Gold, Copper & Miners Hang Tough; General Moly's Liberty Play

Gold & Copper Companions by Mariana Titus

*** Local Mining News ***

The Liberty Starter Pit Project (Press release, 4/8/2014)
 
Midway Gold Newsletter (March/April 2014)

Latest Nevada Gas Prices (click this link)

My latest Kitco commentary:

Oil, Copper & Gold Transmit a Distress Signal (Kitco News, Mar. 18, 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 America: Mariana Titus

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

COMEX Gold price = $1,317.9/oz (June contract most active)
COMEX Silver = $19.990/oz (May)
COMEX Copper = $3.0670/lb (May)


NYMEX WTI crude = $103.42/bbl (May)
ICE Brent crude = $107.35/bbl (June)


Eureka Miner’s Gold Value Index© (GVI) = 89.25 (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) = $1,233.9/oz
COMEX - VAGP = +84.03/oz; gold is trading at a premium to key commodities (bullish implication - "bottom is in for gold")

As of 9:30AM PDT (percentages are from yesterday's closing prices; parentheses are a comparison to last Friday's morning price):

Barrick Gold (ABX) = $18.83 up 0.21% (Last Friday AM $18.70)
Newmont Mining (NEM) = $24.35 down 1.77% ($24.42)
Midway Gold (MDW) = $0.96 down 2.04%% ($0.9997)
General Moly (GMO) = $0.92 up 5.75% ($0.9299)
Timberline Resources (TLR) = $0.1599 up 6.53% ($0.153 )

S&P 500 = 1,825.88 down 0.37% (1,877.75)

Morning Miners!

Gold prices had a good week, plain and simple (input to the weekly Kitco Gold Survey, full report below):

Favorable conditions re-emerged for gold price this week: safe haven status was boosted by a falling U.S. dollar, a tech-led selloff in U.S. equities and a lingering Ukraine crisis which heated up along that countries’ eastern border. Some traders also sense a hint of rising U.S. inflation from this morning’s higher-than-expected PPI number - whether this translates to next week’s CPI is, however, far from certain. China’s worse-than-expected CPI/PPI data and a Euro zone slipping toward deflation make an inflation-fueled argument for the yellow metal suspect from the global perspective. On balance, there are probably more legs to the gold rally if the tech contagion spreads to a broader and deeper sell-off in stocks. There is also at least one more charge of anxiety left in the Land of the Light Brigade. My gold target for next week is therefore up at $1,330 per ounce.

Since I did my early morning analysis, Comex gold is up a buck more at $1,318.8 per ounce and 1.2% above last Friday's close - a steady march higher from April Fool's low of $1,277.4. Gold is not the only happy camper in the Metals & Miners' camp.

Copper & Miners hang tough too...

Given the latest carnage in equity markets it is very encouraging to see copper prices holding their head proudly above the $3-level and most miners spared from deep sell-offs. Comex copper has pulled back from an early jog into $3.06 territory to trade currently at $3.041 per pound. Copper giant and mining bellwether Freeport-McMoRan (FCX) is down today but still above $32 per share with a healthy 3.8% dividend. Remember mid-March when Freeport looked like it may drop below $30? Somebody loves miners.

Moly benchmark miner Thompson Creek (TC) punched a 4-month high this morning before settling back to $2.93 - still up more than 12% for the day. Better-than-expected mine output and improving moly prices have helped lift this miner from itts $1.72 low in December. Maybe change is in the winds?

General Moly's Liberty Play

Copper plus moly appears to be in the new equation for General Moly (GMO) as presented in their latest press release:

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

Bruce D. Hansen, Chief Executive Officer of General Moly, explains:

We believe a copper focused Liberty Starter Pit Project has the potential to generate favorable economics given its low strip ratio in shallow pits combined with relatively low initial capital requirements with the significant pre-existing infrastructure and the site’s prior open-pit operations. In addition, our preliminary view is that the Starter Pit Project can begin on our privately owned land which is expected to allow for a shorter and simpler permitting process with the state of Nevada. Taking into account the current ratio of molybdenum and copper prices today compared with our initial Liberty study in 2008 and updated results in 2011, it makes sense for the initial economics and production schedule to be largely driven by the site’s shallow blanket of secondary sulfide copper mineralization.

We anticipate completing the PEA in the summer of 2014, and believe the results will demonstrate the inherent value and flexibility that the Liberty Project provides to our shareholders, complementing the significant value and optionality of the Mt. Hope Project. Even as we initiate this PEA at Liberty we are continuing to pursue financing alternatives for the Mt. Hope Project, and recent updates to capital and operating costs, mine plans, and project economics are supporting ongoing due diligence efforts. In addition, we are pleased to see an upward trend in underlying molybdenum prices from just over $9 per pound in the summer of 2013 to the current $11.50 per pound. This represents a 14-month high for moly prices and is supported by improved demand and tighter supply. Given the cost structure of the industry along with further growth demand potential, we feel the molybdenum price has the potential to continue to improve in the coming years to a more sustainable long term level.

Now, that's not such a bad idea is it? I threw a few shares of GMO in the buckboard Monday at March 2009 prices. GMO is presently trading at $0.92 up 5.75%.

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

Keep the faith, pardner!

Kitco Gold Survey

My weekly input to the Kitco Gold Survey:

04/11/2014 (10:40 AM CDT)

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

A. Up. My target price is $1,330 per ounce.

Q. Why?

Favorable conditions re-emerged for gold price this week: safe haven status was boosted by a falling U.S. dollar, a tech-led selloff in U.S. equities and a lingering Ukraine crisis which heated up along that countries’ eastern border. Some traders also sense a hint of rising U.S. inflation from this morning’s higher-than-expected PPI number - whether this translates to next week’s CPI is, however, far from certain. China’s worse-than-expected CPI/PPI data and a Euro zone slipping toward deflation make an inflation-fueled argument for the yellow metal suspect from the global perspective. 

On balance, there are probably more legs to the gold rally if the tech contagion spreads to a broader and deeper sell-off in stocks. There is also at least one more charge of anxiety left in the Land of the Light Brigade. My gold target for next week is therefore up at $1,330 per ounce.

For $1,330 per ounce gold we can expect to see silver in a statistically bounded range* of $20.1-$20.7 per ounce. Silver is expected to have a negative bias with respect to a range mean of $20.393 per ounce. Volatility in the gold-to-copper ratio has decreased allowing the second range prediction in several weeks for copper price. Future copper is in a wide but statistically bounded range* of $2.79-$3.24 per ounce. Copper is expected to have a positive bias with respect to a range mean of $3.0166 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 is down 1.9% for the week in morning trading and 3.6% down from the all-time intraday high set last Friday. Comex gold is up 1.1% for the week gaining 3.1% in value to the S&P at $1,317.9 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 then rose above the lower boundary of the sideways channel (blue dashed line) However, this advance has now bearishly retreated below the lower boundary. This week gold is taking another run at the lower boundary (green circle); breaking it again would be bullish for gold prices. This morning’s gold price represents a loss of 43.3% of value relative to the November peak (AUSP=1.2710).

The yellow metal lost value to oil and some to copper for the week; oil gained slightly 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 429.7 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 latest column, Oil, Copper & Gold Transmit a Distress Signal (Kitco news, 3/17/2014). Bearish trends have re-surfaced for the yellow metal but thankfully gold has rallied more than 1% this week.

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 89.25, below the key-100 level and the 1-month moving average of 90.44. The 2012 high was 103.73 on Nov. 13. The value adjusted price of gold is $1,233.9 per ounce or $84.03 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 America: Mariana Titus

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