Survey:


05/31/2013 (10:32 AM CT)


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

A. Down, $1,380 per ounce target.

Q. Why?

A. Gold got another boost this week from a falling Nikkei which plumbed a 12% correction together with conjecture over U.S. monetary stimulus reduction. The yellow metal enjoys a second week of gaining ground relative to equities, copper and oil. However, this is a likely a bull run in a bear market for gold that could soon see a test of the April low and eventually enter $1,200 per ounce territory (Ref 4).

The S&P 500 has pulled back this week from recent new highs as gold has gained momentum, illustrated by a plot of the gold-to-S&P 500 ratio, or AUSP:





However, the ratio has been in a descending channel since mid-November with rotation of money away from gold assets into the U.S. stock market with gold losing more than 30% of value relative to equities from the November peak (AUSP=1.2710). Even with gold’s move up this week, the channel is still intact. A pullback in gold price next week is likely and my target price of $1,380 per ounce is the mean (note 1) of the May high ($1,421.6) and low ($1,338.0).

For $1,380 per ounce gold we can expect to see silver in a statistically bounded range of $21.8-$22.5 per ounce; and copper in a range of $2.83-$3.32 per pound. Silver is expected to have a neutral bias with respect a range mean of $22.143 per ounce; copper, a positive bias with respect to a mean of $3.0751 per pound.

Gold has recovered not only dollar price but has gained value relative to copper and oil this week; oil has lost value to copper. The chart below is a week-on-week valuation matrix (Read the chart as “1 unit of A buys X units of B”; for example,”1 ounce of gold buys 426.9 pounds of copper. Percentages are change from last Friday’s closing numbers):




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 4, Ref 2 & 3)

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 90.44, below the key-100 level and slightly below the 1-month moving average of 91.58. The 2012 high was 103.73 on Nov. 13.


Background Notes:
  1. My gold target price of $1,380 per ounce is the geometric mean between the stated high and low.
  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 90.44 or 12.8% below the 2012 high of 103.73; a value of 100 represents a historically high-value of gold relative to key commodities oil, copper and silver.
  4. Although gold has lost considerable value relative to oil and copper since early November, the long-term uptrend in gold value relative to these global commodities is still intact (mid-2006 to the present). If this relation gives way, gold could see considerable downside. The 1-month gold ratios relative to WTI & Cu are still showing signs of stability divergence (>3%).
    1. Au:WTI -1.37 sigma below 6-1/2 year trend line; Au:Cu -1.06 sigma below trend - I consider > a negative 2-sigma indicative of a potential breakdown
    2. Au:WTI 1-month stability* 3.2%;  Au:Cu 3.9% - I consider ratio stability > 3% to be potentially divergent & worrisome
(* stability is defined as the standard deviation of the gold ratio normalized by its mean over 1-month)


Ref 2: The Emperor of Metals Heeds a Warning from Copper (Kitco News, 03/11/2013)
Ref 3: Copper & Gold – Is April the Cruelest Month? (Kitco News, 04/22/2013)
Ref 4: Oil, Copper & $1,200 Gold - A Wild Ride Ahead (Kitco News, 05/28/2013)

Cheers,

Colonel Possum

Photos by Mariana Titus

Please checkout bayoutales.com for books and book orders


Paintings by Mariana Titus, The Three Anas, are presently 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, May 24, 2013

General Moly back from China; SJR15 Update; The Colonel's Metal Prices for Next Week

Man's Best Friend, Eureka, Nevada

*** GENERAL MOLY NEWS ***

General Moly Provides Finance Update (5/15/2013)

General Moly Quarterly Report (Released 5/3/2013)

Here is a very detailed General Moly briefing for investors on the status of Mt. Hope molybdenum project:

General Moly Investor Presentation

See earlier March 22 and March 29 reports for a full chronology of the $665 million Hanlong loan suspension.

Latest Nevada Gas Prices (click this link)

My latest Kitco commentary:  Oil, Copper & Gold – Herd Mentality? (05/06/2013)

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

Friday's morning prices...

Below are the morning prices used for today's analysis:

COMEX Gold price = $1,388.9/oz (June contract most active)

COMEX Silver = $22.370/oz (July)
COMEX Copper = $3.2835/lb (July)
NYMEX WTI crude = $93.26 (July)
ICE Brent crude = $101.71/bbl (July)

Eureka Miner’s Gold Value Index© (GVI) = 90.44 (gold value is elevated with respect to key commodities oil & copper given historical norms)
Value Adjusted Gold Price© (VAGP) = $1,283.2/oz
COMEX - VAGP = $105.7/oz; gold is trading at a declining premium to key commodities.




Morning Miners!

It has been quite a week for gold prices, General Moly and the evolving story on Nevada's mining tax issue. Let's take 'em one at a time -  full analysis and discussion of gold, copper and silver prices are included in my input to the weekly Kitco Gold Survey (below), General Moly's Zach Spencer provided some encouraging inputs on Mt. Hope, and Eureka County Assessor Michael Mears has been tenaciously tracking SJR15.

General Moly (GMO) Management team back from China

I called Zach Spencer yesterday to get the latest news. CEO Bruce Hansen and CFO Dave Chaput have now returned from their trip to China. The trip went well as they sought a new strategic partner capable of advancing the full financing of the Mt. Hope molybdenum project. The China Development Bank (CDB) apparently remains interested in a new team with a solid substitute partner. Hanlong had been that partner until problems arose with their founder Liu Han (See  March 22 and March 29 reports for a full chronology of the $665 million Hanlong loan suspension).

The good news is that there are several interested parties that have started a due diligence process. I believe the General Moly management team plans to return to China but Zach is not sure just when. In the meantime, Zach informed the Eureka Miner that a handful of Ames Construction people will remain onsite and that the Phase II cultural clearance mitigation with Kautz Environmental Consultants is continuing as originally planed.

The ole Colonel was happy to discover that General Moly Corporate Counsel Roswell Scott bought 7,300 shares of GMO at $2.04 on Monday. CEO Bruce Hansen added to his position April 22 buying 30,000 shares at $1.86. GMO is presently trading at $2.04 and has been showing signs of accumulation over the past several days - I interpret all of these transactions in a very positive light. Please do your own research, pardner - markets can turn on you faster than a feral cat.

Keep the faith!



Molybdenum Prices

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

Metals Week Weekly Average: US$10.825 as of May 20, 2013 (updated weekly)

Ryan's Notes Average: US$10.90 as of May 21, 2013 (updated twice weekly)

Thankfully, the London Metal Exchange (LME) futures contracts are holding above $11 per pound this week. 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 $25,200 per metric ton ($11.43 per pound)

Mining Tax Update

Eureka County Assessor Michael Mears has kept the Eureka Miner well informed about the latest twists and turns in Nevada's mining tax saga. Thursday, Mike gave me this report on SJR15:

At this point, SJR15 is on the desk in the Assembly awaiting a vote. That vote is expected to take place during today’s floor session. All indications are that the bill will pass out of the Assembly. Having already passed the Senate, the issue will go on the 2014 ballot for voter approval where it is highly likely to pass. As I stated earlier, the proposal removes the entire paragraph in the Nevada Constitution related to the net proceeds of mines tax. So what does it all mean? Nobody can say for sure at this point. The Legislative attorneys from Legal Counsel Bureau have stated that the net proceeds tax can continue to be administered under the authority in Nevada Revised Statutes (NRS) 362. Other legal minds I have spoken with argue whether the tax, once out of the Constitution, will be allowable under the uniform and equal language within the Constitution. Some have argued that it will become a special tax and may not be Constitutional. Also at stake is the rate of taxation. Currently, the net proceeds tax rate is 5% on operations with annual net proceeds of $4,000,000 or more. The maximum local government tax rate is currently $3.64 per $100 of assessed value. The argument has been made that once out of the Constitution, the 5% rate would no longer apply and would revert to the $3.64 rate resulting in a loss of revenue to the State. There were proposals floated during the session to attempt to modify the net proceeds tax within the existing law, but none of those proposals actually went anywhere. With only 12 days left in the session, it is highly unlikely that anything will come forward; however, in the last week of the session, anything can happen. Local governments, like Eureka County, who receive net proceeds tax revenue, are certainly concerned about the uncertainty of this measure and are hoping perhaps after the session, some of our questions may be answered.

This morning, Mike told me that SJR15 passed out of the Assembly yesterday afternoon on 26-15 party-line vote. He also sent a link to a Ralston report on the mining tax issues for a little perspective:

Uncertain road led to mining tax resolution passage; uncertain road lies ahead, too (Ralston Reports, Jon Ralston, 05/23/2013)

Hats off to Mike for his excellent inputs on what could become a significant headwind for Nevada miners.

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



Here is my weekly input to the Kitco Gold Survey:


05/24/2013 (10:32 AM CT)


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

A. Up, $1,395 per ounce target.

Q. Why?

A. Gold has had a very volatile week buffeted by comments from Federal Reserve Chairman Bernanke’s comments about possibly tapering bond buying later this year and a sharp downturn in the Nikkei after Bank of Japan governor Kuroda said that enough stimulus had been announced. Encouragingly, the yellow metal has gained ground relative to equities, copper and oil since last Friday.

The S&P 500 has pulled back this week from recent new highs as gold has gained momentum, illustrated by a plot of the gold-to-S&P 500 ratio, or AUSP:

Inline image 1


However, the ratio has been in a descending channel since mid-November with rotation of money away from gold assets into the U.S. stock market with gold losing more than 30% of value relative to equities from the November peak (AUSP=1.2710). Even with gold’s move up this week, the channel is still intact.

My gold target for next week is therefore the current S&P 500 futures contract for June adjusted by the present AUSP ratio:

Expected gold price = 1,640 (S&P futures) * 0.85 (AUSP) = 1,395

For $1,395 per ounce gold we can expect to see silver in a statistically bounded range of $22.4-$23.0 per ounce; and copper in a range of $2.93-$3.48 per pound. Silver is expected to have a neutral bias with respect a range mean of $22.713 per ounce; copper, a positive bias with respect to a mean of $3.2034 per pound.

Gold has recovered not only dollar price but has gained value relative to copper and oil this week; oil has lost value to copper.


The chart below is a week-on-week valuation matrix (Read the chart as “1 unit of A buys X units of B”; for example,”1 ounce of gold buys 447.5 pounds of copper. Percentages are change from last Friday’s closing numbers):

Inline image 2


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 4, Ref 2 & 3)

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 90.44, below the key-100 level and slightly below the 1-month moving average of 91.58. The 2012 high was 103.73 on Nov. 13.

Background Notes:
  1. My gold target price of $1,395 per ounce is below resistance at $1,400 per ounce.
  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 90.44 or 12.8% below the 2012 high of 103.73; a value of 100 represents a historically high-value of gold relative to key commodities oil, copper and silver.
  4. Although gold has lost considerable value relative to oil and copper since early November, the long-term uptrend in gold value relative to these global commodities is still intact (mid-2006 to the present). If this relation gives way, gold could see considerable downside. Alarmingly, 1-month gold ratios relative to WTI & Cu are now showing stability divergence (>3%).
    1. Au:WTI -1.45 sigma below 6-1/2 year trend line; Au:Cu -1.11 sigma below trend - I consider > a negative 2-sigma indicative of a potential breakdown
    2. Au:WTI 1-month stability* 3.5%;  Au:Cu 4.3% - I consider ratio stability > 3% to be potentially divergent & worrisome
(* stability defined as the standard deviation of the gold ratio normalized by its mean over 1-month)
Ref 2: The Emperor of Metals Heeds a Warning from Copper (Kitco News, 03/11/2013)
Ref 3: Copper & Gold – Is April the Cruelest Month? (Kitco News, 04/22/2013)

Cheers,

Colonel Possum

Photos by Mariana Titus

Please checkout bayoutales.com for books and book orders


Paintings by Mariana Titus, The Three Anas, are presently 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, May 10, 2013

$1,100 Gold? Key Date for General Moly Approaches; The Colonel's Metal Prices for Next Week

The Long Road, Eureka, Nevada

*** GENERAL MOLY BREAKING NEWS ***
*** (5:34AM PDT, May 15,2013) ***

General Moly Provides Finance Update

*** GENERAL MOLY NEWS ***

General Moly Quarterly Report (Released 5/3/2013)

Here is a very detailed General Moly briefing for investors on the status of Mt. Hope molybdenum project:

General Moly Investor Presentation

See earlier March 22 and March 29 reports for a full chronology of the $665 million Hanlong loan suspension.

Latest Nevada Gas Prices (click this link)

My latest Kitco commentary:  Oil, Copper & Gold – Herd Mentality? (05/06/2013)

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

Please remember to vote for Mariana: Violet Valise Studios

Friday's morning prices...

Below are the morning prices used for today's analysis:

COMEX Gold price = $1,429.1/oz (June contract most active)

COMEX Silver = $23.260/oz (May)
COMEX Copper = $3.3420/lb (May)
NYMEX WTI crude = $94.41 (May)
ICE Brent crude = $102.37/bbl (May)

Eureka Miner’s Gold Value Index© (GVI) = 90.95 (gold value is elevated with respect to key commodities oil & copper given historical norms)
Value Adjusted Gold Price© (VAGP) = $1,312.9/oz
COMEX - VAGP = $116.2/oz; gold is trading at a declining premium to key commodities.




Morning Miners!

Gold prices were hit hard today by a strong dollar as the yen broke 100 yesterday coupled with better-than-expected jobless claims and new rumors that the Federal reserve may pullback from its present generously accommodative policies sooner than expected. Presently trading at $1,429.1 per ounce, Comex gold is off its morning low of $1,418.50 but down nearly $40 from its Thursday close. Ouch.

I had an informative e-mail exchange with Janet Mirasola, Managing Director of R.J. O'Briens, this morning about a floor for gold prices that reflects "true commodity value." Although we both agreed it is probably above $1,200 per ounce, she wisely commented that prices in these markets can easily overshoot to the downside making a trip to the $1,100-level possible. The full analysis and discussion are included in my input to the weekly Kitco Gold Survey (below).

A Key Date for General Moly (GMO)

General Moly has found itself in a perfect storm of bad news but there is potential for things to reverse, perhaps this month. Suspension of Hanlong financing in March (see previous reports above), overall pressure on the mining sector and lackluster molybdenum prices are a tough environment to find new financing and kick start Mt. Hope mine construction.

My understanding is that mid-May the exclusivity agreement for Hanlong financing expires and that the General Moly management team is in China [5/15/2013 UPDATE: The Eureka Miner tries to report as accurately as possible. Please read the latest Press Release to determine the current and accurate status of the GMO/Hanlong relation. Bruce D. Hansen, Chief Executive Officer of General Moly, said, "Hanlong's cooperation and assistance is appreciated as we move forward to secure another Chinese strategic partner capable of advancing the full financing of the Mt. Hope Project and reinvigorating advanced stage loan negotiations with China Development Bank..." and, "Our efforts to secure such a strategic partner are incrementally enhanced by the elimination of these warrants which reduces the potential for future dilution. We are actively marketing the Mt. Hope Project as a fully permitted, construction-ready, high grade / lower cost molybdenum deposit supported by our joint venture partner POS-Minerals, and recently attracted a number of parties in China who are beginning to engage in due diligence."]. This report surmised last week that although direct financing from Hanlong is unlikely, it appears they remain a viable organization for seeking alternative paths for GMO. I remain optimistic for a positive outcome form this visit.

What the Colonel has heard in the ether is that although there is presently a pause in Ames Construction activities, their work could resume this fall - possibly sooner. Eureka Moly's Zach Spencer informed me this morning that, "Specific to GMO, there remains a handful of Ames employees at Mt. Hope."

I also understand Kautz Environmental Consultants is continuing their activities. Kautz has been contracted by Eureka Moly to initiate cultural clearance mitigation and will be onsite until the conclusion of the process. Kautz is a well-known and respected firm specializing in cultural resource surveys, mitigation, and regulatory compliance. They have extensive experience in Nevada and throughout the Western United States, having completed numerous projects since 1994.

Molybdenum spot and futures prices have stabilized above $11 per pound (see below). On the supply side, the April 10 Kennecot Bingham Canyon slide was extensive and may represent one to two years of delay and a 3%  reduction of moly production worldwide. There are also strikes in Chile and unrest for copper miners elsewhere putting a floor under moly and copper prices (molybdenum is a common byproduct of copper mining). Demand side may be boosted by a better-than-expected recovery in the U.S although the jury is still out for China and Europe. Staying above $11 per pound will be a good global bellwether going forward.

GMO is presently having a 3-day rally trading at $1.96 per share. The ole Colonel threw a few more shares in the buckboard at $1.86 yesterday, very near CEO Bruce Hansen's buy-point several weeks ago. Please do your own research, pardner, I've read it wrong in the past. Remember, markets can turn on you faster than a feral cat .

Keep the faith!



Molybdenum Prices

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

Metals Week Weekly Average: US$11.34 as of May 6, 2013 (updated weekly)

Ryan's Notes Average: US$11.05 as of May 8, 2013 (updated twice weekly)

The London Metal Exchange (LME) futures contracts are holding above $11 per pound this week, mostly unchanged from last week. 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 $25,000 per metric ton ($11.34 per pound)

15-month seller's contract $25,740 per metric ton ($11.68 per pound)

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



Here is my weekly input to the Kitco Gold Survey:



05/10/2013 (10:52 AM CT)


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

A. Up, $1,445 per ounce target.

Q. Why?

A. Gold prices were hit hard today by a strong dollar as the yen broke 100 yesterday coupled with better-than-expected jobless claims and new rumors that the Federal reserve pullback from its present generously accommodative policies sooner than expected.

Janet Mirasola, Managing Director of R.J. O’Briens, humorously described gold’s present dilemma in her Friday pre-market brief, “The Shiny One [gold] remains gender confused as it tries desperately to hold onto its currency haven status knowing full well that its true commodity value may be many dollars below current levels.”

I asked Ms. Mirasola if she agreed with my analysis that shows the “ture commodity value” of gold has a floor of $1,250 to $1,280 per ounce.

Since October 2010, my adjusted gold price (given historical norms for oil, copper and silver) has had these lows:

10/1/2010 $1,273 (just before the dawn of QE2)
10/3/2011 $1,266
6/22/2012 $1,279
4/18/2013 $1,253 (most recent)

She concurred that the RJO number is also around $1,200 per ounce but that it could easily overshoot and go to $1,100. Ms. Mirasola added, “All commodities currently have new high level ‘cost of production’ – but this calculation is never set in stone expect in the leanest of times.  So if that cost is for instance $1200 the closer the market gets to the benchmark the more likely that producers will find ways to cut the cost.”

It is likely that today’s pullback is overdone and prices should find some relief next week. My target is therefore $1,445 per ounce – above the mean of the May 3 high ($1,487.2) and the Feb. 16 low ($1,321.5).

For $1,445 per ounce gold we can expect to see silver in a statistically bounded range of $23.3-$25.8 per ounce; and copper in a range of $3.06-$3.48 per pound. Silver is expected to have a negative bias with respect to a range mean of $24.508 per ounce; copper, a positive bias with respect to a mean of $3.2694 per pound.

The S&P 500 has set new record highs again this week. This has caused gold to continue its loss of value relative to equities as illustrated by a plot of the gold-to-S&P 500 ratio, or AUSP:



Since mid-November, the ratio has been in a descending channel with rotation of money away from gold assets into the U.S. stock market with gold losing more than 30% of value relative to equities from the November peak (AUSP=1.2710). Today set a new low at 0.8762.

Gold has lost dollar price and value relative to copper and oil this week; copper has lost value to oil. Gold continues to behave as a commodity but its correlation with these two key commodities is declining. The yellow metal remains positively correlated to copper and oil on both a short-term (1-month>+0.5) and mid-term (3-month >0.6) basis.

The chart below is a week-on-week valuation matrix (Read the chart as “1 unit of A buys X units of B”; for example,”1 ounce of gold buys 427.6 pounds of copper. Percentages are change from last Friday’s closing numbers):


Inline image 2





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 2 & 3)

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 90.95, below the key-100 level and below the 1-month moving average of 92.99. The 2012 high was 103.73 on Nov. 13.

Background Notes:
  1. My gold target price of $1,445 per ounce is below strong resistance at May’s high of $1,487.2 per ounce
  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. Although gold has lost considerable value relative to oil and copper since early November, the long-term uptrend in gold value relative to these global commodities has remained on solid footing (mid-2006 to the present). If this relation gives way, gold could see considerable downside. Also, 1-month gold ratios relative to WTI & Cu have remained quite stable* unlike the early-October 2011 commodity debacle following the U.S. debt downgrade (Ref 2 & 3). There are, however, continued signs that divergent ratios for copper are possible:
    1. Au:WTI –1.39 sigma below 6-1/2 year trend line; Au:Cu -1.03 sigma below trend - I consider > a negative 2-sigma indicative of a potential breakdown
    2. Au:WTI 1-month stability* 2.5%;  Au:Cu 3.2% - I consider ratio stability > 3% to be potentially divergent & worrisome
(* stability defined as the standard deviation of the gold ratio normalized by its mean over 1-month)


Ref 2: The Emperor of Metals Heeds a Warning from Copper (Kitco News, 03/11/2013)
Ref 3: Copper & Gold – Is April the Cruelest Month? (Kitco News, 04/22/2013)
Cheers,

Colonel Possum

Photos by Mariana Titus

Please checkout bayoutales.com for books and book orders


Paintings by Mariana Titus, The Three Anas, are presently 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, May 3, 2013

Good Report on Jobs & General Moly; The Colonel's Metal Prices for Next Week

Ready to Roll to Eureka, Nevada

*** GENERAL MOLY NEWS ***

General Moly Quarterly Report (Released 5/3/2013)

Here is a very detailed General Moly briefing for investors on the status of Mt. Hope molybdenum project:

General Moly Investor Presentation

See earlier March 22 and March 29 reports for a full chronology of the $665 million Hanlong loan suspension.

Latest Nevada Gas Prices (click this link)

My latest Kitco commentary:  Oil, Copper & Gold – Herd Mentality? (05/06/2013)

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

Please remember to vote for Mariana: Violet Valise Studios

Friday's morning prices...

Below are the morning prices used for today's analysis:

COMEX Gold price = $1,465.7/oz (June contract most active)

COMEX Silver = $23.935/oz (May)
COMEX Copper = $3.2755/lb (May)
NYMEX WTI crude = $95.01 (May)
ICE Brent crude = $103.95/bbl (May)

Eureka Miner’s Gold Value Index© (GVI) = 93.60 (gold value is elevated with respect to key commodities oil & copper given historical norms)
Value Adjusted Gold Price© (VAGP) = $1,308.4/oz
COMEX - VAGP = $157.3/oz; gold is still trading at a premium to key commodities.



Good Morning Miners!

Sadly, Eureka has lost another another icon - RD Damele passed away last Friday. I understand he was on Antelope Summit with two of his granddaughters when he felt dizzy, collapsed and was gone. RD was a great man and long-time resident of Pine Valley and Eureka. Services will be held today. Mariana and I extend our thoughts and condolences to the Damele family who have shared a proud legacy with this country since the late-1800s.

Good reports

There were two good reports to start the morning. The U.S. Labor Department announced that the economy added 165,000 jobs last month, topping an expected 148,000. The unemployment rate fell from a previous 7.6% to 7.5%, the lowest level since December 2008, as more people found work. Encouragingly, there were significant upward revisions to the February and March numbers to 338,000 and 138,000 respectively. This news pushed the DOW above 15,000 and the S&P 500 above 1,600 - both on their way to set new closing highs this afternoon.

The second upbeat report came from General Moly (GMO) which released their results for the first quarter of 2013:

General Moly Quarterly Report (Released 5/3/2013)

General Moly earnings per share (EPS) of -$0.03 beats by $0.01 the expected number. The negative number reflects that GMO is not in production but beating the analyst's estimate shows they are doing a good job of controlling costs as they seek alternative financing for the Mt. Hope molybdenum project.

Bruce D. Hansen, Chief Executive Officer of General Moly, says,

The Company made substantial progress with regards to our preliminary construction activities at Mt. Hope during the first quarter including early well field development, clearing and grubbing of terrain and cultural clearance.

We are working with Hanlong to secure another Chinese strategic partner to help advance the full financing of the Mt. Hope Project and reinvigorate advanced stage loan negotiations with China Development Bank. Our efforts to secure such a strategic partner are enhanced, given that we are advancing a fully permitted, construction-ready, high grade / lower cost molybdenum deposit along with our EMLLC partner POS-Minerals. 

Mr. Hansen concludes,

As we continue our efforts towards full financing at Mt. Hope, the Company will continue to prudently manage our unrestricted cash position of $57 million at the end of the first quarter with an additional $36 million in restricted cash.


Mt. Hope Construction Update

The quarterly report also summarizes the recent activities at Mt. Hope:

Early construction activities progressed as planned at the Mt. Hope Project site including cultural clearance, clearing and grubbing, wood harvesting, and the development of early construction water. Kautz Environmental Consultants completed field mitigation activities for all 29 cultural sites identified in the Phase I Cultural Mitigation of the initial construction program. Official releases from the Bureau of Land Management (“BLM”) and the State Historical Preservation Office have been obtained for all 29 cultural sites and the Company has advanced into Phase II Cultural Mitigation activities. Ames Construction has cleared and grubbed approximately 1,800 acres in preparation for starting major earthworks. The mine, process plant, and tailings dam areas and associated roads have been substantially cleared. Ames Construction also has completed four miles of water pipeline (approximately 50% of total planned) to supply construction water from the permitted well field to the plant site.

General Moly stock got a nice bid this morning, presently up 6.25% at $1.87.

Benchmark moly miner Thompson Creek (TC) is also getting a vote of confidence in the markets, trading up 6.57% at $3.08.

Keep the faith.



Molybdenum Prices

Spot moly oxide prices remain above the key-$11 per pound but sagged a tad last week. Here are the latest numbers compliments of moly benchmark miner  Thompson Creek (TC):

Metals Week Weekly Average: US$11.20 As of April 29, 2013 (updated weekly)

Ryan's Notes Average: US$11.15 As of April 30, 2013 (updated twice weekly)

The London Metal Exchange (LME) futures contracts are holding above $11 per pound this week moving up a bit from last week. 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 $25,000 per metric ton ($11.34 per pound)

15-month seller's contract $25,750 per metric ton ($11.68 per pound)

Mining Tax Update

Here is the latest attempt from the Legislature to tax the mines. Eureka County Assessor Mike Mears  told this report, "[The] big question is still whether a tax outside the Constitution is legal." As reported by the Las Vegas Sun:

Six Republicans propose doubling Nevada’s mining tax (Las Vegas Sun, 4/24/2013)

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



Here is my weekly input to the Kitco Gold Survey:


05/03/2013 (10:38 AM CT)


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

A. Up, $1,470 per ounce target.

Q. Why?

A. The new dichotomy for gold persists as strong physical demand in Asia continues balanced by outflows in gold exchange traded funds. However, there are signs that demand may soften next week and the flow of funds from ETFs is now slowing. This will probably limit the upside for the yellow metal against a backdrop of bearish influences including the eventual unwind of the Federal Reserve from its present generously accommodative policies. A wider conflagration in the Middle East could bring back safe haven status for the yellow metal but those fears have subsided as U.S. intervention in Syria is less certain.

Gold will probably move slightly higher next week as it remains range bound with considerable resistance at $1,500 per ounce.

My target is therefore $1,470 per ounce – above the mean of the Feb. 15 high ($1,495.0) and the Feb. 16 low ($1,321.5).

For $1,470 per ounce gold we can expect to see silver in a range of $22.8-$26.0 per ounce; and copper in a range of $3.02-$3.45 per pound. Silver is expected to have a negative bias with respect a range mean of $24.396 per ounce; copper, a negative bias with respect to a mean of $3.2375 per pound.

The S&P 500 has regained upward momentum setting new highs given after a better-than-expected U.S. employment report. This has caused gold to continue its loss of value relative to equities as illustrated by a plot of the gold-to-S&P 500 ratio, or AUSP:




Since mid-November, the ratio has been in a descending channel with rotation of money away from gold assets into the U.S. stock market with gold losing more than 25% of value relative to equities from the November peak (AUSP=1.2710). April 15 trading broke below the channel to score a low of 0.8768. This morning the AUSP follows the lower channel limit.

Gold has recovered some dollar price but has lost value relative to copper and oil this week; copper has lost value to oil. Gold continues to behave as a commodity but its correlation with these two key commodities is declining. The yellow metal remains positively correlated to copper, oil and silver on both a short-term (1-month>+0.70) and mid-term (3-month >0.7) basis.

The chart below is a week-on-week valuation matrix (Read the chart as “1 unit of A buys X units of B”; for example,”1 ounce of gold buys 447.5 pounds of copper. Percentages are change from last Friday’s closing numbers):


Inline image 2


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 2 & 3)

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 93.60, below the key-100 level and slightly below the 1-month moving average of 93.86. The 2012 high was 103.73 on Nov. 13.


Background Notes:
  1. My gold target price of $1,470 per ounce is below today’s high at $1,487.2 per ounce and strong resistance at $1,500 per ounce
  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 93.60 or 9.8% below the 2012 high of 103.73; 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 447.47 pounds per ounce and above to its 3-month moving average of 451.71 and below its 6-1/2 year trend of 491.93.
  5. The gold-to-silver ratio (GSR) is above its historical norm at 62.650; The GSR is above its 3-month average of 56.58; the 1-month gold-to-silver ratio stability is 3.25%.
  6. Although gold has lost considerable value relative to oil and copper since early November, the long-term uptrend in gold value relative to these global commodities has remained on solid footing (mid-2006 to the present). If this relation gives way, gold could see considerable downside. Also, 1-month gold ratios relative to WTI & Cu have remained quite stable* unlike the early-October 2011 commodity debacle following the U.S. debt downgrade (Ref 2 & 3). There are, however, continued signs that divergent ratios are possible:
    1. Au:WTI -1.29 sigma below 6-1/2 year trend line; Au:Cu -0.71 sigma below trend - I consider > a negative 2-sigma indicative of a potential breakdown
    2. Au:WTI 1-month stability* 3.3%;  Au:Cu 3.3% - I consider ratio stability > 3% to be potentially divergent & worrisome
(* stability defined as the standard deviation of the gold ratio normalized by its mean over 1-month)
Ref 2: The Emperor of Metals Heeds a Warning from Copper (Kitco News, 03/11/2013)
Ref 3: Copper & Gold – Is April the Cruelest Month? (Kitco News, 04/22/2013)
Cheers,

Colonel Possum

Photos by Mariana Titus

Please checkout bayoutales.com for books and book orders


Paintings by Mariana Titus, The Three Anas, are presently 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