Barrick Mining Accident in Elko County - Two Miners Missing and Feared Dead

Latest Update: Barrick releases names of two miners (Adella Harding, Elko Daily Free Press, August 14, 2010)
Update: Search team reaches bottom of mine shaft (Adella Harding, Elko Daily Free Press, August 13, 2010)
Update (9:27pm PDT): Rescuers reach bottom of shaft (Adella Harding, Elko Daily Free Press, August 13, 2010)
Update (11:29am PDT) Search ongoing for two miners (Adella Harding, Elko Daily Free Press, August 13, 2010)

Morning Miners!

It is 6:00 AM sharp and Friday the 13th. Grab a cup of Raine's TGIF and let's reflect a moment on some very sad news. There was a mining accident at Barrick's Meikle mine yesterday; two miners are missing and feared dead at this underground mine in Elko County. Here is the latest from Mining Editor Adella Harding, Elko Daily Free Press, and an evening news feed from KRNV, Reno:

Trapped miners feared dead: Barrick still searching (Adella Harding, Elko Daily Free Press, August 12, 2010 11:26am PDT)

2 miners feared dead still missing in NE Nevada mine (MyNews4, KRNV, Reno, Last Updated: August 12, 2010 7:35pm PDT)

The two miners were descending in a shaft when a pressure spike was observed on the hoist cable drum. As reported by Ms. Harding, it is suspected that a large pipe that carries backfill and aggregate broke loose from a wall and fell down the shaft. Barrick assumes this caused severe damage to the hoist cage but the U.S. Mine Safety and Health Administration (MSHA) personnel had not yet reached the men at the time of the news stories. This Report extends its thoughts and prayers to the rescue personnel and the families of the miners.

Upbeat Gross Domestic Product (GDP) reports from Europe show a very strong Germany bolstered by exports. In a strange turn of fate, the Greek debt crisis probably helped support these numbers by cratering the euro this spring. Exporters do well when their home currency is weak compared to the countries that receive their manufactured goods. The strong surge in Germany helped the euro-zone economy (see note 1) grow at its fastest pace in four years for this last quarter C'est la vie.

An improving European recovery is important for the molybdenum story since it is a key alloy in the production of some European steels. UBS views the present European steel industry in a positive light as reported by Steel Business Briefing yesterday:

"Investment bank UBS says European steel prices may increase slightly by the end of the third quarter and into Q4 as demand improves and there is some restocking. As a result, it has upgraded its outlook for the sector from neutral to positive.

'We do not believe in a double dip scenario and significant investor cash still remains on the sidelines. The UBS Equity Risk Appetite Indicator has crossed into positive territory for the first time since 3 May while steel leading indicators have been rising since mid July,' UBS analysts wrote in a report obtained by Steel Business Briefing." (Steel Business Briefing, 8/12/2010)

European molybdenum prices and the London Metal Exchange (LME) moly futures contracts have been stable and slightly above western molybdenum prices for some time.

Things appear mixed and choppy as the broader markets open in the United States. NYMEX Oil and COMEX gold and copper are trading just about where they were at this time yesterday. Importantly, copper continues to follow gold with the 1-month correlation reaching positive territory for the first time since July 6th. The 3-month correlation continues to improve but has been negative since May 12th. A thesis of this report is that both copper/gold correlations must be positive to sustain optimism for the metals complex (Will Gold & Copper Ever Make Up?). Let's keep our fingers crossed, pardner.

Quadra FNX (TSX: QUX) reported strong quarterly results yesterday although the Robinson copper mine outside of Ely has run into problems in areas where old timers mined the red metal. Here's the link to the press release:

Quadra Fnx Mining Ltd. Announces 2010 Second Quarter Financial Results (Press Release, 8/12/2010)

Paul Blythe, President and CEO of Quadra, commented on the Robinson mine:

"The Robinson Mine continued to generate the majority of our overall revenues and operating income during the quarter, however, as we have mined further into the Ruth pit, which will be the only production pit by the fourth quarter, an area of underground workings from the 1950's has proven to be larger than expected. These workings were block caves where higher grade ore was extracted, with lower grade material then caving in to fill the voids. While we continue to understand and evaluate the impact of this block caving, we feel it prudent to lower Robinson's copper production expectation to 115 -- 125 million pounds of copper and 75,000 ounces of gold for the year (previously 135 million pounds of copper and 80,000 ounces of gold). We were aware of the underground workings at Ruth and have relied on historical records to understand these. Now that we are well along with dewatering the pit, we have the drill access required to drill from the bottom of the pit to confirm the full extent of these workings, and this work is in progress." (Press Release, 8/12/2010)

Have a safe and thoughtful weekend.

Enough talk, let's walk the walk:

The Eureka Miner's Index(EMI) remains above par at 112.78, slightly above yesterday's 111.80 but still considerably above the 6/7/10 low of 50.7. We are very close to breaking the lower trend line which signals caution. Remember an EMI greater than 100 is good times (or at least better times) for the metals & miners.

4-WD is ON - rough roads in the marketplace; The VIX or "fear index" remains above 25; metals & miners are still on shaky timber with bellwether Freeport-McMoRan (FCX) dropping to the high-$60s after being recently near its 200-day average of $75.3 (our new warning level, 8/05 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment but there is some deflationary caution now that we are sub-3%.

The YELLOW light is turned back on for Commodity Reflation. Although copper is trading above $3/lb, the 10-yr T-Note is solidly below 3.00%

The GREEN light is turned on for Stable Markets the VIX below the 30 level (what's this?)

The YELLOW light is turned on for Inflation/Deflation Watch as the Federal Reserves resumes buying back Treasurys and the 10-yr T-Note remains below 3.00%

The YELLOW light is turned back on for Investor Confidence as the bond markets signal trouble ahead

The GREEN light is turned on our Fuel Gauge with oil dropping below $80

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions , General Moly Mt. Hope Water Rights, U.S. House committee debates miner workplace safety bill

Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)

NYMEX/COMEX: Oil is up $0.03 in early trading to $75.77 (September contract, most active); Gold is down $1.9 to $1214.8 (December contract, most active); Silver is down $0.050 to $18.015 (September contract, most active); Copper is down $0.0185 to $3.2655(September contract, most active)

Western Molybdenum Oxide is $14.25; European Molybdenum Oxide is $15.45; LME moly 3-month seller's contract is $15.65, LME cash seller is $15.44

The DOW is down 14.08 points to 10,305.87; the S&P 500 is down 2.37 to 1081.24. The miners are mostly down:

Barrick (ABX) $42.98 down 0.51%
Newmont (NEM) $56.88 down 1.51%
US Gold (UXG) $4.78 unchanged
General Moly (Eureka Moly, LLC) (GMO) $2.95 down 1.01%
Thompson Creek (TC) $8.95 down 1.00%
Freeport-McMoRan (FCX) $69.75 down 0.91% (a bellwether mining stock spanning copper, gold & molybdenum)

The Steels are mixed, (a "tell" for General Moly & Thompson Creek):

ArcelorMittal (MT) $30.25 down 0.17% - global steel producer
POSCO (PKX) $103.38 up 0.30% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.46% to $1,346,792.54 (what's this?).

Cheers,

Colonel Possum

Note 1 - The combined gross domestic product of the 16 countries that use the euro grew 1.0% compared with the first three months of the year, the strongest quarterly expansion since the second quarter of 2006 (WSJ, 8/13/2010)

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Headline photograph by Mariana Titus