"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, July 26, 2013

Mt. Hope - A Journey in Space and Time (Part II, From Supernovae to Earthly Minerals)


Reflections in the Paleozoic, Eureka, Nevada

*** GENERAL MOLY NEWS ***

General Moly Announces Results of Annual Meeting (6/14/2013)
Mt. Hope construction continues despite financial issues (by Marianne Kobak McKown, Elko Daily Free Press, 5/31/2013)
General Moly Provides Finance Update (5/15/2013)
General Moly Quarterly Report (Released 5/3/2013)

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 & $1,100 Gold - The Seven Year Itch (07/22/2013)

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 = $1,324.1/oz (August contract most active)

COMEX Silver = $19.935/oz (September)
COMEX Copper = $3.1110/lb (September)
NYMEX WTI crude = $105.01 (September)
ICE Brent crude = $107.13/bbl (September)


Eureka Miner’s Gold Value Index© (GVI) = 88.97 (gold value is trading at a discount to oil and near fair value relative to copper)
Value Adjusted Gold Price© (VAGP) = $1,243.5/oz
COMEX - VAGP = $80.6/oz; gold is trading at a declining premium to key commodities.


General Moly (GMO) = $1.94 down 2.02%
Barrick Gold (ABX) = $17.47 down 0.23%
Newmont Mining (NEM) = $29.55 down 1.27%


Morning Miners!

Gold has had a good week above the $1,300-level but has retreated some today, down $4.7 to $1,324.1 per ounce. Please checkout my input to the weekly Kitco News Gold Survey (below) and most recent Kitco News commentary for my latest thoughts, Oil, Copper & $1,100 Gold - The Seven Year Itch.

This morning we continue our summer story about Mt. Hope...

Mt. Hope - A Journey in Space and Time (Part II, From Supernovae to Earthly Minerals)

A multi-part series that circumnavigates the Mt. Hope molybdenum mine site on Eureka County back roads and highways.  Starting with the creation of molybdenum in the early universe, this journey will cover the geology of the area as well as its colorful history. There will be two trips, Loop#1 and #2, which include ranches of early settlers, a portion of the Pony Express Trail, a challenging section of the old Eureka-Palisade Railroad and a mine site tour. If you'd like to visit Mt. Hope, please make arrangements beforehand with Zach Spencer, General Moly's Director of Media Relations. Like any mine site, there are both security and safety concerns at Mt. Hope, but Zach and the Mt. Hope team do everything possible to accommodate public interest in their project. You can contact Zach by e-mail: zspencer@generalmoly.com


From Supernovae to Earthly Minerals

Since traveling the Mt. Hope loops is a journey through time as well as interesting places, we began our story last week by describing how molybdenum and other elements heavier than iron were formed and distributed throughout the universe by massive stellar explosions called supernovae.

Some four billion years ago all this cosmic gas and metallic shrapnel came together to form our planet earth. The swirling heated mixture cooled and over time metals like molybdenum were distributed unevenly about the earth's crust for reasons we'll examine later. Northern Nevada has the great fortune to have inherited more than her fair share of these minerals as geologists like to call metals and other inorganic substances found in their earthly state.


For example, Mt. Hope will be mined for molybdenite which is a mineral of molybdenum disulfide comprised of molybdenum in combination with sulfur. Minerals are characterized, in part, by atomic structure - in this case a sheet of molybdenum atoms sandwiched between sheets of sulfur atoms. The moly-sulfur bonds are strong, but the interaction between the sulfur atoms at the top and bottom of separate layers is weak, resulting in easy slippage. This gives molybdenite a lubricating quality as a consequence of its layered structure (if you’re a gearhead, think of that the next your hands are black with moly grease!).


Although useful in lubricants, molybdenum is used primarily as an alloy agent in steel manufacturing.  When added to steel, moly enhances steel strength, resistance to corrosion, and extreme temperature performance. Our gearhead friend with the blackened hands will tell you that 4130 chrome moly tubing has been used in dragsters for decades where maximum strength at minimum weight is key. Within the chemical industry, moly also has an important role in the petroleum refining process, acting as a cracking agent to remove sulfur from liquid fuels - again, the affinity of moly for sulfur.



The process that brought many minerals of economic interest to the surface in Northern Nevada occurred in two major steps: mountain building in the Paleozoic era (hundreds of millions of years ago) followed by faulting and volcanism during the more recent Miocene (tens of millions of years ago) creating features like the Northern Nevada Rift (NNR).

Located on the eastern border the NNR, Mt. Hope became an amazing warehouse of rare stellar gifts brought to earth’s surface by our planet’s most powerful physical processes. It is an ageless museum of exotic minerals which include not only vast deposits of molybdenum but possibly even rhenium, one of the rarest elements on our planet - even more rare than gold. Nickel-based superalloys of rhenium are used in the combustion chambers, turbine blades, and exhaust nozzles of jet engines.


Molybdenum and valuable by-products like rhenium have critical and strategic applications whose production will enhance the future economic diversity of Eureka County. General Moly estimates that Mt. Hope will have a 44-year mine life - that's a lot of stardust to process, pardner!

We’ll dig deeper into the geology that supported molybdenum’s concentration at Mt. Hope as we travel around the mountain’s base on our two different loops. Let’s do a little trip prep first.

The Atlas of Eureka County

The ole Colonel is big on maps. Google Maps is terrific for trip planning and we’ll use the satellite imagery in a later episode to locate the old Eureka-Railroad Railroad rail bed at Garden Pass. Google Earth will allow you to fly in 3-D around Mt. Hope and follow the roads of both Loop #1 and Loop#2.

As cool as Google is, there is no substitute for a good paper map in the back country of northern Nevada where cellphone and internet access are spotty or nonexistent. If you've ever had to hike out after high-centering your 4WD in spring mud, you can testify to the value of a paper map - especially if you’re in unfamiliar territory.

Fortunately, a quick trip to the historic Eureka Courthouse will fix you up. In 2004, Eureka County commissioned an extensive aerial survey of the county to enhance the data developed by their GIS Department. The resulting maps are part of the “Atlas of Eureka County” on sale for $25 at the County Assessor’s office (door to the left of the main entrance on Main Street). The Atlas is a compendium of detailed relief maps showing main routes, county roads (and numbers), non-county roads and more than a few cow trails. Importantly, it identifies all of the historic sites that will be visited during this summer series. Start packing, we’ll start Mt. Hope Loop #1 bright n’ early next Friday.

Molybdenum Prices

Spot moly oxide prices have fallen far deeper into the $9 per pound-level. Here are the latest numbers compliments of moly benchmark miner  Thompson Creek (TC):

Metals Week Weekly Average: US$9.25 as of July 22, 2013 (updated weekly)

Ryan's Notes Average: US$9.15 as of July 23, 2013 (updated twice weekly)

The London Metal Exchange (LME) futures contracts have thankfully returned above spot prices 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 $20,500 per metric ton ($9.29 per pound)

15-month seller's contract $21,200 per metric ton ($9.62 per pound)

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

Here is my weekly input to the weekly Kitco Gold Survey:

07/26/2013 (10:28 AM CT)

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

A. Up. My target price is $1,334 per ounce; the 50% retracement from June’s low to May’s high.

Q. Why?

A. Gold had another good week buoyed a weaker US dollar and rumors about dovish candidates for Chairman Bernanke’s replacement next year. News today that Russia and some emerging market central banks had bought gold in June was also supportive. Although gold has pulled back some this morning, the yellow metal rose in U.S. dollar terms and gained value relative to both copper and oil (see table below). However, until the relation of gold and U.S. equities changes, I continue to be bearish on the near term prospects of the yellow metal although the onset of the summer doldrums will likely preclude any serious price declines. The longer term prospects remain positive.

The S&P 500 made a new all-time record Monday but is likely to close down for the week. Comex gold has recovered over $115 per ounce from its July 5 low. The relation between the two is illustrated by a plot of the gold-to-S&P 500 ratio, or AUSP:


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 38% of value relative to equities from the November peak (AUSP=1.2710). Although gold has made some progress relative to the S&P 500 since the July low, the channel remains intact. Gold will likely make the target 50% retracement point next week at $1,334 per ounce but fail to break solid resistance at $1,350.

For $1,334 per ounce gold we can expect to see silver in a statistically bounded range* of $19.5-$20.7 per ounce; and copper in a range of $3.08-$3.35 per pound. Silver is expected to have a neutral bias with respect to a range mean of $20.135 per ounce; copper, a negative bias with respect to a mean of $3.2141 per pound.

(* +/- 2-standard deviations, 1-month basis)

This week, gold has gained dollar price and value relative to oil and copper; oil has lost value relative to copper. The chart below is a week-over-week valuation matrix (Read the chart as “1 unit of row A buys X units of column B”; for example,”1 ounce of gold buys 425.6 pounds of copper. Percentages are change from last Friday’s closing numbers):



Since last November, gold has experienced bearish value destruction not only in U.S. dollar terms but value relative to oil and copper. Recently, gold has regained some of its value lost to the red metal:



There is a danger that gold may re-enter $1,100 territory as explained in my July 22 Kitco commentary. Although I remain long-term bullish on gold:

Gold will test June's low ($1,179.4) before breaking May's high ($1,488.5).


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 88.97, below the key-100 level but above the 1-month moving average of 86.25. The 2012 high was 103.73 on Nov. 13. 

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, July 19, 2013

Mt. Hope - A Journey in Space and Time (Part I, The Very Beginning)


Mt. Hope Loop #1, Eureka, Nevada

*** GENERAL MOLY NEWS ***

General Moly Announces Results of Annual Meeting (6/14/2013)
Mt. Hope construction continues despite financial issues (by Marianne Kobak McKown, Elko Daily Free Press, 5/31/2013)
General Moly Provides Finance Update (5/15/2013)
General Moly Quarterly Report (Released 5/3/2013)

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 & $1,100 Gold - The Seven Year Itch (07/22/2013)

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 = $1,291.4/oz (August contract most active)

COMEX Silver = $19.420/oz (September)
COMEX Copper = $3.1335/lb (September)
NYMEX WTI crude = $107.98 (September)
ICE Brent crude = $108.77/bbl (September)


Eureka Miner’s Gold Value Index© (GVI) = 86.94 (gold value is trading at a discount to oil and near fair value relative to copper)
Value Adjusted Gold Price© (VAGP) = $1,241.1/oz
COMEX - VAGP = $50.3/oz; gold is trading at a declining premium to key commodities.


General Moly (GMO) = $1.92 down 1.54%
Barrick Gold (ABX) = $16.28 up 3.43%
Newmont Mining (NEM) = $28.81 up 2.67%



Morning Miners!

Gold has had a pretty good week but fell short of breaking the $1,300 per ounce-level. Gold miners are also seeing a few rays of light after brutal fall down the mine shaft this spring. Please checkout my input to the weekly Kitco News Gold Survey (below) and most recent Kitco News commentary for my latest thoughts.

This morning we kick off the first part in our summer story about Mt. Hope...

Mt. Hope - A Journey in Space and Time (Part I, The Very Beginning)

A multi-part series that circumnavigates the Mt. Hope molybdenum mine site on Eureka County back roads and highways.  Starting with the creation of molybdenum in the early universe, this journey will cover the geology of the area as well as its colorful history. There will be two trips, Loop#1 and #2, which include ranches of early settlers, a portion of the Pony Express Trail, a challenging section of the old Eureka-Palisade Railroad and a mine site tour. If you'd like to visit Mt. Hope, please make arrangements beforehand with Zach Spencer, General Moly's Director of Media Relations. Like any mine site, there are both security and safety concerns at Mt. Hope, but Zach and the Mt. Hope team do everything possible to accommodate public interest in their project. You can contact Zach by e-mail: zspencer@generalmoly.com


The Very Beginning

How did molybdenum make its way to Mt. Hope? It is a very long, long, long story that starts with a bang followed by a series of violent stellar explosions, a massive tectonic collision, volcanic eruptions and a widening rift that runs across Northern Nevada like a big scar on earth’s crusty face. That’s enough drama to qualify Miss Moly for a reality T.V. series! By the way, she didn't come alone; the minerals of economic interest in these parts, like gold, silver and copper, share similar rough n’ tumble life stories as we’ll discover in a moment – all in the family of elements heavier than iron.

A good sci-fi thriller starts our journey…


Our story begins about 14.8 billion years ago and don’t be late for the first episode – the really good part happens in the slightest fraction of a second. At the beginning of the show there is a Big Bang and the early universe inflates from a very dense core with quark–gluon plasma and lots of elementary particles with funny names. I’ll leave the physics explanation to smart folks like Dr. Stephen Hawkins at the University of Cambridge. He has written a wonderful collection of books on the subject which include A Brief History of Time (1988) and The Universe in a Nutshell (2001).

The Big Bang Theory, not to be confused with the popular sitcom by the same name, next tells of an epic battle between quarks and leptons versus anti-quarks and anti-leptons; the former win by an edge and that victory explains why there is more matter than antimatter in the present universe (if you ever worried about such things on late night moonless road trips).

The giant singles party

The next phase in the Big Bang is a little more down to earth although that expression will be meaningless for quite a few more billions of years to come. A very energetic young universe begins to cool down and quarks and gluons combine to form more garden variety protons and neutrons as the story clock reads one-millionth of a second. At about 1 second, electrons and positrons appear on stage and a few minutes later, neutrons bond with protons to form helium nuclei.  Lone protons (hydrogen nuclei), helium nuclei and electrons then all go to a giant singles party lit up by photons. Eventually, the lone nuclei meet electrons and join their partners of opposite electric charge to make the first atoms, mostly hydrogen and some helium – by weight, a ratio of about three to one. The clock now reads 379,000 years. There is a lot of debris left over from this shindig including radiation, elementary particles and antimatter in the dark recesses of a rapidly expanding dance floor.


Fatal attraction

After the Big Bang, unevenly distributed hydrogen and helium atoms throughout space begin to “clump” under the influence of gravity. These clumps will eventually form galaxies and stars. The short story is that the internal processes by which a star shines also create higher mass elements within the star over time. Upon the death of a star, marked by a giant explosion called a nova or supernova, even more massive elements are formed in a much shorter period. All these pieces are thrown into space to eventually combine again into more stars and celestial bodies including our planet earth.

Digging a little deeper in the stellar closet, it is handy to have a scorecard to keep track of unfolding events. The atomic number tells us how many protons are in the nucleus of an atom and is a helpful way to order the mass of elements; the bigger the atomic number the heavier the element. The Big Bang gets us up to atomic number two: hydrogen, one and helium, two - the lightest elements in the universe. Popular minerals to mine in Northern Nevada contain elements with much higher atomic numbers.

Having an atomic number of 79, gold is quit massive followed by silver at 47, molybdenum at 42 and copper at 29.  In the 1940s and 50s, uranium mining was the vogue in the Silver State tipping the atomic scale at 92. In the early days of Eureka mining, lead was as popular as silver scoring a hefty 82. With increasing demand for such things as high tech batteries, operations are starting up 60 miles north of Winnemucca by Western Lithium to mine the mineral hectorite for the lightest metal lithium with an atomic number of three. Another element with high tech applications is vanadium which falls just below iron at 23. Vanadium pentoxide will be the ore extracted by American Vanadium from the Gibellini mine in the southeast corner of Eureka County. Vanadium is a steel strengthener like molybdenum and has a bright future in energy storage devices for power grids.

Here’s the key - elements up to iron with an atomic number of 26 generally come from the normal slow pace evolution of stars; the higher the initial star mass, the higher the potential to create heavier elements over time. To make the really heavy players like Miss Moly, you need some super-duper stellar violence over a very short period of time. Who says physics and chemistry are boring?

Inside a star

A star produces temperatures and densities in its core high enough to sustain nuclear fusion; the same process that makes the H-bomb go boom. Essentially conditions are such that electrons are stripped away from their nuclei allowing the nuclei to react with each other and “fuse” together. Enormous amounts of energy are released during fusion causing, among other things, the star to shine. Normally, the outward pressure of this reaction is balanced by gravity so unlike the H-bomb, the star maintains a stable size and its mass contents are not blown into space.



Hydrogen atoms fuse together and produce helium in youthful stars like our sun. Over time, the heavier helium accumulates at the core and pressures and temperatures increase to a point where helium fusion begins. This results in the formation of carbon, additional energy release and an increase in the size of the star. Like the prior phase, the heavier carbon is pulled to the center and pressure and temperatures increase until carbon fusion is possible producing neon.  At each step the star grows bigger and bigger and successively heavier elements are created as shown in the illustration below:



Like a Biblical tale of lineage, neon then begets oxygen, oxygen begets silicon and silicon begets iron. At this stage the star has grown to a massive red supergiant joining the biggest stars in the universe. When our sun grows this old and big, Venus and Mercury have been vaporized and humans will need more than sunscreen to go to the beach – what beach? Yikes, this is the end my friend...

Ka-boom

It turns out that a fusion product of the last iteration is a very stable isotope of iron called Fe-56. Isotopes are atoms with extra neutrons stuck on their nuclei. In a regular atom the number of protons and neutrons are equal so for iron, with an atomic number of 26, you have 52 protons and neutrons. Fe-56, by far the most common form of iron found on earth, carries 4 extra neutrons and is such a steady-eddy that it causes a decrease in the internal pressure of the star upsetting its delicate equilibrium with gravity.

This is the point where things go really haywire and the iron core of the supergiant suddenly collapses into an energetic ball of protons, neutrons and alpha particles. Further compression ends with a violent rebound as a recoiling core collides with the collapsing outermost layers of the star. Two things happen that cause the rapid formation of heavier elements; temperatures skyrocket and a high concentration of neutrons from the core are captured by surrounding nuclei. These captured neutrons decay to a proton and electron plus a strange particle called a neutrino – each captured neutron bumps the atomic number up by one and we get a heavier element. The process repeats over and over and large atoms like Miss Moly are born -Voila!

Supernova

The extent of atom building depends on the initial mass of the star; the really big ones can make it all the way up to silicon fusion which creates iron. Collapse of the iron core leads to a stellar explosion called a supernova creating heavier elements than iron in a very short period of time. The supernova spews radiation and the contents of the star throughout the universe and supplies the basic building blocks for new stars and celestial bodies like our earth. To create molybdenum and elements with higher atomic numbers, we need a big whopper Type II supernova of old stars up to 40 to 50 times the present mass of our sun. Miss Moly certainly did have a rough childhood and her journey to Mt. Hope has only just begun. 

Molybdenum Prices

Spot moly oxide prices have fallen far 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$9.669 as of July 15, 2013 (updated weekly)

Ryan's Notes Average: US$9.55 as of July 9, 2013 (updated twice weekly)

The London Metal Exchange (LME) futures contracts are ominously below spot prices 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 $21,000 per metric ton ($9.526 per pound)

15-month seller's contract $21,720 per metric ton ($9.852 per pound)

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

Here is my weekly input to the weekly Kitco Gold Survey:

07/19/2013 (10:36 AM CT)

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

A. Down, $1,285 per ounce target.

Q. Why?

A. Gold had a good week buoyed by falling treasury rates and a weaker US dollar. The yellow metal rose in U.S. dollar terms, gained value relative to copper and lost some ground to oil (see table below). However, until the relation of gold and U.S. equities changes, I continue to be bearish on the near term prospects of the yellow metal even though there may be short covering rallies if prices raise much above the $1,300-level. The longer term prospects remain positive.

The S&P 500 made all-time highs yesterday and gold has recovered over $80 from its July 5 low. The relation between the two is illustrated by a plot of the gold-to-S&P 500 ratio, or AUSP:



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 40% of value relative to equities from the November peak (AUSP=1.2710). As equities continue to make new records, the channel remains intact. Gold will likely stay range bound in $1,200 territory for the time being as treasury rates stabilize. My target price of $1,285 is based on today’s AUSP and an expectation that the S&P 500 will pull back to $1,675 next week.

For $1,285 per ounce gold we can expect to see silver in a statistically bounded range* of $19.2-$20.4 per ounce; and copper in a range of $2.85-$3.19 per pound. Silver is expected to have a neutral bias with respect to a range mean of $19.817 per ounce; copper, a positive bias with respect to a mean of $3.0188 per pound.

(* +/- 2-standard deviations, 1-month basis)

This week, gold has gained dollar price and value relative to copper losing some value to oil; oil has gained value relative to copper. The chart below is a week-over-week valuation matrix (Read the chart as “1 unit of row A buys X units of column B”; for example,”1 ounce of gold buys 412.1 pounds of copper. Percentages are change from last Friday’s closing numbers):


Since last November, gold has experienced bearish value destruction not only in U.S. dollar terms but value relative to oil and copper:


There is a danger that gold may re-enter $1,100 territory as explained in my July 9 Kitco commentary.

Fundamental premise:
“Comex gold price falling below April’s low will be the first step to reaching price equilibrium in the $1,200 range. After that point, gold may very well enter a period where it trades again at a discount to key commodities. This would repeat the reaction of the yellow metal during QE2 for the current round of Federal Reserve monetary easing, QE3.” (June 11, 2013)


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 86.94, below the key-100 level but slightly above the 1-month moving average of 6.73. The 2012 high was 103.73 on Nov. 13. 


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, July 12, 2013

A NEW SERIES "Mt. Hope - A Journey in Space and Time"; The Colonel's Metal Prices for Next Week

Mile Zero of Mt. Hope Loop #1, Eureka, Nevada

*** GENERAL MOLY NEWS ***

General Moly Announces Results of Annual Meeting (6/14/2013)
Mt. Hope construction continues despite financial issues (by Marianne Kobak McKown, Elko Daily Free Press, 5/31/2013)
General Moly Provides Finance Update (5/15/2013)
General Moly Quarterly Report (Released 5/3/2013)

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:  $1,100 Goldilocks and the Three Bears (07/09/2013)

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 = $1,278.1/oz (August contract most active)

COMEX Silver = $19.830/oz (September)
COMEX Copper = $3.1550/lb (September)
NYMEX WTI crude = $105.30 (August)
ICE Brent crude = $107.53/bbl (September)


Eureka Miner’s Gold Value Index© (GVI) = 85.60 (gold value is trading at a discount to oil and near fair value relative to copper)
Value Adjusted Gold Price© (VAGP) = $1,248.2/oz
COMEX - VAGP = $30.5/oz; gold is trading at a declining premium to key commodities.


General Moly (GMO) = $1.90 down 4.04%
Barrick Gold (ABX) = $15.01 down 1.38%
Newmont Mining (NEM) = $27.41 down 2.52%


Morning Miners!

It's good to be back. The Eureka Miner took a brief hiatus initiated by technical problems with the blogsite (unusual for Google-based products!) followed by some personal travel - thank you for your patience. There have been some wild rides for the metals while I was away, please checkout my input to the weekly Kitco News Gold Survey (below) and most recent Kitco News commentary for my latest thoughts.

Mt. Hope - A Journey in Space and Time

The Colonel is happy to announce a new multi-part series, "Mt. Hope - A Journey in Space and Time," the first installment will commence next Friday.

For those new to the Eureka Miner, Mt. Hope is one of the world's largest deposits of molybdenum 22 miles north of Eureka, Nevada, and is presently awaiting mine construction by General Moly (GMO). All the permits have been obtained and pre-construction activities are underway. A $665 million loan suspension in March has delayed full construction activities and the GMO management team is presently working very hard to find financing alternatives; a subject  of this report and the Elko Daily Free Press for many weeks (please see links below today's headline photo).

While we await resolution of the financial issue, the ole Colonel thought it would be fun to circumnavigate the mine site on Eureka County back roads and highways to appreciate some of the geology of the area as well as its colorful history which includes ranches of early settlers, a portion of the Pony Express Trail, a challenging section of the old Eureka-Palisade Railroad and a mine site tour. There will be two different routes starting from Main St. Eureka with mileage markers at points of interest :

Mt. Hope Loop #1: A 65 mile day trip that departs Highway 50 at the Roberts Creek turnoff. 26 miles are on well-graded roads that take the traveler around the base of Mt. Hope to eventually join HWY 278 for a return to Eureka. This loop includes a tour of the General Moly mine site.

Mt. Hope Loop #2: A longer 110 mile day trip leaving Highway 50 at Three Bars Road with 50 miles of graded roads that pass many of the historic Damele family ranches. This route also joins HWY 278 a little further north at the Alpha turnoff. Background material for this tour was graciously provided by Eureka County Public Works Director Ron Damele and his mother, Arlene Damele.

For this time of year, 4-WD is not required but the standard precautions should be taken when traveling in the back country of Northern Nevada - lots of water, a sleeping bag and a good map are at the top of my list and don't forget some treats for your 4-legged friend.

Both loops will take you past the entrance to the Mt. Hope mine. If you are thinking of stopping there, please make arrangements beforehand with Zach Spencer, General Moly's Director of Media Relations. Like any mine site, there are both security and safety concerns at Mt. Hope, but Zach and the Mt. Hope team do everything possible to accommodate public interest in their project. You can contact Zach by e-mail:

zspencer@generalmoly.com

Molybdenum Prices

Spot moly oxide prices have fallen far 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$10.074 as of July 8, 2013 (updated weekly)

Ryan's Notes Average: US$9.98 as of July 9, 2013 (updated twice weekly)

The London Metal Exchange (LME) futures contracts are just above spot prices 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 $22,000 per metric ton ($9.98 per pound)

15-month seller's contract $25,200 per metric ton ($10.31 per pound)

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

Here is my weekly input to the weekly Kitco Gold Survey:
07/12/2013 (10:36 AM CT)

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

A. Down, $1,250 per ounce target.

Q. Why?

A. Gold had a very positive week buoyed by dovish comments by Federal Reserve Chairman Ben Bernanke and a pickup in physical buying. The yellow metal enjoyed not only a rise in U.S. dollar terms but value relative to key commodities oil and copper (see table below). However, until the relation of gold and U.S. equities changes, I continue to be bearish on the near term prospects of the yellow metal. The longer term prospects remain positive.

The S&P 500 made all-time highs yesterday and gold has recovered over $70 from its July 5 low. The relation between the two is illustrated by a plot of the gold-to-S&P 500 ratio, or AUSP:



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 40% of value relative to equities from the November peak (AUSP=1.2710). As equities soar to new records, the channel is still intact. Gold will remain range bound in $1,200 territory for the time as some of the stimulus glow fades and Indian government curbs on gold consumption inhibit robust physical buying. My target price of $1,250 is the geometric mean of July’s highs and lows ($1,297.2 and $1,214.4 per ounce respectively).

For $1,250 per ounce gold we can expect to see silver in a statistically bounded range* of $18.9-$20.1 per ounce; and copper in a range of $2.77-$3.23 per pound. Silver is expected to have a neutral bias with respect a range mean of $19.519 per ounce; copper, a positive bias with respect to a mean of $2.9996 per pound.

(* +/- 2-standard deviations, 1-month basis)

This week, gold gained dollar price and value relative to oil and copper; oil has lost value relative to copper. The chart below is a week-on-week valuation matrix (Read the chart as “1 unit of row A buys X units of column B”; for example,”1 ounce of gold buys 405.3 pounds of copper. Percentages are change from last Friday’s closing numbers):


Since last November, gold has experienced bearish value destruction not only in U.S. dollar terms but value relative to oil and copper:



There is a danger that gold may re-enter $1,100 territory as explained in my July 9 Kitco commentary.

Fundamental premise:

“Comex gold price falling below April’s low will be the first step to reaching price equilibrium in the $1,200 range. After that point, gold may very well enter a period where it trades again at a discount to key commodities. This would repeat the reaction of the yellow metal during QE2 for the current round of Federal Reserve monetary easing, QE3.” (June 11, 2013)

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 85.60, below the key-100 level and below the 1-month moving average of 87.72. The 2012 high was 103.73 on Nov. 13.

Cheers,

Colonel Possum

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