"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, January 23, 2015

Gold Giddy-Up; Europe Throws Miners a Curve Ball; GMO Surprise


Eureka-Croesus Mine, Eureka, Nevada

Please checkout Mariana's Eureka, Nevada on Facebook

*** Local Mining News ***

General Moly Announces Agreement with POS-Minerals to Utilize $36 Million in Reserve Account to Fund Mt. Hope Project (Press release, 1/21/2015)

Midway Provides Construction Update For Pan Gold Project, Nevada (Press release, 01/16/2015)

Timberline Resources Drilling Identifies New Zone of Gold Mineralization at Eureka (Press release, 01/14/2015)

General Moly Announces Closing of Private Placement Financing (Press release, 12/30/2014)

*** AM Prices ***

The early morning prices used for today's analysis (most active contracts):

Goldman Sachs Commodity Index

S&P GSCI 380.6 (378.5 52-wk low)

Nymex/Comex

Nymex oil (WTI) $46.17 per barrel
Comex copper $2.5065 per pound
Comex gold $1,295.7 per ounce
Comex silver $18.345 per ounce

Latest Nevada gasoline prices

Note: There are several changes to the Eureka Miner for the new year. For the time being, Kitco News, Montreal has suspended their weekly gold survey due to staffing changes. However, I will provide a periodic gold price outlook based on my column in the Winter 2014 Edition of the Mining Quarterly with updates to the analysis and charts given in that piece (see below). This replaces the weekly survey input to Kitco News. The ole Colonel will continue to contribute periodic articles to that publication and this report.



Super Mario

Morning Miners!

Another crazy week in global markets!

No, it wasn't the death of Saudi King Abdullah that has roiled equities and commodities. In the not too distant past, such an event would spike oil prices and trigger broad-based volatility. Nowadays, after a brief pop, oil continues its slide down, down. The Kingdom announced early this morning, that it is likely to continue to pump crude in the face of a global glut - Nymex light sweet crude is presently trading at $46.17 per barrel down 40% from its late-October high. As far as OPEC drama goes - ho-hum.

Central bankers wear the big hat these days and this week it was Europe's turn to walk the walk. European Central Bank (ECB) President Mario Draghi announced the launch of an eye-popping monthly 60 billion euro private and public bond-buying program yesterday which is scheduled for 18 months beginning in March. This long anticipated monetary largese, will put 1.1 trillion new euros into the world's currency pot - that's printing some money, pardner!

The reaction? The euro fell to an 11-year low (1.1116) approaching near parity with the U.S. dollar. King dollar in turn raced to a 12-year high as measured by the U.S. dollar index (.DXY). Most raw commodities are priced in U.S. dollars which caused additional downward pressure on metals and blunted a brilliant gold rally that had touched $1,307.8 per ounce (Comex, February contract) prior to the ECB announcement.

Although it is satisfying to see the U.S. dollar in strong ascendancy, it creates a new headwind for the mining sector. The good news for gold miners is that the yellow metal continues to hold a much stronger hand than other players in the metals complex. This morning Comex gold is trading at $1,295.7 per ounce; Comex copper is at a lowly $2.5065 per pound. The Eureka Miner's Gold Value Index (GVI), which measures gold value against oil, copper and silver independent of currency tells the story (click for larger view):



Todays GVI (point C) is at high levels not seen since the dark days of early-2009. Reassuringly gold has been trending higher relative to these key commodities (i.e. real stuff, not paper money) since mid-2006.

My gold 2015 price forecasts (below) are derived from the Colonel's column on the yellow metal in the latest edition of the...

Winter 2014 Mining Quarterly


The online edition of the Winter 2014 Mining Quarterly is out and about. Elko Daily Free Press Editor Marianne Kobak McKown and her team have done an outstanding job on this publication. There are feature articles on Cortez Hills, Barrick's Turquoise Ridge and Newmont's Twin Creeks together with updates on Comstock, Pershing Gold, Veris Gold and Western Lithium. It's a dandy!

The ole Colonel wrote a gold price outlook for 2015, Gold at the Crossroads, which you can find on pages 72-77 of the online edition and 75-79 of the printed version.

This report closes with updates for the charts and numbers provided in this column - the underlying assumptions for 2015 remain unchanged.



Local & Benchmark Mining Stocks

The Mining Sector is still in the storm of volatile metal prices with gold miners faring best. Big gold miners Newmont (NEM) and Barrick Gold (ABX) are trading at $24.29 and $12.61 (chart below, click for larger view) . Midway (MDW) is $0.7510 down 1.18% in morning trade. Benchmark Moly Miner Thompson Creek (TC) is down 0.79% at $1.2699. GMO is just below 60 cents per share at $0.5753. Timberline Resources (TLR) is up 4.29% at $0.70 per share. Please checkout the latest press releases from General Moly, Midway and Timberline at the top of this report.

Finally, benchmark miner and copper giant Freeport-McMoRan (FCX) is down 2.47% at $19.52. Freeport has taken on oil interests to diversify so feels double-pain when red metal and oil prices are down.




Mining Stocks, Yahoo Finance

General Moly (GMO) Surprise

As flagged by Wednesday's Eureka Miner e-mail alert, General Moly got a significant funding boost from POS-Minerals (subsidiary of South Korean steel giant POSCO and 20% owner of Mt. Hope):

General Moly Announces Agreement with POS-Minerals to Utilize $36 Million in Reserve Account to Fund Mt. Hope Project (Press release, 1/21/2015)

Bruce D. Hansen, Chief Executive Officer, said, “This agreement, combined with the recently announced $8.5 million private placement financing that closed in December 2014, provides the Company with a significantly improved project and corporate liquidity profile as we bridge to a project financing for Mt. Hope, while at the same time minimizing the dilution to our shareholders. We want to thank POS-Minerals for their continued financial support and partnership.”

Mr. Hansen continued, “We remain confident in the progress being made toward full Mt. Hope Project financing. Negotiations on investment agreement terms, sponsorship requirements, and indicative loan terms associated with a $700 to $750 million debt and equity package, are continuing to advance. We have strong interest from multiple private Chinese industrial companies and a large Chinese bank in advancing the fully permitted, construction-ready project.”

Gold Forecast Update

Some highlights updated through this morning's trading:

  1. Gold has fared quite well compared to other key commodities; one ounce still buys more ounces of silver, pounds of copper and barrels of oil than it did in late-December 2013. Outpacing a 7.8% gain in U.S. dollar price, glitter is up 14% over the white metal, 46% over the red and a whopping 130% over oil (chart #1, below). A 8-1/2 year uptrend in gold value relative to these commodities is intact. 
  2. Gold's relation to commodities works like the force of gravity. Without the propulsion of safe haven or monetary hedge, the yellow metal falls back in line with commodity prices and historical norms. 
  3. This relation has formed a declining value wedge since 2011 (chart #2, dashed red lines) which has proved quite accurate in predicting future price ranges. Extending the dashed lines suggests a commodity value range of $790 to $1,170 per ounce for this quarter (1Q2015). The lower number represents a U.S. dollar floor for gold relative to key commodities. 
  4. Gold presently carries a premium to the aggregate of key commodities in chart #2; this has been mostly true since August 2011. Using the gravity analogy, gold needs to achieve escape velocity (>$1,300) from the value wedge by increasing premium even more. If that premium disappears gold will follow commodities lower this year. This week, we witnessed gold's first attempt to challenge the key-$1,300 level.

Chart #1 (updated from the Winter 2014 Edition of the Mining Quarterly, click for larger view):




Chart #2: 





Cheers - Colonel

Photos by Mariana Titus

Friday, January 16, 2015

Gold Breaks $1,280; Copper Crash Bottom? Miners Embattled, Not Broken


Winter Sky, Eureka, Nevada

Please checkout Mariana's Eureka, Nevada on Facebook

*** Local Mining News ***

Midway Provides Construction Update For Pan Gold Project, Nevada (Press release, 01/16/2015)

Timberline Resources Drilling Identifies New Zone of Gold Mineralization at Eureka (Press release, 01/14/2015)

General Moly Announces Closing of Private Placement Financing (Press release, 12/30/2014)

Timberline Resources Commences Drilling at Eureka (Press release, 12/17/2014)

*** AM Prices ***

The early morning prices used for today's analysis (most active contracts):

Goldman Sachs Commodity Index

S&P GSCI 387.5 (378.5 52-wk low)

Nymex/Comex

Nymex oil (WTI) $47.49 per barrel
Comex copper $2.5760 per pound
Comex gold $1,273.1 per ounce
Comex silver $17.360 per ounce

Latest Nevada gasoline prices

Note: There are several changes to the Eureka Miner for the new year. For the time being, Kitco News, Montreal has suspended their weekly gold survey due to staffing changes. However, I will provide a periodic gold price outlook based on my column in the Winter 2014 Edition of the Mining Quarterly with updates to the analysis and charts given in that piece (see below). This replaces the weekly survey input to Kitco News. The ole Colonel will continue to contribute periodic articles to that publication and this report.



Wipe Out Wednesday

Morning Miners!

What a crazy week this has been - crashing copper prices, gold rally to a new 4-month high and blood on the street for the Mining Sector. Although red metal prices started their fall Monday, the worst day was Wednesday with Comex copper plumbing $2.4240 per pound. The Eureka Miner issued an e-mail alert which included Wells Fargo Securities Janet Mirasola warning in her pre-market brief:

"Copper – our Red One! was crushed overnight as traders in China stampeded the exits leaving a 9% scar on the price as it traded to a low of $5353 mt [$2.4281 per pound] before recovering back to current levels around $5500 and a more manageable overnight loss of only 6.5%. This move highlights the contagion that began in the Oil market where values have lost about 60% since last June. “What could possibly go wrong?” is obvious here and the fact that CHINA IS REALLY SLOWING tells us that this commodity rout may not be an isolated move and could start to affect global asset classes across the board."

Ouch! Fortunately, Comex copper bounced off these lows and is trading this morning at $2.5760 per pound. Are the lows in? Hard to say, but Mirasola sees surplus and declining demand. Her brief continued Thursday:

"Now that the dust is settling a bit, investors will likely take time to reassess portfolio strategies. What is clear is that there still remains a real mispricing between copper and oil. While copper had been under steady pressure, oil was falling at a faster pace over the last six months. Copper hadn’t really reacted to the oil move as many were hoping for some kind of Chinese stimulus that would save the day. The reality is that most analysts expect the market to be in surplus until 2017. With oil’s sell off, production costs are actually lower (sub $5k per tonne[$2.27 per pound]), so a correction of some magnitude is not surprising. We just didn’t expect it would come in one day. We expected to see the steady erosion we’d seen over the last few months. The move overnight appears to be some kind of capitulation of a major long which then had a snowball effect. On a relative basis, you could still see further downside in copper if oil prices stay low (the ratio of copper prices to oil prices is still running way above historical averages)."

Oil, oil, oil - that is the question! Although lower crude oil prices mean lower gas prices and input costs for domestic manufacturing, there are some real downsides too if we stay in the $40 per barrel range for long. The fracking boom has contributed much to U.S. recovery and the rise in employment - prices at this level could put the brakes on that industry with adverse ripple effects for the economy.

On the global scale, oil-dependent countries like Russia and Venezuela could potentially liquidate a portion of their substantial gold reserves given that their economies already on the brink. This would introduce supply pressure on gold prices. But for now....

Gold is a Shining Star!

Gold has re-established a considerable "safe-haven" premium. Pick your favorite combination of worldly woes du jour: slowdown in China, oil and copper precipitous declines, Russia turmoil and ruble collapse, renewed debate over Greece’s membership in the EU and horrifying attacks in France. Clearly the biggest driver to the late-week rally was the Swiss National Bank (SNB) surprising decision to unpeg the franc from the euro causing volatility in both the currency and precious metal markets.

There is some delight in seeing gold rally briefly above $1,280 per ounce on the same day the U.S. Dollar Index soars to new highs. This report tracks the Powershares DB U.S. Dollar Index Fund (UUP) which is up a full 17% from its May low of last year. In contrats the euro is dropping to new lows (presently 1.1517) as deflation fears in the euro-zone accelerate.

My gold 2015 price forecasts are derived from the Colonel's column on the yellow metal in the latest edition of the...

Winter 2014 Mining Quarterly


The online edition of the Winter 2014 Mining Quarterly is out and about. Elko Daily Free Press Editor Marianne Kobak McKown and her team have done an outstanding job on this publication. There are feature articles on Cortez Hills, Barrick's Turquoise Ridge and Newmont's Twin Creeks together with updates on Comstock, Pershing Gold, Veris Gold and Western Lithium. It's a dandy!

The ole Colonel wrote a gold price outlook for 2015, Gold at the Crossroads, which you can find on pages 72-77 of the online edition and 75-79 of the printed version. This report closes with updates for the charts and numbers provided in this column - the underlying assumptions for 2015 remain unchanged.



Local & Benchmark Mining Stocks

The Mining Sector is recovering from a horrible week of broad-based declines. Big gold miners Newmont (NEM) and Barrick Gold (ABX) are trading at $22.07 up 2.60% and $11.77 up 3.56% (chart below, click for larger view) . Midway (MDW) is $0.7531 up 1.50% in morning trade. Benchmark Moly Miner Thompson Creek (TC) is up 7.21% at $1.29. GMO is just below 50 cents per share at $0.49. Timberline Resources (TLR) is down 3.45% at $0.70 per share. Please checkout new press releases from Midway and Timberline at the top of this report.

Finally, benchmark miner and copper giant Freeport-McMoRan (FCX) is up 3.06% at $18.89 after a horrendous week that witnessed a $17 handle. Freeport has recently taken on oil interests to diversify so feels double-pain when red metal and oil prices are down. Comex copper is trading presently at $2.5760 per pound.

Blood on the streets? How about when a benchmark miner like Freeport falls to $17.85 on Wipe Out Wednesday - 54.6% below it July intraday high for 2014 ($39.32 per share).



Mining Stocks, Yahoo Finance

Gold Forecast Update

Some highlights updated through this morning's trading:

  1. Gold has fared quite well compared to other key commodities; one ounce still buys more ounces of silver, pounds of copper and barrels of oil than it did in late-December 2013. Outpacing a 5.9% gain in U.S. dollar price, glitter is up 18% over the white metal, 40% over the red and a whopping 119% over oil (chart #1, below). A 8-1/2 year uptrend in gold value relative to these commodities is intact. 
  2. Gold's relation to commodities works like the force of gravity. Without the propulsion of safe haven or monetary hedge, the yellow metal falls back in line with commodity prices and historical norms. 
  3. This relation has formed a declining value wedge since 2011 (chart #2, dashed red lines) which has proved quite accurate in predicting future price ranges. Extending the dashed lines suggests a commodity value range of $790 to $1,170 per ounce for this quarter (1Q2015). The lower number represents a U.S. dollar floor for gold relative to key commodities. 
  4. Gold presently carries a premium to the aggregate of key commodities in chart #2; this has been mostly true since August 2011. Using the gravity analogy, gold needs to achieve escape velocity (>$1,300) from the value wedge by increasing premium even more. If that premium disappears gold will follow commodities lower this year. 

Chart #1 (updated from the Winter 2014 Edition of the Mining Quarterly, click for larger view):




Chart #2: 





Cheers - Colonel

Photos by Mariana Titus

Friday, January 9, 2015

Mixed Jobs Report; Gold Rallies; General Moly (GMO) Up and At'em



Prospect, Eureka County, Nevada

Please checkout Mariana's Eureka, Nevada on Facebook

*** Local Mining News ***

General Moly Announces Closing of Private Placement Financing (Press release, 12/30/2014)

Timberline Resources Commences Drilling at Eureka (Press release, 12/17/2014)

*** AM Prices ***

The early morning prices used for today's analysis:

Goldman Sachs Commodity Index

S&P GSCI (1/15 futures contract) 396.55 (395.2 52-wk low)

Nymex/Comex

Nymex oil (WTI) $48.52 per barrel
Comex copper $2.7515 per pound
Comex gold $1,214.3 per ounce
Comex silver $16.395 per ounce

Latest Nevada gasoline prices



Happy New Year Miners!

There are several changes to the Eureka Miner for the new year. For the time being, Kitco News, Montreal has suspended their weekly gold survey due to staffing changes. However, I will provide a periodic gold price outlook based on my column in the Winter 2014 Edition of the Mining Quarterly with updates to the analysis and charts given in that piece (see below). This replaces the weekly survey input to Kitco News. The ole Colonel will continue to contribute periodic articles to that publication and this report.

This morning started off with the first monthly Labor Department report for 2015. The good news is that the U.S. added 252,000 jobs in December while economists expected a gain of 240,000 nonfarm payrolls. Revisions also showed employers added 50,000 more jobs in October and November than previously estimated. The unemployment rate fell to 5.6%, its lowest level since June 2008. The economy is improving.

Unfortunately, average hourly earnings fell from the prior month and were up only 1.7% from a year earlier.  No signs of  wage inflation indicates there is still considerable slack in the labor force. Key for gold price is the timing of the first interest-rate increase by the Federal Reserve and many investors expect that to occur this year. Any unexpected weakness in employment growth could delay the first increase along with worries about weak growth in Europe and Japan and the threat of deflation in the former. A continued low interest stance by the Fed is supportive of gold prices going forward.

Presently there is a significant safe-haven premium built into gold price given the situation in Europe and the deflationary effects of falling oil prices. As a consequence, the Comex gold is keeping its head above the key-$1,200 per ounce level bouncing slightly to $1,214.3 per ounce as the report did its analysis following the jobs data. Midday prices are up a bit more at $1217.6.

As explained below, gold has fared far better than silver, copper and oil since the close of 2013. An ounce of gold today buys nearly twice as much oil as a year ago and continues to show strength relative to the euro and Japanese yen. Although dollar price still hovers around $1,200 with little net change year-over-year, that's a good enough for most mining operations. Macquaire sees improving physical demand coming from both China and India:

Macquarie: Gold Has Potential To Move Higher In 2015 (Kitco News, 01-09-2015)

HSBC has moved their forecast up to $1,234 per ounce but sees headwinds for PGMs; their silver forecast remains unchanged at $17.65 an ounce for the coming year:

 HSBC Raises Gold Forecast To $1,234/oz, Lowers PGM Forecast (Kitco News, 01-09-2015)

On the darker side, if an oil price-dependent economy like Russia collapses and forces their central bank to begin liquidating gold reserves, gold price could move significantly south in 2015. The commodity support for gold is now a very lowly $854 per ounce based on AM prices (see below).



General Moly (GMO) Up and At'em

General Moly got an $8.5M lifeline in December as detailed in this press release near the close of last year:

General Moly Announces Closing of Private Placement Financing (Press release, 12/30/2014)

The Private Placement financing, is a bridge to a project financing for Mt. Hope designed to minimize dilution to shareholders.

As a point of disclosure, I remain positive on GMO and added to my position at $0.36 per share in December prior to learning of the placement. My thoughts were pretty simple: the world is still here, folks need steel products even though global demand is in decline and Mt. Hope is a tangible asset filled with critical and strategic minerals. The ole Colonel is willing to wait this out. After the first news of the placement, GMO share price bumped to $0.67. This morning GMO is trading at $0.53. Please do your own research, markets can turn on you faster than a feral cat.

A trusted source added some background to this release for the Eureka Miner. Steve Mooney, the former Chairman and Chief Executive Officer of Thompson Creek Metals Company (TC), provided the lion's share of the financing with a $5 million investment. Mr. Mooney founded TC in 1993 and led its sale in 2006, after helping build it into one of the largest primary molybdenum producers in the world. He has significant experience in the mining and molybdenum space and a deep understanding of the viability of the Mt. Hope Project. That's commitment, pardner.

As explained in the above release, General Moly’s executive management team and board of directors supported the Private Placement by investing over $2 million in aggregate underscoring the strong internal support for the future prospects of the company.

Metals Week (1/2/2015) reports a moly oxide price of $9.10.

Relative to molybdenum fundamentals in 2015, my source pointed out that Thompson Creek Mine and Endako Mine halted production by year-end 2014 (the two mines produced 33mm pounds in 2013, the most recent full year report currently available). Furthermore, Mercator’s Mineral Park Mine (10mm pounds produced in 2013) has been put on care and maintenance. Together this could remove approximately 40mm lbs of 2014 moly production from the market in 2015. This goes a long way to offset production from Sierra Gorda when that mine comes online sometime in 2015.

Reduced supply and improving global demand should be supportive of both moly price and GMO's efforts to secure construction financing for Mt. Hope. Keep the faith.

Winter 2014 Mining Quarterly


The online edition of the Winter 2014 Mining Quarterly is up and ready to rock n' roll. Elko Daily Free Press Editor Marianne Kobak McKown and her team have done an outstanding job on this publication. There are feature articles on Cortez Hills, Barrick's Turquoise Ridge and Newmont's Twin Creeks together with updates on Comstock, Pershing Gold, Veris Gold and Western Lithium. It's a dandy!

The ole Colonel wrote a gold price outlook for 2015, Gold at the Crossroads, which you can find on pages 72-77 of the online edition and 75-79 of the printed version. This report closes with updates for the charts and numbers provided in this column - the underlying assumptions for 2015 remain unchanged.



Local & Benchmark Mining Stocks

Big gold miners Newmont (NEM) and Barrick Gold (ABX) are trading at $20.41 and $10.88 (chart below, click for larger view) . Midway (MDW) is $0.7410 up 1.51% in morning trade. Benchmark Moly Miner Thompson Creek (TC) is don 3.59% at $1.58. GMO remains above 50 cents per share at $0.5294. Timberline Resources (TLR) is up 4.31% at $0.7510 per share. Checkout the December press release on TLR at the top of this post.

Finally, benchmark miner and copper giant Freeport-McMoRan (FCX) is down .32% at $23.29. Freeport has recently taken on oil interests to diversify so feels double-pain when red metal and oil prices are down. Comex copper is trading presently at $2.7515 per pound.



Mining Stocks, Yahoo Finance

Gold Forecast Update

Some highlights updated through this morning's trading:

  1. Gold has fared quite well compared to other key commodities; one ounce still buys more ounces of silver, pounds of copper and barrels of oil than it did in late-December 2013. Outpacing a 1.0% loss in U.S. dollar price, glitter is up 19% over the white metal, 25% over the red and a whopping 105% over oil (chart #1, below). 
  2. Gold's relation to commodities works like the force of gravity. Without the propulsion of safe haven or monetary hedge, the yellow metal falls back in line with commodity prices and historical norms. 
  3. This relation has formed a declining value wedge since 2011 (chart #2, dashed red lines) which has proved quite accurate in predicting future price ranges. Extending the dashed lines suggests a commodity value range of $810 to $1,170 per ounce for this quarter (1Q2015). 
  4. Gold presently carries a premium to the aggregate of key commodities in chart #2; this has been mostly true since August 2011. Using the gravity analogy, gold needs to achieve escape velocity from the value wedge by increasing premium even more. If that premium disappears gold will follow commodities lower this year. 

Chart #1 (updated from the Winter 2014 Edition of the Mining Quarterly, click for larger view):



Chart #2: 





Cheers - Colonel

Photos by Mariana Titus