Jobs, Gold, Moly and Mnogovershinnoye

Morning Miners!

It is 5:44 AM and Becky Quick of CNBC just left the break room. She grabbed a cup and left off the initial job claims report. Gold bounced in London and the ole Colonel just found Ruby Hill's sister in Mnogovershinnoye, Russia. If I can digest all this news and put it in a few words before your first cup, The Report has accomplished its mission. Let's start with jobs. Once a month the private-sector and government release employment reports. The playbill is the ADP report yesterday, new claims for state jobless benefits today and the unemployment report tomorrow. Like a rock concert; the first two are warm up bands, the unemployment report is the BIG headliner. All three are important in understanding where we are in the recession.

The private-sector ADP report based on payrolls showed private employers cut 371,000 jobs during the month of July. This is not great but better than the 473,000 jobs lost in the previous month. It's also the best number by ADP since the Lehman bankruptcy disrupted the economy in the second half of 2008.

CNBC reported that the number of workers filing new claims for state jobless benefits fell 38,000 to 550,000 last week, providing another glimmer of hope that the economy may be on the road to recovery. If tomorrow's numbers are "less worse" too, some talking heads are declaring the recession may already be behind us. How is this possible? The government Einsteins that figured out that the recession began in December 2007 will be the ones to have the final say. Their estimate is months away even if turns out that June 2009 marked the end. I'm sure glad none of these people work for the fire department. The truth is that lots of folks are still getting the axe and most of us won't feel a lot better until there are signs of job growth.

In the meantime gold and silver continue to rally and that is great news! I checked my numbers last night to find that oil, copper and gold have the highest positive correlation for the entire year. Correlation gives us a sense for how the price of different things move in relation to each other. For example the dollar often has a negative correlation relative to gold. If one goes up the other goes down. A tight positive correlation implies that prices are all moving together up, up and away. Dr. Doom predicts a reversal in this trend this year and then a second move up in 2010 (Moly Hits Magic Number, Dr. Doom Speaks to Miners). Stay tuned...oops, spot gold just slipped a bit.


Molybdenum seems to be riding the same train with oil, copper and gold. It sits at a new summer high of $18.25. Good Golly Miss Moly!



To close, I'd like to propose a "sister" mine in Russia for our own Ruby Hill. Although Highland Gold is a Russian operation, Barrick Gold is a not an insignificant shareholder (as the Canadians might say in a double-negative way). Highland's Mnogovershinnoye mine located in the aevsk area of the Khabarovsk Territory in the far-east of the Russian Federation has produced about 900,000 ounces of gold so far. This puts it behind Ruby's recent million mark but in the same league. The ole Colonel just loves the name; if you can say "Mnogovershinnoye", I'll buy you a beer. Here's another Russian word that's a bit easier to say. If you asked me today how things were going, I'd say:

Отлично! - (pronounced "Otlichno" for EXCELLENT!)

Oh, who's the woman in the funny hat? Mine security, of course!

Enough sisterhood, let's walk the walk:

Oil is down $1.73 to $70.24 in early trading (September contract); Gold is up $1.3 to $967.6 (December contract, most active); Silver is up $0.085 to $14.845 (September contract); Copper is up 0.0715 to $2.7405 (September contract); Molybdenum rests on a perch at $18.25.

The DOW is down 35.52 points to 9245.45; the S&P 500, down 5.94 points to 996.78. The miners are down today:

Barrick (ABX) $35.83 down 0.56%
Newmont (NEM) $41.34 down 1.36%
General Moly (Eureka Moly, LLC) (GMO) $2.78 down 1.77%
Freeport McMoran (FCX) $63.82 up 0.99% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are mixed today, (a "tell" for General Moly):

Nucor (NUE) $48.24 up 0.56% - domestic steel manufacturing
ArcelorMittal (MT) $37.34 down 2.37% - global steel producer
POSCO (PKX) $102.59 up 1.69%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is down 0.54% to $1,130,681.68

Cheers,

Colonel Possum

The Road from Eureka to Yekaterinburg

Morning Miners!

It is 5:52 AM, the coffee is hot and we're packed to do some traveling eastbound. Tucked away in the Ural mountains of Russia is the historic city of Yekaterinburg, namesake of Tsar Peter the Great's wife Empress Catherine I. It is also where nobility came to a bloody end when the royal family was executed by Bolsheviks during the Russian Revolution. Yekaterinburg is deep in the heart of Russian copper mining country and this week hosts the first summit meeting of the so-called BRIC group — Brazil, Russia, India and China.


Why is this important to Eureka, Nevada? The BRIC countries comprise 15% of the world economy and remain for the most part on a solid growth path even in the shadow of a global downturn (see note 1 below). Equally important, the BRIC holds 40% of the world's currency reserves. Coupled with a voracious appetite for raw materials, they are exerting increasing influence on the fate of the US dollar. Dollar denominated commodities are at the center of Eureka County's economy so it is important to watch the actions of these powerful emerging economies.

Yesterday, the Russian minister, Alexei Kudrin, said his country had "full confidence" in the U.S. dollar and it was "too early to speak of an alternative" reserve currency.

Today Russian President Dmitry Medvedev seemed to contradict his minister in a speech to the summit. He said that the world needed new reserve currencies, "We have to consolidate the international monetary system, not only through the consolidation of the dollar but the creation of new reserve currencies."

Interestingly, the Kudrin comment contributed to Monday's pop in the dollar, drop in gold and sell off of dollar-denominated commodities. The Eureka Miner's Grubstake portfolio (a measure of Eureka's future economic health) dove 4.7%, the largest daily drop since its inception.


In early morning trading, the direction of the dollar, gold and commodities is back on the rise. Can this be attributed to the Medvedev speech? This is debatable since there are other factors (e.g., positive housing and PPI news) that are also moving the markets. The ole Colonel will say that the goings-ons in Yekaterinburg are something to watch as carefully as a rattler in the sage. Even less comforting was the surprise appearance of President Mahmoud Ahmadinejad at the summit today. His attendance had not been expected due to the post-election turmoil in Iran. What's this joker doing there anyway? (see note 2)

OK, let's close on a happier note with another positive signpost for Eureka County:

"Tuesday's [Producer Price Index or PPI] data suggest that while deflation risks may be waning amid rising oil prices, the falling U.S. dollar and apparent stabilization in the economy, there is little evidence that inflation is taking root." (WSJ, 6/19/09)

Enough feel good stuff, let's walk the walk:

Oil is up $1.47 to $72.09 in early trading (July contract); Gold is up $7.2 to $934.7 (August contract); Silver is up $0.150 at $14.180 (July contract); Copper is down 0.0155 to $2.2695(July contract); Molybdenum got another little shove up to $10.58.

The DOW is up 10.21 points to 8622.34; the S&P 500, up 2.73 points to 926.45. The miners are mostly up:

Barrick (ABX) $33.81 up 2.77%
Newmont (NEM) $42.30 up 1.73%
General Moly (Eureka Moly, LLC) (GMO) $2.48 up 0.41%
Freeport McMoran (FCX) $55.10 down 0.07% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are up (a "tell" for General Moly):

Nucor (NUE) $47.97 up 4.85% - domestic steel manufacturing
ArcelorMittal (MT) $33.47 up 2.10% - global steel producer
POSCO (PKX) $85.51 up 2.96%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is up 1.58%.

Cheers,

Colonel Possum

Photos from Google Earth and Associated Press

Note 1: The aggregate GDP 2009 growth for BRIC is estimated to be +3.4% with a global GDP contracting more than 2.0% over the same period. The ole Colonel used the IMF GDP dollar estimates for 2008 derived from purchasing power parity (PPP) calculations together with GDP predictions for each country cited in the latest Economist (June 13, 2009). For the number geeks, here are my calculations:

Brazil 2008 GDP $1.98T down 1.5% in 2009 = $1.95T
Russia 2008 GDP $2.26T down 5.0% in 2009 = $2.15T
India 2008 GDP $3.29T up 5.0% in 2009 = $3.45T
China 2008 GDP $7.92T up 6.5% in 2009 = $8.43T

BRIC Total 2008 = $15.45T
BRIC Total 2009 = $15.98T
BRIC aggregate growth 2009/2008 = 3.4%

Note 2: There is at least a marginally valid reason for Ahmadinejad's attendance. This first BRIC summit occurs together with the ninth annual Shanghai Co-operation Organisation (SCO) which brings together Russia, China, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan. India, Pakistan, Iran and Mongolia have joined as observer members. I count more foxes than chickens in this hen house!