BREAKING NEWS: The Liu Han Trial - The Eureka Miner's Market Report

Morning miners!

There is breaking news in China on 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)

And from Australia a few days earlier...

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.

The Hanlong financing fell through after Liu Han's arrest last year. The Eureka Miner carried several reports on this:

General Moly (GMO) Update, Liu Han Saga Continues; The Colonel's Gold Price for Next Week (March 29. 2013, Eureka Miner)

The General Moly (GMO) team has been diligently seeking alternate financing for Mt. Hope and plans to start a smaller scale copper/molybdenum project at their Liberty mining property near Tonopah:

Gold, Copper & Miners Hang Tough; General Moly's Liberty Play (April 11, 2014, Eureka Miner)

The best of luck to the General Moly team!

Given that the Easter holiday is upon us, it is with some irony that my 2013 report began:

Happy Easter Miners!

The Mt. Hope and Liu Han saga rolled into this week with more details emerging about Mr. Liu's errant brother, an alleged triple murder and politics of doing business with China's new leaders. This would be a terrific mystery thriller if Eureka County weren't one of the set props in the unfolding drama...

The drama continues one year later...

Cheers,

Colonel

Bluer Skies for General Moly? The Colonel's Metal Prices for Next Week

Art in Unexpected Places, Eureka, Nevada

*** GENERAL MOLY NEWS ***

Last week General Moly posted a very detailed briefing for investors on the status of Mt. Hope molybdenum project:

General Moly Investor Presentation

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 – Is April the Cruelest Month? (04/22/2013)

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

Friday's morning prices...

Below are the morning prices used for today's analysis:

COMEX Gold price = $1,469.5/oz (June contract most active)
COMEX Silver = $24.140/oz (May)
COMEX Copper = $3.2125/lb (May)
NYMEX WTI crude = $92.99 (May)
ICE Brent crude = $102.71/bbl (May)

Eureka Miner’s Gold Value Index© (GVI) = 94.26 (gold value is elevated with respect to key commodities oil & copper given historical norms)
Value Adjusted Gold Price© (VAGP) = $1,302.7/oz
COMEX - VAGP = $166.8/oz; gold is still trading at a premium to key commodities.

Good Morning Miners!

I was very sad to hear that recently elected Commissioner Pat Dempsey passed away last Saturday. Pat and I had a nice chat before he won the election - he seemed like a very nice man and a good fit for the District 3 seat. Pat and I discovered we were only a few days separated in age - he laughed when I told him that I was his senior. Pat was a Reno native who had ranched for 50 years and also owned a construction firm. He is survived by his wife, Julie. I'll miss Pat.

Eureka County Assessor Mike Mears informed this report that, "The replacement process is an appointment by the Governor. The County Clerk notices the board vacancy to the Secretary of State who in turn, notifies the Governor. It is then up to the Governor to determine how to proceed. Replacement candidates must come from District 3 and must be a registered Republican as that was the party Pat represented..." and, "The seat will have to be part of the 2014 general election (2 year term) and will also roll over to the 2016 election (4 year term) to get it back into its original rotation."

Bluer Skies for General Moly?

This is purely conjecture on my part, but there may be bluer skies ahead for General Moly and the prospects for Mt. Hope. The key issue is finding new financing for Mt. Hope after the Hanlong loan suspension in March (See earlier March 22 and March 29 reports for a full chronology of events).

With all the turmoil in the metals markets last week, the ole Colonel missed an important article in a Chinese publication:

Fallout From the Arrest of Hanlong's Chairman Continues (Ferro-Alloys, 4/15/2013)

Here's their update relative to Moly Mines of Australia:

The fallout from the arrest of Hanlong’s Chairman continued last week. Moly Mines of Australia announced that its Board and its major shareholder, Hanlong Mining Investments, agreed that the three current independent directors will be replaced with new independent directors in the six months following the company’s annual meeting on May 31. In addition, Liu Han, the Chairman of Hanlong, will be replaced as a director by his current alternate Nelson Chen at the annual meeting. Hanlong has said it will continue to support the merger and acquisition strategy of Moly Mines even though Hanlong said it is unlikely to be in a position to give direct financial support to an acquisition or project development in the near future. Hanlong said it would seek to assist Moly Mines secure financing from Chinese banks and other sources. Sundance Resources, meanwhile, said it had terminated its USD1.4-billion iron ore development agreement with Hanlong Mining. Hanlong reportedly failed to meet funding conditions for the Mbalam-Nabeba iron ore project in Cameroon.

I found it interesting that Hanlong still appears quite viable for seeking financing alternatives if not direct financial support. Also, Nelson Chen is already  a member of General Moly's Board of Directors, serving since September 2011. According to the General Moly website:

Prior to joining Hanlong, Mr. Chen was an Associate Director at the Sydney, Australia office of PricewaterhouseCoopers ("PwC"). Mr. Chen has 11 years of audit and M&A transaction advisory experience with PwC. He was involved in a large number of financial due diligence and acquisition advisory transactions with a focus on leading engagements servicing Chinese clients. He has extensive experience in many industries including mining, manufacturing, consumer products, financial services, real estate.

Even more reassuring is the fact that General Moly CEO Bruce Hansen bought 30,000 additional shares of his company's stock Monday at $1.8635 per share (April 22, 2013 transaction, SEC Form 4 filing, April 23, 2013). This puts Mr. Hansen's total shares at 1,116,266 - that's commitment! Mr. Hansen commented about the path forward in the April 3 General Moly Press Release:

In addition to extending the Bridge Loan, we are working with Hanlong to secure another Chinese strategic partner to help advance the full financing of the Mt. Hope Project. We feel this path provides the most promise in the near term given China’s strategic long-term view towards moly sourcing, our current exclusivity agreement with Hanlong, and taking into account the Company’s advanced stage of loan negotiations with China Development Bank.

I decided to throw a few more shares in the buckboard at $1.88 yesterday; this morning General Moly is presently trading at $1.91.

Please do your own analysis, pardner. The Colonel has been dead wrong in the past and markets can turn on you faster than a feral cat.

All in all, I think the above developments are positive signs. The mining sector has been under tremendous pressure for several years so it is a risky thing to invest in.

Keep the faith.

Molybdenum Prices

Spot moly oxide prices remain above the key-$11 per pound and inched up a little more - very positive. Here are the latest numbers compliments of moly benchmark miner  Thompson Creek (TC):

Metals Week Weekly Average: US$11.75 As of April 22, 2013 (updated weekly)

Ryan's Notes Average: US$11.20 As of April 23, 2013 (updated twice weekly)

The London Metal Exchange (LME) futures contracts are holding above $11 per pound this week which also remains encouraging. Remember that this is a thinly traded futures market and contract prices reflect developments in Europe probably more than the global spot price averages above.

3-month seller's contract $24,500 per metric ton ($11.11 per pound)

15-month seller's contract $25,200 per metric ton ($11.43 per pound)

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

Here is my weekly input to the Kitco Gold Survey:

04/26/2013 (10:40 AM CT)

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

A. Up, $1,495 per ounce target.

Q. Why?

A. Gold has recovered some dollar price and value relative to copper this week. Its valuation relative to oil and silver has seen little change. The yellow metal remains highly correlated to oil, copper and silver on both a short-term (1-month>+0.85) and mid-term (3-month >0.8) basis. Gold is therefore behaving as a commodity but could easily regain safe-haven status with a flare up in the Middle East. Higher oil and gold prices are likely for that scenario with increased headwinds for copper.

The S&P 500 is trying to regain upward momentum but is still off its record highs given a much lower than expected GDP number this morning (2.5 versus 3.2 exp.). This has helped gold regain value relative to equities as illustrated by a plot of the gold-to-S&P 500 ratio, or AUSP:

Since mid-November, the ratio has been in a descending channel with rotation of money away from gold assets into the U.S. stock market with gold losing more than 20% of value relative to equities from the November peak (AUSP=1.2710). April 15 trading broke below the channel to score a low of 0.8768. This morning the AUSP has returned to the channel.

The new dichotomy for gold persists with a strong pickup in physical buying in Asia balanced by continued outflows in gold exchange traded funds. This will probably limit the upside for the yellow metal against a backdrop of bearish influences including fear of gold liquidation by central banks in the troubled southern countries of the euro-zone and the eventual unwind of the Federal Reserve from its present generously accommodative policies. However, a wider conflagration in the Middle East could bring back safe haven status for the yellow metal and change these dynamics, at least for the short-term.

Gold will probably move higher next week on re-emerging fears about Syria and Iraq but find considerable resistance at $1,500 per ounce

My target is therefore $1,495 per ounce – above the mean of the Feb. 12 high ($1,564.2) and the Feb. 16 low ($1,321.5).

For $1,495 per ounce gold we can expect to see silver in a range of $23.9-$27.0 per ounce; and copper in a range of $3.01-$3.46 per pound. Silver is expected to have a neutral bias with respect a range mean of $24.450 per ounce; copper, a negative bias with respect to a mean of $3.2336 per pound.

If the long-term gold value uptrend relative to oil and copper remains intact, the longer term prospects for gold priced in dollars are good. The data suggest that this is still the case (Note 6, Ref 2 & 3)

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 94.26, below the key-100 level and above the 1-month moving average of 93.91. The 2012 high was 103.73 on Nov. 13.

Background Notes:

1. My gold target price of $1,495 per ounce is below strong resistance at $1,500 per ounce
2. Given the target gold price, the silver price ranges are derived from the 1-month gold ratio mean (GSR) and its respective ratio stability (CRS©). The same technique was used to predict the price range for copper.
3. My Gold Value Index© (GVI) equals 94.26 or 9.1% below the 2012 high of 103.73. Today gold value is above its 1-month moving average of 93.91; a value of 100 represents a historically high-value of gold relative to key commodities oil, copper and silver.
4. The gold-to-copper ratio today is 457.43 pounds per ounce and above to its 3-month moving average of 450.86 and below its 6-1/2 year trend of 491.1. The 1-month gold-to-copper ratio stability at 3.52% is falling slightly. The 1-month rolling correlation is +0.86; 3-month is +0.88. 3-month relative volatility is 1.02X gold and price sensitivity (beta) is +0.895.
5. The gold-to-silver ratio (GSR) is above its historical norm at 60.874; the 3-month rolling correlation is +0.97, relative volatility is 1.74X gold and price sensitivity (beta) is +1.69. The GSR is above its 3-month average of 55.88; the 1-month gold-to-silver ratio stability is 3.14%.
6. Although gold has lost considerable value relative to oil and copper since early November, the uptrend in gold value relative to these global commodities has remained on solid footing (mid-2006 to the present). If this relation gives way, gold is probably in a world of hurt. Also, 1-month gold ratios relative to WTI & Cu have remained quite stable* unlike the early-October 2011 commodity debacle following the U.S. debt downgrade (Ref 2 & 3). There are, however, continued signs that divergent ratios are possible:
1. Au:WTI -1.16 sigma below 6-1/2 year trend line; Au:Cu -0.54 sigma below trend - I consider > a negative 2-sigma indicative of a potential breakdown
2. Au:WTI 1-month stability* 3.0% (3.2% 10/6/11); Au:Cu 3.5% (5.7% 10/3/11) - I consider ratio stability > 3% to be potentially divergent & worrisome

(* stability defined as the standard deviation of the gold ratio normalized by its mean over 1-month)

Ref 1: Gold Versus Copper, Oil and Silver: The Value Trend Is Your Friend (Kitco News, 7/23/2012)

Ref 2: The Emperor of Metals Heeds a Warning from Copper (Kitco News, 03/11/2013)

Ref 3: Copper & Gold – Is April the Cruelest Month? (Kitco News, 04/22/2013)

Cheers,

Colonel Possum

Photos by Mariana Titus

Please checkout bayoutales.com for books and book orders

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

Shocking Jobs Report, Breathing Room for General Moly; The Colonel's Metal Prices for Next Week

Sun Angles, Eureka, Nevada

*** LATEST NEWS ***

This week General Moly received some breathing room on the Mt. Hope molybdenum project financing:

General Moly Announces Financing Update (Press Release, Wednesday, 4/3/2012)

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 Weather Report (03/25/2013)

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

Friday's morning prices...

Below are the morning prices used in today's analysis:

COMEX Gold price = $1,562.8/oz (June contract most active)
COMEX Silver = $27.010/oz (May)
COMEX Copper = $3.3465/lb (May)
NYMEX WTI crude = $92.60 (May)
ICE Brent crude = $105.20/bbl (May)
Eureka Miner’s Gold Value Index© (GVI) = 95.735 (gold value is elevated with respect to key commodities oil & copper given historical norms)
Value Adjusted Gold Price© (VAGP) = $1,364.0/oz
COMEX - VAGP = $198.8/oz; gold is trading at a premium to key commodities.

Good Morning Miners!

Since March 2009, the Eureka Miner has brought you the monthly U.S. employment report and my thoughts on how it impacts the metals & miners. Released by the U.S. Labor Department promptly at 5:30 AM PDT on the first Friday of the month, the announcement of nonfarm payrolls and unemployment rate have become quite a media event for early birds, this morning was no exception. The ole Colonel watches CNBC Business News and records the quotes from talking heads as the jobs numbers are digested. Here's a sample:

"A punch to the gut!"
"A puzzler for the Fed!"
"A tough report..."
"Massive decline in retail..."
"Terrible numbers!"
"Struggling to find anything good!"
"It's all about the sequester!"
"No it's not!"

Yup, it was a bad one. The consensus going into the announcement was 200,000 new jobs; the answer was a meager 88,000 and lower than even the gloomiest economic pessimists predicted. Oddly, the unemployment rate ticked down from February's 7.7% to 7.6% - the lowest since December 2008. The catch is that both the unemployed actively looking for work and folks currently employed both ticked down, so the rate is nothing to cheer about.  The simple way to state this is there are more workers leaving the labor force than getting jobs. The labor force participation rate, at 63.3%, is at its lowest level since 1979. Ouch.

OK, what are the positives? The Federal Reserve will no doubt continue their present quantitative easing program (aka QE3) to prop up the U.S. stock markets and put a floor under commodity prices, including metals. Scary reports generally boost gold prices making an absolutely horrible week for gold just a horrible week as I explain in my weekly input to the Kitco Gold Survey below. Copper prices that were falling through the floor yesterday (intraday Comex low of  $3.306 per pound) are trading presently at $3.3465. The S&P 500 fell to 1,539.8 shortly after the open but has since crawled up to 1,541.39. Earlier in the week the S&P made an all-time closing high of 1,570.25 - shucks, we're only down 1.8% on a bum report!

Nonetheless, a tough environment for miners who have been heading down, down lately as the broader markets go up, up. It will take some time to determine whether today's report is a game changer or not. Stay tuned.

General Moly Update

The torrent of negative Liu Han headlines has thankfully subsided this week and General Moly received some welcome breathing room on their Hanlong bridge loan:

General Moly Announces Financing Update (Press Release, Wednesday, 4/3/2012)

See earlier March 22 and March 29 reports for a full chronology of the $665 million Hanlong loan suspension.


I asked General Moly's Zach Spencer how things were going and he replied just prior to the press release:

Mt. Hope is a world class molybdenum deposit, we have a great management team with decades of experience and we have all of our permits in place. Pre-construction activities are continuing and as soon as we have an update we will certainly share it with you, the market, and the media.

The markets seem to agree with Zach; General Moly (GMO) share price is up 2% at $2.07 on an otherwise down day in the markets. This report has set the $2 as an important level to watch and this week the markets tested $2.01 for three days in a row but did not break lower - so far so good.

The best of luck to the General Moly team.

Molybdenum Prices

Spot moly oxide prices are below the key-$11 per pound level but holding steady from last week. Here are the latest numbers compliments of moly benchmark miner  Thompson Creek (TC):

Metals Week Weekly Average: US$10.766 As of April 1, 2013 (updated weekly)

Ryan's Notes Average: US$10.75 As of April 2, 2013 (updated twice weekly)

The London Metal Exchange (LME) futures contracts are still above $11 per pound this week which remains encouraging. Remember that this is a thinly traded futures market and contract prices reflect developments in Europe probably more than the global spot price averages above.

3-month seller's contract $24,500 per metric ton ($11.11 per pound)

15-month seller's contract $25,240 per metric ton ($11.45 per pound)

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

Here is my weekly input to Kitco Gold Survey :

04/05/2013 (10:49 AM CT)

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

A. Up, $1,570 per ounce target.

Q. Why?

A. After a horrible week for gold, silver and copper prices, it took a horrible Friday jobs report to make it a little less horrible for gold and silver on a short covering rally. Even the embattled red metal finds itself above its Thursday low. With an expected 200,000 nonfarm payrolls becoming reality at only 88,000, the metals find themselves in a conflicted environment. The poor number reinforces the notion that QE3 is here to stay for a long time but casts another shadow of uncertainty on the robustness of the U.S. recovery against the gray backdrop of a slowing China and contracting Europe.

Aggressive monetary easing in the U.S. and Japan have buoyed their stock markets to new highs as other global equity markets are lack luster to down for the year. For gold, a plot of the gold-to-S&P 500 ratio, or AUSP, tells the story:

Since mid-November, the ratio has been in a descending channel dropping briefly below parity yesterday (AUSP=0.9972). This reflects a rotation of money away from gold assets into the U.S. stock market with gold losing more than 20% of value relative to equities from the November peak (AUSP=1.2710). This morning finds some relief at 1.0139 but still constrained within the channel.

My target is therefore only slightly up for the yellow metal at $1,570 per ounce – the geometric mean between February’s high ($1,620.6) and Thursday’s low ($1,539.4). Since yesterday’s low may prove a double-bottom from last May’s $1,545 per ounce, a floor of $1,540-$1,550 may be in for the year.

For $1,570 per ounce gold we can expect to see silver in a range of $26.7-$29.1 per ounce; and copper in a range of $3.29-$3.57 per pound. Silver is expected to have a neutral bias with respect a range mean of $27.900 per ounce; copper, a negative bias with respect to a mean of $3.4280 per pound.

If the long-term gold value uptrend relative to oil and copper remains intact, the longer term prospects for gold priced in dollars are good. The data suggest that this is still the case (Note 6, Ref 5)

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 95.74, below the key-100 level but above the 1-month moving average of 94.85. The 2012 high was 103.73 on Nov. 13.

Background Notes:

1. My gold target price of $1,570 per ounce is below Wednesday’s resistance at $1,577.3
2. Given the target gold price, the silver price ranges are derived from the 1-month gold ratio mean (GSR) and its respective ratio stability (CRS©). The same technique was used to predict the price range for copper.
3. My Gold Value Index© (GVI) equals 95.74 or 7.7% below the 2012 high of 103.73. Today gold value is above its 1-month moving average of 94.56; a value of 100 represents a historically high-value of gold relative to key commodities oil, copper and silver.
4. The gold-to-copper ratio today is 467.00 pounds per ounce and now above its 3-month moving average of 452.69 but below its 6-1/2 year trend of 490.39. The 1-month gold-to-copper ratio stability is a low 2.01%. The 1-month rolling correlation is +0.17; 3-month is +0.80. 3-month relative volatility is 0.1.37X gold and price sensitivity (beta) is +1.09.
5. The gold-to-silver ratio (GSR) is above its historical norm at 57.860; the 3-month rolling correlation is +0.94, relative volatility is 1.91X gold and price sensitivity (beta) is +1.81. The GSR is above its 3-month average of 54.51; the 1-month gold-to-silver ratio stability is a low 2.01% (same as copper)
6. Although gold has lost considerable value relative to oil and copper since early November, the uptrend in gold value relative to these global commodities remains on solid footing (mid-2006 to the present). If this relation gives way, gold is probably in a world of hurt. Also, 1-month gold ratios relative to WTI & Cu remain quite stable* unlike the early-October 2011 commodity debacle following the U.S. debt downgrade (Ref 4):
1. Au:WTI -0.80 sigma below 6-1/2 year trend line; Au:Cu -0.37 sigma below trend - I consider > a negative 2-sigma indicative of a potential breakdown
2. Au:WTI 1-month stability* 2.0% (3.2% 10/6/11); Au:Cu 2.0% (5.7% 10/3/11) - I consider ratio stability > 3% to be divergent & worrisome

(* stability defined as the standard deviation of the gold ratio normalized by its mean over 1-month)

Ref 1: Gold Versus Copper, Oil and Silver: The Value Trend Is Your Friend (Kitco News, 7/23/2012)

Ref 2: Oil, Copper & Gold – All in the Family (Kitco News, 01/22/2013)

Ref 3: Oil, Copper & Gold – Beware the Snake? (Kitco News, 02/11/2013)

Ref 4: Oil, Copper & Gold – Don’t Worry (Kitco News, 02/25/2013)

Ref 5: The Emperor of Metals Heeds a Warning from Copper (Kitco News, 03/11/2013)

Cheers,

Colonel Possum

Inset painting and headline photo by Mariana Titus

Please checkout bayoutales.com for books and book orders

Paintings by Mariana Titus, The Three Anas, are presently being featured 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

General Moly (GMO) Update, Liu Han Saga Continues; The Colonel's Gold Price for Next Week

Eureka stories, old building glories, Eureka, Nevada

*** BREAKING NEWS ***

Last week a $665 million loan was suspended for the General Moly Mt. Hope molybdenum project. Below is a chronology of related articles that came to the attention of the Eureka Miner this week (newest to oldest, click here for earlier articles):

(1518 PT Mar 28, 2013)

Missing Tycoon Mars Overseas Push of China’s Private Businesses (Michael Wei in Shanghai, By Bloomberg News - Mar 28, 2013 9:00 AM PT)

This report is presently trying to contact Michael Wei

Tuesday's market mover:

Hanlong Misses Deadline for $1.19 Billion Sundance Iron Bid (Elisabeth Behrmann, Soraya Permatasari, Henry Sanderson and Helen Yuan, Bloomberg News Mar 25, 2013 9:43 pm ET)

(1041 PT Mar 24, 2013, note that Australia is one day ahead)

Murder claims hit Sundance takeover (SARAH-JANE TASKER From: The Australian March 25, 2013 12:00AM) 

(0822 PT Mar 23, 2013)

Firms Try to Get Fix On Chinese Tycoon (with Liu Han video) (By JAMES T. AREDDY in Shanghai and GILLIAN TAN in Sydney, Wall Street Journal, Updated March 20, 2013, 5:34 p.m. ET)

James Areddy is the lead WSJ correspondent in Shanghai and contacted this report in 2012 to check on how things were going with the Mt. Hope project.

Source article on Liu Han & Mt. Hope (reported by the Eureka Miner Dec 28, 2012):

In Nevada, a Chinese King of the Hill (James T. Areddy, WSJ, Dec 28, 2012)


Latest Nevada Gas Prices (click this link)

My latest Kitco commentary:  Copper & Gold Weather Report (03/25/2013)

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

Friday's morning prices...

Below are the closing prices for yesterday, the last market day of this shortened holiday week:

COMEX Gold price = $1,595.7/oz (April contract most active)
COMEX Silver = $28.323/oz (May)
COMEX Copper = $3.4020/lb (May)
NYMEX WTI crude = $97.23 (May)
ICE Brent crude = $110.02/bbl (May)
Eureka Miner’s Gold Value Index© (GVI) = 94.35 (gold value is elevated with respect to key commodities oil & copper given historical norms)
Value Adjusted Gold Price© (VAGP) = $1,413.2/oz
COMEX - VAGP = $182.5/oz; gold is trading at a premium to key commodities.

Happy Easter Miners!

The Mt. Hope and Liu Han saga rolled into this week with more details emerging about Mr. Liu's errant brother, an alleged triple murder and politics of doing business with China's new leaders. This would be a terrific mystery thriller if Eureka County weren't one of the set props in the unfolding drama. Links to the latest articles are given below today's headline photo including a Liu Han video.

Here is a quote from Chairman Liu Han taken from his website: www.hanlonggroup.com

Mountains stand tall and high, and our ambitions stand higher than the sky. Looking into the future, with the preeminent management and innovation capabilities, Hanlong Group shall devote its efforts to providing the society with richer and better life choices and jointly creates a better future to make contributions for the country and society in accordance with credible and sound management style.

Early in the week Mr. Liu's Sichuan Hanlong Group faced the collapse of their $1.19 billion takeover of Australia’s Sundance Resources Ltd. after missing a term-sheet deadline. This news hit our markets Tuesday morning and took General Moly (GMO) stock down another leg. Last week Hanlong had suspended a $665 million loan for General Moly's Mt. Hope molybdenum project. Here's a quick replay of closing and intraday low share prices:

Friday (3/22) close $2.43
Monday (3/25) close $2.32 ($2.23 low)
Tuesday (3/26) close $2.17 ($2.12 low)
Wednesday (3/25) close $2.25 ($2.10 low)
Thursday (3/25) close $2.21 ($2.16 low)

A rough slide considering that GMO share price touched $4.25 on January 3 and yesterday the S&P 500 set an all time new record closing at 1,569.19 - Ouch.

On the positive side, share price still remains above $2 indicating that the markets have not lost faith in General Moly's resourceful management team to turn Mt. Hope around with an alternate financing plan(s). I believe mine pre-construction activities are funded and will continue. Remember, pardner, Mt. Hope remains a world class asset of strategic and critical minerals with a lot of hard work already done.

A faithful follower of the Eureka Miner recently took this photo of Mt. Hope as viewed from Diamond Valley near 10th Street. You can see some of the clearing and grubbing that has occurred as part of the mine pre-construction phase.

Molybdenum Prices

Spot moly oxide prices are below the key-$11 per pound level. Here are the latest numbers compliments of moly benchmark miner  Thompson Creek (TC):

Metals Week Weekly Average: US$10.75 As of March 25, 2013 (updated weekly)

Ryan's Notes Average: US$10.75 As of March 26, 2013 (updated twice weekly)

The London Metal Exchange (LME) futures contracts are above $11 per pound this week which is encouraging. Remember that this is a thinly traded futures market and contract prices reflect developments in Europe probably more than the global spot price averages above.

3-month seller's contract $24,500 per metric ton ($11.11 per pound)

15-month seller's contract $25,185 per metric ton ($11.42 per pound)

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

My weekly input to Kitco Gold Survey was a target price for gold without the usual in-depth analysis on this shortened holiday week and no targets for silver or copper price.

Here is my e-mail survey input to the Kitco News Global Editor Debbie Carlson:

Just under the wire "Up, $1,610 per ounce target" 

Technical analysis: Positive bias above March lows & highs ($1,588.9 geometric mean) + yesterday's quiz question and answers (strange correlation landscape for the yellow metal)

Headline analysis: If Cyprus crisis grows worse, gold up: if not, sideways to down.

The strange "correlation landscape" is a reference to a quiz the ole Colonel put together on gold's curious relation to other market parameters. Admittedly, this is a quiz for market nerds; if you are so inclined have fun:

Crazy Market Quiz

On a one month basis...

1) Comex gold is positively correlated with the S&P VIX     T or F

2) Comex gold is positively correlated with Nymex WTI & Brent crude  T or F

3) At least gold has a friend in silver, both are still highly correlated  T or F

For the last 3 months...

4) Oil prices have been more volatile than gold  T or F

Answers:

1) False, gold has zero correlation with the so-called "fear index" (rolling correlation -= -0.06)
2) False, gold is positively correlated with WTI and negatively correlated with Brent (+0.64 & -0.37 with WTI-Brent spread collapsing)
3) False, gold is gaining value on the white metal and the correlation is a paltry +0.25
4) False, WTI has been 0.9X less volatile than gold on a relative basis over the last three months

If you got all four answers correct, I'll buy you a beer at the Keyhole. Have a good'un.

Cheers,

Colonel Possum

Inset painting and headline photo by Mariana Titus

Please checkout bayoutales.com for books and book orders

Paintings by Mariana Titus, The Three Anas, are presently being featured 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

General Moly (GMO) Loan Suspended; Unfolding Saga of Liu Han, Hanlong & Mt. Hope

Liu Han, right, Chairman of Sichuan Hanlong Group, has been reportedly detained in China, image from news.com.au  (Australia) & Associated Press

*** BREAKING NEWS ***

$665 million Chinese sourced Hanlong loan for Mt. Hope suspended:

General Moly Announces Financing Update (Press Release, Mar 20, 2013)

Chronology of related articles that came to the attention of the Eureka Miner throughout the week (most recent to first news break):

(0833 PT Mar 22, 2013)

Sundance suitor's chairman Liu Han detained for harbouring fugitive brother (news.au.com & AP March 21, 2013 11:37 PM)

(1426 PT Mar 21, 2013)

Sundance poised to pull plug on Hanlong (Philip Wren, Business day (Australia), March 22, 2013)

(1251 PT Mar 20, 2013)

Latest update on the Liu Han Saga (note co-author and source article from last December below). The Fox News (via WSJ) article mentions Mt. Hope and General Moly directly. 

Firms Struggle to Locate Chinese Tycoon (Fox News: Gillian Tan, James T. Areddy, WSJ, Mar 20, 2013) 
 

(0827 PT Mar 20, 2013)

Sundance Seeks Information From Hanlong After Detention Report (By Soraya Permatasari & Janet Ong, Bloomberg - Mar 19, 2013 11:28 PM PT)

China detains Hanlong founder (Philip Wen, Mar 21, 2013 (Australia time), The Sidney Morning Herald) 

Source article on Liu Han & Mt. Hope (reported by the Eureka Miner Dec 28, 2012):

In Nevada, a Chinese King of the Hill (James Areddy, WSJ, Dec 28, 2012)


James Areddy is the lead WSJ correspondent in Shanghai and contacted this report in 2012 to check on how things were going with the Mt. Hope project.



Latest Nevada Gas Prices (click this link)

My latest Kitco commentary:  Copper & Gold Weather Report (03/25/2013)

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

Friday's morning prices...

Below are the prices used for this morning's analysis. Since then COMEX gold is up a tad at 1,607.1/oz (0948 PT):

COMEX Gold price = $1,606.2/oz (April contract most active)
COMEX Silver = $28.665/oz (May)
COMEX Copper = $3.4670/lb (May)
NYMEX WTI crude = $93.13 (May)
ICE Brent crude = $107.62/bbl (May)
Eureka Miner’s Gold Value Index© (GVI) = 95.39 (gold value is elevated with respect to key commodities oil & copper given historical norms)
Value Adjusted Gold Price© (VAGP) = $1,406.9/oz
COMEX - VAGP = $199.3/oz; gold is trading at a premium to key commodities.

Morning Miners!

A rough way to start the spring for the General Moly team...and Eureka County.

Just before the Equinox, news started to break that Liu Han, the Chairman and founder of  Hanlong Sichuan, together with members of his family had been mysteriously detained in China. General Moly has been waiting for a $655 million loan from Hanlong to begin Mt. Hope mine construction in earnest this spring. Pre-construction activities are presently underway to clear and grub the Mt. Hope site together with associated waterworks for the construction effort.

Below the headline AP photo is a chronology of the news as it came to the attention of this report. The ole Colonel updated last Friday's Eureka Miner with these links but waited to hear from General Moly (GMO) before publishing Thursday's Special Report. The really bad news came with a GMO press release after the market close Thursday.

General Moly Announces Financing Update (Press Release, Mar 20, 2013)

It states:

 "[General Moly] has been informed that legal counsel has suspended work on the $665 million Chinese sourced Term Loan that is currently being negotiated with China Development Bank (“CDB”) for the development of the Mt. Hope Project until further notice. This suspension of activities relates to media reports that Mr. Liu Han, Chairman of Sichuan Hanlong Group (“Hanlong”) has reportedly been detained by Chinese authorities. Hanlong or an affiliate is obligated to arrange and guarantee the Term Loan, throughout its life."

I first learned of Liu Han last year from the Wall Street Journal source report by James Areddy, their correspondent in Shanghai:

In Nevada, a Chinese King of the Hill (James Areddy, WSJ, Dec 28, 2012)

James Areddy had interviewed a number of Eureka residents including this report in the preparation of this article. Ironically, the Eureka Miner e-mailed James on an unrelated topic this Monday before the recent stories broke. In closing, I joked that construction of Eureka's Liu Han Casino hadn't started yet. He didn't reply to my humor and now I know why!

Truth is stranger than fiction (and jokes) with the Australian press citing Mr. Han's shady ties to Macau casinos, suspected money laundering and most recently, hiding his brother who is suspected of murder. Australia is keen to find out more about the Chinese tycoon because they have two mines whose future hangs in the balance of Hanlong loans. General Moly is as anxious to sort out the latest dust-up and to seek financing alternatives. A trusted source informed me several minutes ago that it is likely that Ames will be allowed to continue their present work and that General Moly should have plenty of cash on hand after the winter Mt. Hope activities are tallied.

The markets seem to agree that there is still a lot of hope for Mt. Hope. After closing at $2.77 a share Wednesday, General Moly stock plummeted to an intraday low of $2.04 Thursday (-26%) but then recovered to close at $2.31 followed by this morning's trading at $2.32. We'd be well south of $2 by now if the investment community was heading for sunlight in this moly mine.

As a point of disclosure, I lost 1/4 of my position in GMO by stop loss but have decided to tough it out with the remaining 3/4 position until dust clears on that mountain top 21 miles north of town. General Moly has a strong management team and have climbed a lot of other mountains in the past - after all, one of the world's largest molybdenum reserves hasn't left Eureka County!

The best of luck to the entire General Moly team!

Please do your own research, pardner. As I warned last week "markets can turn on you faster than a feral cat."

Molybdenum Prices

Spot moly oxide prices are now below the key-$11 per pound level. Here are the latest numbers compliments of moly benchmark miner  Thompson Creek (TC):

Metals Week Weekly Average: US$10.98 As of March 18, 2013 (updated weekly)

Ryan's Notes Average: US$10.90 As of March 19, 2013 (updated twice weekly)

The London Metal Exchange (LME) futures contracts are below $12, and the 3-month contact has dipped below $11. Remember that this is a thinly traded futures market and contract prices reflect developments in Europe probably more than the global spot price averages above.

3-month seller's contract $24,200 per metric ton ($10.98 per pound)

15-month seller's contract $25,210 per metric ton ($11.44 per pound)

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

Here is my weekly input to Kitco Gold Survey:

03/22/2013 (10:25 AM CT)

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

A. Up, $1,620 per ounce target.

Q. Why?

A. Gold is quickly moving away from the commodity camp as safe-haven status reemerges in response to the Cyprus debacle. Only last week, the yellow metal was strongly correlated with global commodities copper and oil on a 1-month basis (+0.89 & +0.81, respectively); today, the correlation is negative for copper and falling for oil (-0.49 & +0.55). This is a bearish sign for metals but bullish for gold.

However, opposing forces may cap gold’s advance below solid resistance at the $1,630 per ounce level. Assuming the Cyprus situation continues into next week without satisfactory resolution, gold should get another boost higher but may be limited by liquidations to raise capital for damage control in the euro-zone. My target of $1,620 is a positive bias above March’s highs, challenges the February high ($1,619.7) but is below $1,630 resistance.

For $1,620 per ounce gold we can expect to see silver in a range of $28.8-$29.6 per ounce; and copper in a range of $3.39-$3.58 per pound. Silver is expected to have a neutral bias with respect a range mean of $29.200 per ounce; copper, a neutral bias with respect to a mean of $3.4807 per pound between the intraday high and low for March.

Although the yellow metal has lost considerable value relative to global commodities oil and copper since mid-November, this trend has now reversed to the upside for gold.

If the long-term gold value uptrend relative to oil and copper remains intact, the longer term prospects for gold priced in dollars are good. The data suggest that this is still the case (Note 6, Ref 5)

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 95.39, below the key-100 level but above the 1-month moving average of 94.07. The 2012 high was 103.73 on Nov. 13.

The ratio of gold-to-the S&P 500 (AUSP) is off its low for the year, but still 18.8% below its 2012 high (1.2710, Nov.15) at 1.0362 (2013 low = 1.0166). The latest price action indicates gold has lost significant value relative to the broader market but has bottomed and is now regaining ground.

Background Notes:

1. My gold target price of $1,620 per ounce challenges the February intraday high of $1,619.7 (2/26/2013).
2. Given the target gold price, the silver price ranges are derived from the 1-month gold ratio mean (GSR) and its respective ratio stability (CRS©). A different technique was used to predict the price range for copper given its present negative correlation with gold.
3. My Gold Value Index© (GVI) equals 95.39 or 8.0% below the 2012 high of 103.73. Today gold value is above its 1-month moving average of 94.07; a value of 100 represents a historically high-value of gold relative to key commodities oil, copper and silver.
4. The gold-to-copper ratio today is 463.28 pounds per ounce and now above its 3-month moving average of 452.05 but below its 6-1/2 year trend of 488.88. The 1-month gold-to-copper ratio stability is a low 1.82%. The 1-month rolling correlation is -0.48; 3-month is +0.71. 3-month relative volatility is 0.1.12X gold and price sensitivity (beta) is +0.80.
5. The gold-to-silver ratio (GSR) is above its historical norm at 56.033; the 3-month rolling correlation is +0.92, relative volatility is 1.62X gold and price sensitivity (beta) is +1.49. The GSR is above its 3-month average of 54.22; the 1-month gold-to-silver ratio stability is a very low 0.77%.
6. Although gold has lost considerable value relative to oil and copper since early November, the uptrend in gold value relative to these global commodities remains on solid footing (mid-2006 to the present). If this relation gives way, gold is probably in a world of hurt. Also, 1-month gold ratios relative to WTI & Cu remain quite stable* unlike the early-October 2011 commodity debacle following the U.S. debt downgrade (Ref 4):
1. Au:WTI -0.65 sigma below 6-1/2 year trend line; Au:Cu -0.41 sigma below trend - I consider > a negative 2-sigma indicative of a potential breakdown
2. Au:WTI 1-month stability* 1.0% (3.2% 10/6/11); Au:Cu 1.8% (5.7% 10/3/11) - I consider ratio stability > 3% to be divergent & worrisome

(* stability defined as the standard deviation of the gold ratio normalized by its mean over 1-month)

Ref 1: Gold Versus Copper, Oil and Silver: The Value Trend Is Your Friend (Kitco News, 7/23/2012)

Ref 2: Oil, Copper & Gold – All in the Family (Kitco News, 01/22/2013)

Ref 3: Oil, Copper & Gold – Beware the Snake? (Kitco News, 02/11/2013)

Ref 4: Oil, Copper & Gold – Don’t Worry (Kitco News, 02/25/2013)

Ref 5: The Emperor of Metals Heeds a Warning from Copper (Kitco News, 03/11/2013)

Cheers,

Colonel Possum

Inset painting by Mariana Titus

Please checkout bayoutales.com for books and book orders

Paintings by Mariana Titus, The Three Anas, are presently being featured 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