"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, November 1, 2013

Gold & Miners Retreat; What's Up in the Kobeh Valley?


Kobeh Valley, Eureka County, Nevada

*** GENERAL MOLY NEWS ***

General Moly Announces Third Quarter 2013 Results (11/04/2013)

General Moly Announces Implementation of Cost Reduction Program While Actively Pursuing Mt. Hope Financing (9/09/2013)

The latest General Moly briefing on the status of the Mt. Hope molybdenum project (with Webcast): General Moly - John Tumazos Very Independent Independent  Research Conference (10/16/2013)

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:  Copper & Gold – The Long Ride from Lehman Brothers (Part II) (10/28/2013)
Paintings by Mariana Titus, The Three Anas & The Three Moon Anas, are presently at Lafitte Guest House & Gallery, New Orleans

Friday's AM prices used for this morning's analysis: 


COMEX Gold price = $1,314.1/oz (December contract most active)
COMEX Silver = $21.870/oz (December)
COMEX Copper = $3.2995/lb (
December)
NYMEX WTI crude = $95.32/bbl (
December)
ICE Brent crude = $107.22/bbl (December)



Eureka Miner’s Gold Value Index© (GVI) = 85.53 (gold value relative to a basket of commodities that include oil, copper and silver)
Value Adjusted Gold Price© (VAGP) = $1,292.9/oz
COMEX - VAGP = +$30.34/oz; gold is trading at a small premium to key commodities.


General Moly (GMO) = $1.61 down 1.83%
Barrick Gold (ABX) = $18.05 down 6.91%
Newmont Mining (NEM) = $25.94 down 4.88%

Timberline Resource(TLR) = $0.1728 down 0.52%
S&P 500 = 1754.20 down 0.13%




Morning Miners!

Nuts. This week is the evil twin of last week. In our previous report, gold was holding its own with rising stock markets, gaining value relative to copper and oil, and feeling pretty happy to be in mid-$1,300 pasture again. The miners were whistling their way to work too. Our mining bellwether Freeport-McMoRan (FCX) was marking its eleventh consecutive market-day of up-up and away. Gold miners Barrick Gold (ABX) and Newmont Mining (NEM) were riding the wave of higher gold prices and feeling pretty good too.

This morning gold is back in the doldrums in the low-$1,300 hard scrabble and Freeport is scoring its fourth down day in five. Barrick and Newmont are really feeling the pain with both down Friday morning by 5-6% . Gold and oil were the big losers this week although not many in our county will bemoan the latter if it means lower gas prices on the horizon. There are all manner of reasons this has been a tough week for the metals and miners. For one, the U.S. dollar is a lot stronger on a falling euro and new hawkish interpretations of when the Fed may begin pulling back their accommodative monetary policies. China manufacturing (as measured by the PMI)  is stronger than expected which has helped copper prices move up slightly while other commodities fall on the stronger dollar. But China is undergoing a credit crunch and how does that factor into the big picture? My input to the Weekly Kitco Gold Survey (below) and latest Kitco commentary attempt to tie some of these confusing pieces together.

Let's put these cares away for the moment and try to solve a more fun puzzle - you may know the answer!




What's up in the Kobeh Valley?

Timberline Resources (TLR) had an interesting press release Monday about obtaining new claims in Eureka County:

Timberline Amends Property Agreement to Include Additional Claims in Nevada (Press release, 10/28/2013)

Timberline has been fairly active in exploring a 23 square-mile South Eureka land package located on the south end of Nevada's Battle Mountain / Eureka Trend, just four miles from Barrick Gold's Archimedes / Ruby Hill mine. Their flagship project is Lookout Mountain but also includes portions of the old Windfall Canyon mine (dear in the hearts of many Eureka old timers).

The press release mentions that Timberline picked up 104 additional claims "approximately 25 miles northwest of Eureka, Nevada within the productive Battle Mountain-Eureka Gold Trend, and include Carlin-type disseminated gold targets." These are only identified as "WFWKV Claims" so I asked Eric Pastorino to help me with a little head scratching. We believe these may be in the so-called "Afgan-Kobeh" property which the Eureka Miner passed through during this summer's eight part series on Mt. Hope (see sidebar for links). Another possibility are claims just outside this larger property and directly north of the Roberts Creek ranch house. The location of the claims is conjecture so far and I intend to do more research.

Afgan-Kobeh is illustrated on the NV-Gold Corporation (TS_V:NVX) website with this map:


The map may be a little hard to read but the western boundary includes the Henderson (M-108A, aka "Pony Express Trail") turnoff from Roberts Creek Road (M-108) pictured in the above photo. The Roberts Creek ranch house is about 1.5 miles further north on Roberts Creek Road. This is in the northern part of the Kobeh Valley amid the foothills of the Roberts Mountains. Eric figures it's about 5 miles southeast of the Gold Pick Pit of the old Atlas mine (another memorable period of recent Eureka history, late-1980s to early-1990s).



The exploration of these claims from 1980 through 2007 reads like a history of gold mining companies in this area: Amselco, Hecla Mining Company, Santa Fe Mining, Inc., Phelps Dodge Mining Company, Great Basin, Cominco American Inc., White Knight Gold, Inc., and Midway Gold Corp.

Who now exactly owns or leases which claims is still a bit of a mystery to me but this is the lineage described on the NV Gold site:

Westley Explorations Inc. and Castleworth Ventures Inc. also held parts of the property in the past, but did not undertake significant exploration activities. In 2007, Gold Standard Royalty (Nevada) Inc. purchased all of the properties of the LFC Trust, and NV Gold purchased its interests in both the Afgan and the Kobeh properties from Gold Standard in 2010. 

Have a portion of these claims been transitioned to Timberline? The Afgan-Kobeh has 109 unpatented lode mining claims that cover an area of approximately 2,180 acres; the Timberline press release mentions 104. 

One fuzzy fact is the distance from Eureka - the press release mentions 25 miles northwest; the NV Gold site identifies Kobeh-Afgan as being 28 miles northwest; my trip odometer places the Henderson turnoff at 29.2 miles. Of course 2,000+ acres covers a lot of ground so the discrepancy may be in where one places the claims center or even road travel versus "as the crow flies."

[Update 11/05/2013, This report contacted Timberline Resources today and they confirmed the general Afgan-Kobeh area. Their claims are on a long lease arrangement with David Knight. The claims are 25 NW of Eureka as the "as the crow flies". Timberline said they would gladly discuss the claims location detail when there is a future opportunity for the Eureka Miner and Timberline folks to get together. The best of luck to the Timberline team on all their ventures - RB]

This is how the Timberline concludes their Monday release:

Under the amended agreement, the Company now controls a total of 590 mineral claims in Nevada comprised of seven separate properties. As consideration for the inclusion of the additional claims, the amendment to the agreement provides, subject to regulatory approval, for the issuance of 200,000 restricted shares of the Company's common stock.

The ole Colonel isn't getting excited about anything happening out this way soon. With the current gold price and number of projects Timberline is already pursuing, they no doubt have a full plate - the press release is interesting nonetheless. Please do your own research, I presently own some shares of Timberline Resources (TLR) and always remind folks that markets can turn on you faster than a feral cat.

Holler at the ole Colonel if you know anything more and I will continue to do more digging [see above update].

A Journey in Space and Time

In September, we wrapped up an eight-part summer series on Mt. Hope. You can access the series with the links in the column to your right. We'll be back with a second series on Mt. Hope later this year or next. The second  road trip is longer (110 miles) and will include ranches of early settlers, a second portion of the Pony Express Trail and a challenging section of the old Eureka-Palisade Railroad.

Loop # 1 (65 miles) was a fun trip - I hope you enjoyed the Mt. Hope journey in space and time and look forward to the next trip too!

Molybdenum Prices

Spot moly oxide prices remain stabilized above the $9 per pound-level. Here are the latest numbers compliments of moly benchmark miner  Thompson Creek (TC):

Metals Week Weekly Average: US$9.585 as of October 28, 2013 (updated weekly)

Ryan's Notes Average: US$9.60 as of October 29, 2013 (updated twice weekly)

The London Metal Exchange (LME) futures are thankfully above spot prices on the 3-month contract with the 15-month cracking $10 per pound. Remember that this is a thinly traded futures market and contract prices may reflect developments in Europe more than the global spot price averages above.

3-month seller's contract $21,500 per metric ton ($9.752 per pound)

15-month seller's contract $22,195 per metric ton ($10.068 per pound)




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

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

11/01/2013 (10:40 AM CT)

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

A. Down. My target price is $1,300 per ounce.

Q. Why?

Gold and oil were the big losers this week against a strengthening U.S. dollar. The yellow metal not only fell in dollar price but also lost considerable value relative to copper and the S&P 500 which continued to make new highs. The U.S. dollar rallied on a somewhat hawkish FOMC statement as the euro fell on news that euro zone inflation touched 4-year lows at 0.7%. There is an expectation that the ECB, in response to missing their 2% inflation target, will lower interest rates. Copper was the only winner for the week rising 1% from last Friday on slightly better-than-expected China PMI numbers (51.4 Oct. vs. 51.1 Sep.) although an ongoing credit crunch tempered the improved economic data.

As I explain in my latest commentary, Copper & Gold – The Long Ride from Lehman Brothers (Part II), “Absent future price shocks, an extended QE3 will likely be characterized by low volatility with copper and gold prices stabilized within trading ranges. As monetary accommodations fade and inflation expectations return, this trend should reverse again in gold’s favor with the return of sustainable higher prices.” With deflationary pressures surfacing in the U.S. and Europe this reversal may be a long time in coming.

My gold target of $1,300 per ounce suggests that gold will see further downside next week.

For $1,300 per ounce gold we can expect to see silver in a statistically bounded range* of $21.4-$22.2 per ounce; and copper in a range of $3.11-$3.38 per pound. Silver is expected to have a positive bias with respect to a range mean of $21.790 per ounce; copper, a positive bias with respect to a range mean of $3.2464 per pound.

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

The S&P 500 continued to make new records this week as gold slipped against equities falling in value from last week’s close. The relation between the two is illustrated by a plot of the gold-to-S&P 500 ratio, or AUSP:



The ratio had been in a descending channel beginning mid-November as money rotated away from gold assets into the U.S. stock market. This trend bottomed July 5 although a slightly lower low was set on Oct. 16: a loss of 41.6% of value relative to equities from the November peak (AUSP=1.2710). The relation is presently in a sideways channel (dashed lines). Today comes very close to the October low (0.7456 vs. 0.7418) - breaking the lower boundary of this channel would be very bearish for gold; breaking out of the channel to the upside would improve gold’s price outlook considerably.

This week, Comex gold is down 2.8% for the week and 8.4% below August’s high ($1,434.0). The yellow metal lost significant value relative to copper and slightly to oil; oil lost value to copper. The chart below is a week-over-week valuation matrix. The first row is the current commodity price in the given currency. For all other rows, read “1 unit of row A buys X units of column B”; for example, “1 ounce of gold buys 398.3 pounds of copper.” Percentages are deltas over one week.



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




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 85.53, below the key-100 level but above 1-month moving average of 84.40. The 2012 high was 103.73 on Nov. 13. The value adjusted price of gold is $1,283.8 or a $30.34 discount to actual gold price (i.e. gold is trading at a small premium to key commodities).

Cheers,

Colonel Possum

Photos by Mariana Titus

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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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