The Deer Don't Care If Oil is $59

Morning Miners!

It is 5:49 am and a doe just walked past my office window. The deer don't care if oil is $59 but some of us humans do. It is a crazy upside down world when you find yourself cheering for higher oil prices. The ole Colonel has been guilty of this lately because rising oil prices are another sign that the global recovery is picking up steam. Buckaroos, I'm leaving the bleachers at these prices! Supply/demand fundamentals are getting stomped again by speculation:

"Oil prices rose despite a continued lack of demand, evidenced by U.S. crude stocks that are near 19-year highs and expected to climb further. Prices have jumped from below $35 a barrel in February amid signs indicating that the pace of economic deterioration has slowed, setting the scene for an eventual recovery." (WSJ, 5/12/09)

Sound familiar? The good news is that this crowd of speculators don't have the cajones of last year's wild-eyed commodity gamblers. Watch for oil to head south in the next several weeks.

For miners, I think the sweet spot for oil is a price high enough to ensure we're on the mend but low enough to keep production costs from blowing out the mineshaft. Let's say $45-50 is a safe and sane range in our upsy-daisy world.

Copper is a bit more interesting in the month of May. Traditionally, the Chinese buy most of their raw materials during the first few months of the calendar year. If the copper rally continues through this month, higher prices may be a very positive indication of improving demand. I don't think deer give a damn about copper either unless it's coming at'em in the Fall.

Oh, who's the feller standing on his head? Why that's the Colonel turning the Utah salt flats upside down when he was a young pup!

Enough memory lane, let's walk the walk:

Oil is up $1.38 in early morning trading trading at $59.88 (June contract). Gold is up $8.3 to $921.8 (June contract); Silver breaks $14 at $14.210; Copper rallies 0.0555 to $2.1440 (July contract); Molybdenum gets a nice pop to $9.70.

The DOW is up 17 points to 8436.22; the S&P 500, down 0.47 points to 908.77. Miners are mostly happy today:

Barrick (ABX) $34.35 up 2.11%
Newmont (NEM) $43.19 up 1.12%
General Moly (Eureka Moly, LLC) (GMO) $1.85 up 2.21%
Freeport McMoran (FCX) $50.95 down 0.06% (a bellwether mining stock spanning gold, copper & molybdenum)

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

Nucor (NUE) $42.83 up 0.08% - domestic steel manufacturing
ArcelorMittal (MT) $26.98 down 0.13% - global steel producer
POSCO (PKX) $85.64 down 0.04%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is up 0.42%

Cheers,

Colonel Possum

The Eureka Miner's Million Dollar Grubstake

2010 UPDATE: Changes to the Eureka Miner Grubstake for 2010
Thompson Creek Metals (TC) replaces Nucor (NUE) 01-05-2010
US Gold (UXG) replaces ConocoPhilips (COP) 01-12-2010
2011 UPDATE: Changes to the Eureka Miner Grubstake for 2011
Quadra FNX Mining Ltd. (TSX:QUX) replaces EOG Resources Inc. (EOG) 05-29-2011
Sell 384 shares of Caterpillar (CAT) + cash to purchase 50,000 shares of Timberline Resources Corp. (TLR) 07-13-2011

Morning Miners!

What if the ole Colonel gave you a million dollar grubstake to invest in the future of mining in Eureka County? Pardner, wait no longer your greenbacks are in the buckboard!

Eureka's commodity sensitive economy finds itself at the crossroads of global recovery, somewhere near the intersection of gold and molybdenum. Since late March this report has tried to measure the progress of this recovery by looking at stock and commodity markets, commodity sensitive currencies and most recently, the quarterly reports (1Q09) of our major mining interests. Things are not great but we may very well be coming off a bottom and headed for happier days.

I got to thinking this weekend that it would be fun to put twelve stocks in a Eureka Miner's Million Dollar Grubstake portfolio. Five are directly related to the future of Eureka County mining; the remainder are related to domestic and global recovery. We'll start out with $1,000,000 and see how our fortunes grow (or shrink) in the coming months. The Report will periodically update the portfolio which should be a pretty good leading indicator for local recovery. If we get rich, Yee-ha! If we go broke, head for shelter in the new Firehouse!

Here's how we're spending all those greenbacks in the buckboard:

Stocks Related Directly to the Future of Eureka County Mining:

Barrick (ABX) - Gold mining
Newmont (NEM) - Gold Mining
General Moly (Eureka Moly, LLC) (GMO) - Molybdenum mining
ArcelorMittal (MT) - International steel producer, investor in General Moly
POSCO (PKX) - South Korean integrated steel producer, investor in Mt. Hope Project (Eureka Moly, LLC)

Stocks Related to Domestic & Global Recovery:

Gold exchange traded fund (ETF) (GLD) - Gold investment fund
Silver ETF (SLV) - Silver investment fund
Caterpillar (CAT) - Global supplier of mining equipment
Freeport McMoran (FCX) - A bellwether mining stock spanning gold, copper & molybdenum
Nucor (NUE) - Domestic steel manufacturing
EOG Resources (EOG) - Domestic oil & gas producer
Conoco Phillips (COP) - International integrated energy company

Closing prices for Friday, 5/8/2009:

ABX - $34.04 2,448 shares
NEM - $43.78 1.903 shares
GMO - $1.84 45,290 shares
MT - $28.70 2,904 shares
PKX - $89.00 936 shares
GLD - $89.98 1,084 shares
SLV - $13.79 6,043 shares
CAT - $39.64 2,102 shares
FCX - $51.80 1,609 shares
NUE - $43.59 1,902 shares
EOG - $76.87 1,084 shares
COP - $46.91 1,776 shares

Eureka Miner Grubstake value as of Friday, 5/8/2009: $1,000,000, Look for updates in the right column of this blog.

Enough rolling in the dough, let's walk the walk:

Oil is down $1.06 in early morning trading trading at $57.57(June contract). Gold is down $1.9 to $913.0 (June contract); Silver is down $0.100 to $13.855; Copper is down 0.0715 at $2.0745 (July contract); Molybdenum sits at $9.25.

The DOW is down 137 points to 8437.25; the S&P 500, down 19.69 points to 909.54. Miners are lousy today:

Barrick (ABX) $33.49 down 1.62%
Newmont (NEM) $43.05 down 1.67%
General Moly (Eureka Moly, LLC) (GMO) $1.75 down 4.89%
Freeport McMoran (FCX) $49.91 down 3.65% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are not so hot(a "tell" for General Moly):

Nucor (NUE) $42.50 down 2.50% - domestic steel manufacturing
ArcelorMittal (MT) $27.93 down 2.68% - global steel producer
POSCO (PKX) $89.19 down 3.16%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is down 2.42%

Cheers,

Colonel Possum

Image of old gold miner from http://culturemaking.typepad.com

Springtime for General Moly

Morning Miners!

The ole Colonel is off the road and ready for some "V" time. Don't worry; the daily reports will still be coming at you, I'm just not waking up before the markets open! With a little extra time on my hands, I sorted through my "good pile" for something to read last night and came across the Spring 2008 edition of Mining Quarterly.

The cover story read, "General Moly ready to roll with its Mount Hope project near Eureka." There's a cool picture a chunk of rock containing significant amounts of molybdenum on the cover, remember? I imagine the article was written sometime after gold prices broke $1000 and before oil courted $150. What a difference a year makes.

Through no fault of their own, General Moly (GMO) got hit with the same financial tsunami that everyone on the planet has endured since last Fall. The Colonel is not one to groan and moan so here are some positive thoughts. We know from their recent quarterly report that GMO is in pause mode and good to go once the global recovery gets some legs. Rereading the Quarterly article, reminded me that POSCO, No. 3 steel producer, has a 20% interest in the Mt. Hope project. South Korean POSCO is investing in the joint venture through its Canadian subsidiary, POSCO-Canada.

"Eureka!" the ole Colonel cried out as his eyeglasses hit the floor, "POSCO should be directly benefiting from China's recent stimulus plan!" I checked the numbers and lo and behold PKX (ticker symbol for POSCO) is up 70% from this March's low. We've been tracking the rally of Arcelor Mittal (MT), No. 1 steel producer and another investor in GMO, for sometime in the Report. I'm adding POSCO to our list today, I can't think of a better way to assess the future of Mt. Hope than by watching the fortunes of their benefactors. Think POSitive, think POSCO!!

Enough talk, let's walk the walk:

Oil is up in midday trading at $57.58(June contract). Gold is down $6.7 to $908.8 (June contract); Silver is down $.175 to $13.855; Copper is steady at $2.1690 (July contract); Molybdenum sits at $9.25.

The DOW is up 66 points to 8,475.80; the S&P 500, up 6,51 points to 913.90. Miners are good today:

Barrick (ABX) $32.81 up 0.37%
Newmont (NEM) $42.76 up 0.02%
General Moly (GMO) $1.73 up 0.58%
Freeport McMoran (FCX) $50.64 up 3.25% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are rockin'(a good "tell" for General Moly):

Nucor (NUE) $43.49 up 1.66% - domestic steel manufacturing
ArcelorMittal (MT) $28.54 up 5.47% - global steel producer
POSCO (PKX) $86.41 up 3.20%- South Korean integrated steel producer

Cheers,

Colonel Possum

On the Road Again!

Morning Miners!

It is 6:23 am and life is good. The ole Colonel will be packing up his truck in a bit for a road trip. The report will be off the air for a short while but I think I'm leaving you with fairly good news for local mining and the overall economy. Let's look in the rear view mirror at our recent events:

Quarterly Reports - Barrick (ABX), Newmont (NEM) and General Moly (GMO) all reported their performance for the first quarter of 2009 last week. The big boys are on solid ground with good balance sheets and new projects (e.g. Cortez Hills) in the works. I sold all my Barrick stock last Spring but came back for a nibble Friday - giddy-up go! Although General Moly is in pause mode, there are encouraging signs that the steel industry is coming off the bottom. Moly price and GMO stock performance are showing signs of life.

Broader Markets - As reported in the Wall Street Journal yesterday:

"The Dow Jones Industrial Average jumped 214 points and the S&P 500 surged 3.4% to retake the 900 level and turn positive for the year to date as data on construction spending and home sales bolstered the case that the economy bottomed out in the first quarter and may be beginning to stabilize." (WSJ, 5/4/2009)

Commodities - After a pause, Copper is on a tear again and Molybdenum has got another pop to $9.25. Gold prices are again above $900/oz but may sag some as more safe haven money rushes to the equity markets. I'll still keep my bet that we see $929 before the middle of this month - Yee-ha!

Currencies - Commodity sensitive currencies (e.g. our friends the "Aussie" and "Loonie") are taking the dollar to task lately:

"Economic data and continued gains for stock and commodity prices kept global risk appetites elevated, resulting in more losses for the dollar against a broad range of currencies.

Signs that Chinese industry is ramping up and may soon stoke global demand for commodities and other raw materials are 'an ongoing positive for commodity currencies and commodity prices,' currency strategists at Barclays Capital in New York said, and contributed to the outperformance Monday of currencies like the Australian [Aussie] and Canadian [Loonie] dollars." (WSJ, 5/5/09)


Enough talk, let's walk the walk:

Oil is steady in early trading at $54.45(June contract). The dollar ("Dixie" or .DXY) is up 0.16% at 83.80. The commodity index (.CRB) is down 0.02% to 232.34.

Gold is up $11.3 to $913.5 (June contract); Silver is up $.392 to $13.505; Copper is is down slightly $.0270 to $2.1170 (July contract); Molybdenum pops up to $9.25!

The DOW is up 22 points to 8,449.20; the S&P 500, down 1.11 points to 906.13. Miners are mostly good today:

Barrick (ABX) $31.59 up 2.27%
Newmont (NEM) $41.30 up 0.85%
General Moly (GMO) $1.70 up 1.80%
Freeport McMoran (FCX) $48.58 down 0.49% (a bellwether mining stock spanning gold, copper & molybdenum)

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

Nucor (NUE) $44.65 down 0.51% - domestic steel manufacturing
ArcelorMittal (MT) $28.329 up 1.43% - global steel producer

Cheers,

Colonel Possum

Oil Breaks $54 - Beer, Colonel!

Howdy Miners!

Oil broke $54 (June contract) at 1:55 pm (ET), closing out another bet in the Colonel's Beer Derby (see right column):

Oil sees $54 before $47 on or before 5/8/09

We all hate for oil prices to rise but this may be another sign that global recovery is on the horizon (at least for the time being).

Send the ole Colonel your bet on the future!

Cheers,

Colonel Possum

General Moly Conserves Cash, Adjusts Time Line

Morning Miners!

It is 6:18 am, the coffee is hot and warmer days are on the horizon! Perhaps no mining interest in our area is more influenced by global recovery than General Moly and their Mt. Hope Project. The Report has covered aspects of steel demand and production (a major use of Molybdenum) for the past several weeks. The jury is still out but there do seem to be encouraging signs coming from China's stimulus package. Rising demand in China helps all steelmakers, whether or not they have plants in China, because it keeps excess Chinese steel from flooding the market and depressing prices. Last week the price of Molybdenum jumped from slightly below $8 to a thin flat washer above $9, another encouraging sign.

General Moly announced their first quarter 2009 results Friday. You can access their entire report by clicking on the link in the "Miner's Corner" to your right. The two important elements are their cash conservation plan and adjustments to the time line for initial production. Here are the relevant extracts from their report:

CASH CONSERVATION PLAN

Given the continued uncertainty in the project finance market, current low molybdenum prices, and a longer than expected timeframe to receive the federal permits to begin construction at the Mt. Hope project, on March 26, 2009 the Company implemented a cash conservation plan to reduce expenditures and conserve cash for 2009 and 2010 in order to maximize financial flexibility. With a March 31, 2009 consolidated cash balance of $80.4 million, the Company has the capacity to continue its current level of permitting efforts, maintain efforts to secure project financing, and secure the most critical long lead equipment for the ultimate construction of the Mt. Hope project.

The cash conservation plan will also reduce total cash utilization to approximately $1 million per month by the fourth quarter of this year for all expenditures other than the key equipment purchases. Based on current cash on hand and the cash conservation plan, the Company expects it will have adequate liquidity for operations, as modified, through the end of 2010. Engineering efforts, currently approximately 60% complete, have been suspended pending the completion of financing.

PERMIT AND DEVELOPMENT UPDATE

Following recent discussions with the BLM related to the Company's hydrologic studies of both pit lake geochemistry and regional hydrology, the Company determined that additional analysis and data acquisition will be conducted to improve the technical adequacy of the studies. The Company believes this further work does not indicate a concern related to ultimate permit receipt; however, this work is the primary reason for the delay in the expected receipt of the Record of Decision (ROD) from the fourth quarter of 2009 to mid-year 2010. State-issued permits related to Air Quality, Tailings Dam Safety, and Water Pollution Control are anticipated to be received well before the federal permit (ROD) is received. Once financing is obtained and we have received the major operating permits and the ROD from the BLM, it is expected that Mt. Hope can be constructed and in production within 20 months.

The ole Colonel wishes General Moly the best of luck and will continue providing updates on the pace of global recovery affecting their future.

By the by, here's a new beer bet with a 12-month stretch (the Colonel bought Barrick at $29.09, Friday):

Barrick (ABX) sees $39 before $26 on or before 5/31/2010

Enough talk, let's walk the walk:

Oil is up $0.19 in early trading to $53.39(June contract). The dollar ("Dixie" or .DXY) is down 0.18% at 84.392. The commodity index (.CRB) is up 0.31% to 229.33.

Gold is up $3.1 to $891.3 (June contract); Silver is up $.045 to $12.545; Copper is continuing its rally, up $.0525 to $2.1535 (July contract); Molybdenum holds slightly above $9.

The DOW is down slightly to 8,318.34; the S&P 500, up 11.39 points to 888.91 continuing its strong rally. Miners are ripping today:

Barrick (ABX) $29.98 up 3.38%
Newmont (NEM) $39.82 up 2.81%
General Moly (GMO) $1.62 up 3.85%
Freeport McMoran (FCX) $47.57 up 6.95% (a bellwether mining stock spanning gold, copper & molybdenum)

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

Nucor (NUE) $44.17 up 6.61% - domestic steel manufacturing
ArcelorMittal (MT) $26.47 up 3.44% - global steel producer

Cheers,

Colonel Possum

Two Parts Pig, One Part Bird, One Part Human

Morning Miners!

It is 6:53 am and TGIF! The ole Colonel is getting a little goofy listening to every talking head on television with an opinion on the swine flu outbreak. When I heard a microbiologist describe the H1N1 virus as two parts pig, one part bird and one part human I turned my set off. Isn't this coming from the same corner of the world that brought us Chupacabra? OK, how can we turn this into a miner's market discussion?

The Wall Street Journal reports this morning:

"Stock markets around the world shrugged off some of the worst economic data in decades and the bankruptcy filing of a top U.S. auto maker to post their biggest monthly jump in nearly two decades, capping a dramatic seven-week rebound. The Standard & Poor's 500-stock index, up 9.4% for the month, had its best April since 1938." (WSJ 5/1/09)

Hmm, a lot of irrational exuberance out there and here comes Chupacabra's cousin. I think this whole flu thing is a fizzle but if it isn't a pandemic there will no doubt be something to drive these markets down. Gold is presently getting hammered because money is flowing from safe havens to the stock markets. If there is a reversal in fortunes, there will be a rush back to gold and giddy-up go!

I think the so called "Flu Play" is right in our backyard. Buy gold now? Nah, I think I'll buy Barrick (ABX) instead. Yesterday's closing price was $29.10 and Credit Suisse set a 12-month target price at $40 with a sector outperform rating. That's a 37.5% return on your money buckaroos, sure beats a CD rate nowadays. The other cool thing is that Barrick pays a 1.37% dividend (given yesterday's price), compare that with money market rates that are presently sitting at 1.30%. The downside risk is a 10.5% loss if ABX returns to its March low; 38% upside/10% downside, that's pretty good odds my friend.

The ole Colonel doesn't give investment advice and equities can always go to zero (unlike gold). I just thought you might be interested in what I plan to do if a little furry critter crawls my way.



Enough fear mongering, let's walk the walk:

Oil jumped $1.03 in early trading to $52.15 (June contract). The dollar ("Dixie" or .DXY) is down 0.20% at 84.655. The commodity index (.CRB) is up 1.19% to 225.03.

Gold is in retreat $6.7 to $884.5 (June contract); Silver is down $..035 to $12.290; Copper is back in rally mode, up $.325 to $208.00 (July contract); Molybdenum jumped to $9...yee-ha General Moly!

The DOW is down 42 points to 8126.23; the S&P 500, down 3.69 points to 869.12 falling slightly below the critical level of 870. Miners are mixed today:

Barrick (ABX) $29.98 down 0.41%
Newmont (NEM) $39.15 down 2.71%
General Moly (GMO) $1.5199 down 0.01%
Freeport McMoran (FCX) $43.74 up 2.56% (a bellwether mining stock spanning gold, copper & molybdenum)

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

Nucor (NUE) $41.17 up 1.18% - domestic steel manufacturing
ArcelorMittal (MT) $23.86 up 1.19% - global steel producer

Cheers,

Colonel Possum