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.
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.
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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!
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:
+6-5in.jpg)
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):
+wk.jpg)
Since
last November, gold has experienced bearish value destruction not only in U.S.
dollar terms but value relative to oil and copper:
+nov+09.jpg)
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.
Colonel Possum
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