"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, April 25, 2014

Gold Bet on Ukraine & Akshaya Tritiya; Midway Contracts; Moly Up, Liu Down

Rolling Memories, Eureka, Nevada

*** Local Mining News ***


MIDWAY FORECASTS CAPITAL REDUCTIONS PAN PROJECT (Press Release, April 24, 2014)

The Liu Han trial:

Xinhua Insight: China ends first trials of tycoon-led gang (China English News, 2014-04-19 21:28:36)

Alleged mafia leader denies all charges (Ecns.cn 2014-04-18 09:03Xinhua)

Hanlong founder Liu Han denies murder of rivals in China (SCOTT MURDOCH, THE AUSTRALIAN APRIL 18, 2014 6:23PM)

A background column was posted in the Wall Street Journal April 14th by James Areddy:

Mining Tycoon's Trial Reverberates in Central China (By JAMES T. AREDDY, April 14, 2014 11:16 a.m. ET)

Several folks in Eureka including this report were interviewed by Mr. Areddy for his 2012 column about Mt. Hope and Liu Han, In Nevada, a Chinese King of the Hill.  Defendant Liu Han and his Hanlong Group had agreed to finance a large portion of the Mt. Hope Molybdenum Project.

General Moly: 3 Different Insiders Have Purchased Shares This Month (Markus Aarnio, Seeking Alpha, 4/17/2014)


The Liberty Starter Pit Project (Press release, 4/8/2014)

Latest Nevada Gas Prices (click this link)

My latest Kitco commentary:

Gold's Wild Ride - Up and Away? (Kitco News, Apr. 14, 2014)

My latest column in the Mining Quarterly:

Major McCoy and the Rebellious Ores of Eureka (p. 83-87 online, MQ Spring Edition 2014)


Or in the Elko Daily Free Press: Major McCoy and the rebellious ores of Eureka: How one man helped a small Nevada mining town boom (March 18)

Paintings by Mariana Titus, The Three Anas & The Three Moon Anas, are presently at Lafitte Guest House & Gallery, New Orleans




Mariana's fine art prints are featured in Fine Art AmericaMariana Titus

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

COMEX Gold price = $1,299.8/oz (June contract most active)
COMEX Silver = $19.735/oz (May)
COMEX Copper = $3.1175/lb (
May)



NYMEX WTI crude = $100.68/bbl (May)
ICE Brent crude = $109.86/bbl (June)



Eureka Miner’s Gold Value Index© (GVI) = 88.47 (gold value relative to a basket of commodities that include oil, copper and silver; 100 is a high gold value)
Value Adjusted Gold Price© (VAGP) = $1,227.6/oz
COMEX - VAGP = +72.22/oz; gold is trading at a premium to key commodities (bullish implication - "bottom is in for gold")


As of 9:27AM PDT (percentages are from yesterday's closing prices; parentheses are a comparison to last Friday's morning price):


Barrick Gold (ABX) = $17.57 up 0.57% (Last Friday AM $18.11)
Newmont Mining (NEM) = $26.09 up 2.35% ($23.74)
Midway Gold (MDW) = $0.8551 down 0.57% ($0.88)
General Moly (GMO) = $1.13 down 3.42% ($1.0996)
Timberline Resources (TLR) = $0.1615 up 3.86% ($0.155  )
S&P 500 = 1,867.88 down 0.57% (1,863.66)



Morning Miners!

Gold got a late-week bounce above $1,300 per ounce - will it last?

Gold price has been a slowly leaking tire since mid-March saved by bursts of pressure from escalating but sporadic tensions in the Ukraine. Physical demand form the world’s largest consumers is a mixed picture given tightening supply and rising premiums in India offset by a yuan at year-to-date highs dampening desire for the yellow metal in China [i.e. USD/CNY up => U.S. dollar strong]. In the U.S. gold has stabilized in a sideways but nonetheless bearish relation with equities. The upcoming Akshaya Tritiya festival in India and unresolved border tensions in the eastern Ukraine will likely provide enough air to keep gold inflated above the mid-point of its current trading range. Assuming a challenge of the April 16 $1,307 range high will stall; my gold target is $1,305 per ounce... (input to the weekly Kitco Gold Survey, see full report below).

Since I did my early morning analysis, Comex gold remains at about the same level, $1,299.4 per ounce and 0.4% above last Friday's close - still trapped between April Fool's $1,277.4 low and St. Paddy's $1,392.2 high. The brightest glimmer for physical demand is Akshaya Tritiya starting May 2, India's second-biggest gold buying festival. Gold premiums in India, the world's second largest consumer after China, jumped to their highest level in more than two-and-a-half months due to short supplies.



Midway Contracts

Midway Gold announced a new plan to use contract mining for its initial phase:

MIDWAY FORECASTS CAPITAL REDUCTIONS PAN PROJECT (Press Release, April 24, 2014)

CEO and President Ken Brunk says:

We are excited by our progress at Pan. Our team has worked diligently during the last few months to advance our first project through construction while also finding ways to cut our costs. We believe we can significantly reduce our borrowing needs by employing two significant scope changes to the project—the utilization of a contract miner for early years of mining,and leaching the South Pan ore body by run-of-mine methods thereby deferring the purchase and installation of a crusher plant. We are also fortunate to have had our construction contracts that have been let to date come in at or very close to our feasibility estimates. With these recent reductions in initial capital requirements and our current strong cash balance, we look forward to completing project financing within the coming weeks. We are pleased that the third party engineers that have evaluated the project on behalf of potential lenders have found no “fatal flaws” in any of these approaches or with the project.

Best of luck to the Midway team!

Moly Up, Liu Down

Moly prices are up, courting the $13-level which sure beats the sub-$10 per pound levels that haunted us for months. Metals Week has $13.00 for the monthly average (spot price as of 4/17) and the London Metals Exchange futures show $13.04 for the 3-month seller and  $13.36 for 15-months down the road (LME prices as of 4/24).

This and insider buying reported last week have moved moved General Moly (GMO) share price northward:

General Moly: 3 Different Insiders Have Purchased Shares This Month (Markus Aarnio, Seeking Alpha, 4/17/2014)

GMO is presently trading at $1.13 per share, up 38% from its April 7 low of $0.82.

The General Moly management team continues to pursue alternate financing for Mt. Hope after the collapse of the Hanlong Group loan last year. Hanlong founder Liu Han's trial has concluded as reported in the links below today's headline photo and this report's BREAKING NEWS SPECIAL last Saturday.

Please do your own research - markets can turn on you faster than a feral cat.

Best of luck to the General Moly team!

Kitco Gold Survey

Here is my input to the Weekly Kitco Gold Survey:

04/25/2014 (10:07 AM CDT)

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

A. Up. My target price is $1,305 per ounce.

Q. Why?

Gold price has been a slowly leaking tire since mid-March saved by bursts of pressure from escalating but sporadic tensions in the Ukraine. Physical demand form the world’s largest consumers is a mixed picture given tightening supply and rising premiums in India offset by a yuan at year-to-date highs dampening desire for the yellow metal in China. In the U.S. gold has stabilized in a sideways but nonetheless bearish relation with equities. The upcoming Akshaya Tritiya festival in India and unresolved border tensions in the eastern Ukraine will likely provide enough air to keep gold inflated above the mid-point of its current trading range.

Assuming a challenge of the April 16 $1,307 range high will stall; my gold target is $1,305 per ounce:

For $1,305 per ounce gold we can expect to see silver in a statistically bounded range* of $19.5-$20.2 per ounce. Silver is expected to have a neutral bias with respect to a range mean of $19.871 per ounce. Volatility in the gold-to-copper ratio has subsided considerably. Future copper price is thereby in a narrower statistical range* of $2.96-$3.15 per ounce. Copper is expected to have a positive bias with respect to a range mean of $3.0534 per pound.

(* +/- 2-standard deviations, 1-month basis: prices that fall outside this range likely signal a market-changing event. Bias from mean infers expected market direction from a 1-month gold ratio average)

The S&P 500 at 1,868.86 is up just 0.2% for the week in morning trading retreating from Tuesday highs that nearly breached 1,885. Comex gold is up 0.5% for the week gaining slightly more than 0.2% in value to the S&P at $1,299.8 per ounce. The relation between the two is illustrated by a plot of the gold-to-S&P 500 ratio, or AUSP:



The ratio slid into a descending channel mid-November 2012 as money rotated away from gold assets into the U.S. stock market. This trend transitioned to a sideways channel July 5, 2013 (dashed blue lines, AUSP=0.7431). The AUSP then broke decisively below the lower boundary for a second leg of descent (dashed red lines). This channel was bullishly broken to the upside in late-January and rising above the lower boundary of the sideways channel (blue dashed line) However, this advance has now bearishly retreated below the lower boundary into what appears a second sideways channel bearishly lower than the first. This morning’s gold price represents a loss of 45.0% of value relative to the November peak (AUSP=1.2710).

The yellow metal gained significant value to oil but lost to copper; oil fell nearly 6% to the red metal. 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 416.9 pounds of copper.” Percentages are deltas over one week.



On Jan. 14, I changed sides from bear to bull on gold price as explained in my Kitco commentaries: From Gold Bear to Gold Bull (Kitco News, 2/18/2014), Gold’s Wild Ride Down May Soon Be Up (Kitco News, 1/21/2014). However, there are some troubling signs in the ether as explained in my March column, Oil, Copper & Gold Transmit a Distress Signal (Kitco news, 3/17/2014). Bearish trends have re-surfaced for the yellow metal but there is also light in the mineshaft as explained in my latest commentary, Gold's Wild Ride - Up and Away? (Kitco News, 4/14/2014).

Since November 2012, gold has experienced bearish value destruction not only in U.S. dollar terms but value relative to oil. However, its value relation with respect to copper has recovered ground in 2014.




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 88.47, below the key-100 level and the 1-month moving average of 88.92. The 2012 high was 103.73 on Nov. 13. The value adjusted price of gold is $1,227.6 per ounce or $72.22 discount to actual gold price (i.e. gold is trading at a premium to a basket of key commodities).

Cheers,

Colonel Possum

Photos by Mariana Titus

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Mariana's fine art prints are featured in Fine Art AmericaMariana Titus

Paintings by Mariana Titus, The Three Anas, are presently at Lafitte Guest House & Gallery, New Orleans
 




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