"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 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

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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