"The history of Eureka lies in its future." - Lambert Molinelli, 1878


The author/editor of the Eureka Miner owns common shares of local mining stocks, General Moly (GMO) 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


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)


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

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