Still Fearless in 2010? The Colonel's Market Prediction

Morning Miners!

It is 6:05 AM. Have a cup of that delicious Raine's Red Label TGIF and let's return to a puzzle we started at the end of last year. On 12/29/09 I stated, "Like Alice in Wonderland, the ole Colonel is becoming 'curiouser and curiouser' about the markets lately (Fearless in 2010?). We had a terrorist attack on an airline recently that now appears tied to Al Qaeda and the markets hardly took notice."

Pardner, we're facing the backdoor of March and I'm not any less "curiouser." We've had some ups and downs with sovereign debt issues and China worries but all in all the broader markets have pushed ever higher. Some experts have recently called the market's rally a "melt-up"; others observe it has nothing to do with "fundamentals" or a company's "value." It seems like for many the only fear in the marketplace is a concern that they may miss the rally. Maybe that should be scary.

This Report uses the S&P 500 Volatility Index or "VIX" to gauge fear and we've talked about it quite a bit since last Fall. Here's a link to the original article if you need to brush up on the so-called "fear index":

Viva Las VIXas! Don't Worry Be Happy (The Eureka Miner's Market Report, 9/11/2009)

Simply stated, the VIX above a level of 25 can be a pretty scary place, lately we've been in the sixteens. In fact, yesterday we were at levels close to the market peak just before the now familiar "Great Recession". Look at these numbers:

10/9/2007
S&P closing high 1565.15
VIX close 16.12

3/18/2010
S&P closing high 1165.83
VIX close 16.62

The markets just opened up and the VIX is starting out of the gates at 16.24. This is the Friday before a possible weekend vote on the highly controversial Health Care Bill and renewed confusion about the Greek bailout plan. Fearless on Friday is pretty "curiouser" for my way of thinking. Now, there will probably be a sell-off later today and Monday could be a bad one but I'm willing to bet that there is more room to run in this goofy "melt-up". How about a Colonel prediction? I'd day an S&P 1193 is a reasonable near term top and better-than S&P 1251 is in the cards for 2010. Let's throw some dates on these - two new bets for the Colonel's Beer Derby (lower right column of this blog):

The S&P will break 1193 before Memorial Day 2010
The S&P will break 1251 before Christmas 2010

How low can we go? Now that's a real scary thought buckaroos...stay tuned!


Enough prognostication, let's walk the walk:

4-WD is OFF - the VIX or "fear index" is below 25, an improving broader market trend is expected to continue; metals & miners have a smoother road too with FCX comfortably above $74 (what is this?)

The YELLOW light is switched on our fuel gauge with oil above $80

An ORANGE light is ON for possible adverse regulation/legislation: Miner's claim fee, Miner taxation, Cortez Hills & mercury emissions

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

NYMEX/COMEX: Oil is down $0.32 in early trading to $82.22 (May contract, most active); Gold is down $3.0 to $1124.5 (April contract, most active); Silver is down $0.097 to $17.325 (May contract); Copper is up $$0.0010 to $3.4055 (May contract); Western Molybdenum Oxide sits at $16.25, the LME 3-month and 15-month contracts (seller) both rest at $17.24

The DOW is down 40.59 points to 10738.58; the S&P 500 is down 5.55 to 1160.28. The miners are down:

Barrick (ABX) $39.16 down 1.56%
Newmont (NEM) $50.80 down 0.92%
US Gold UXG) $2.77 down 2.12%
General Moly (Eureka Moly, LLC) (GMO) $3.19 down 2.45%
Thompson Creek (TC) $13.29 down 2.92%
Freeport-McMoRan (FCX) $79.19 down 1.35% (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $42.39 down 2.21% - global steel producer
POSCO (PKX) $120.32 down 0.75% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 1.68% to $1,328,669.12 (what is this?).

Cheers,

Colonel Possum

Headline photograph by Mariana Titus

Commodities Wear The Green for Saint Patrick's Day

Morning Miners!

It is 6:02 AM, grab a green mug and let's toast the Irish! It looks like even commodities are wearing the green for Saint Patrick's Day. The Report will take the morning off tomorrow and be back online Friday.

I don't know if Ben Bernanke has any Irish in him but his comments yesterday sparked a rally in commodities and put a bit of clover on the metals & miners. The U.S. Federal Reserve will continue to hold benchmark rates near zero and renewed a promise to keep them exceptionally low for an "extended period." This report's theme for 2010 is that money will flow to commodities as long as interest rates and the "fear index" (as measured by the .VIX, what's this?) are low. We may be bumped around by sovereign debt issues and China worries but the commodity uptrend should remain intact lacking any major negative developments for either (or some new global bugaboo).

The broader markets just opened on the upside with the .VIX in the sixteens, far below our trip level for concern of 25. To put this in perspective, exactly two years ago Bear Sterns collapsed causing the .VIX to break 35. This set off a financial crisis that peaked with fears of a run on the banks that October and a .VIX nearly hitting 100. Today's "fear levels" are indeed modest by comparison.

Copper, our faithful canary in the global recovery mineshaft, should remain a good test for the low interest rate/fear hypothesis. This morning COMEX copper is near the $3.40/lb level recovering almost all of its losses for March. Mineweb carries a good article on the connection between copper and the Fed's statement this morning:

US Fed statement boosts copper prices (Mineweb, 3/17/2010)

So don't worry, be happy and let's share a pint of Guinness on Lá Fhéile Pádraig!

Enough rolling in the clover, it's time to walk the walk:

4-WD is OFF - the VIX or "fear index" is below 25, improving broader markets are expected; metals & miners have a smoother road with FCX comfortably above $74 (what is this?)

The YELLOW light is switched on our fuel gauge with oil above $80

An ORANGE light is ON for possible adverse regulation/legislation: Miner's claim fee, Miner taxation, Cortez Hills & mercury emissions

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

NYMEX/COMEX: Oil is up $$0.77 in early trading to $82.47 (April contract, most active); Gold is up $1.7 to $1124.2 (April contract, most active); Silver is up $0.036 to $17.390 (May contract); Copper is up $$0.0343 to $3.3995 (May contract); Western Molybdenum Oxide sits at $16.25, the LME 3-month and 15-month contracts (seller) remain at $18.14

The DOW is down 29.02 points to 10715.00; the S&P 500 is up 4.58 to 1164.04. The miners are heading to the pub:

Barrick (ABX) $40.26 up 0.42%
Newmont (NEM) $51.34 unchanged
US Gold UXG) $2.89 unchanged
General Moly (Eureka Moly, LLC) (GMO) $3.39 down 0.59%
Thompson Creek (TC) $13.61 unchanged
Freeport-McMoRan (FCX) $82.48 up 0.35% (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $43.84 up 0.57% - global steel producer
POSCO (PKX) $123.25 up 1.49% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.20% to $1,369,545.77 (what is this?).

Cheers,

Colonel Possum

Headline photograph by Mariana Titus

Miss Moly & Gold Pass the Test

Morning Miners!

It is 5:57 AM. Grab a cup of mid-March coffee and let's check on Miss Moly and her metallic compadres. You'll remember yesterday we saw the metals get pounded starting with Friday's sharp decline in Western moly oxide price and a pullback in the base metals (Hang On, Another Pothole - Moly, Copper Dings). COMEX copper closed the session losing all its gains for March. The culprit? Good ole sovereign debt and China jitters; typical headline-driven volatility for so called "risky assets."

There were at least two new and positive things to note. For molybdenum, the 15% decline in spot price did not crater the London Metal Exchange (LME) futures on Monday. Secondly, gold and silver showed some new found resilience breaking their lock-step march with the base metals.

For moly, the 3-month and 15-month contracts both moved up to $18.14/lb and the Western moly oxide price recovered from its $15.50/lb low to close at $16.25/lb. The ole Colonel believes this is an important test of a very young financial market for molybdenum. I read this latest price action as investor confidence in future moly prices, unshaken by a scary wobble in the spot market. That gets a Colonel Yee-ha!

Yesterday, the Report stated:

"In the recent past, precious metals have jumped down the mineshaft with base metals on any murmur of bad news coming from the global front. Gold returning to 'safe haven' status is somewhat encouraging as we hit another pothole." (The Eureka Miner's Market Report, 3/15/2010)

I got some backup this morning from Jim Wyckoff of Kitco Metals who made a similar observation about Monday's gold price and the follow through today:

"Spot gold in Europe was also higher Tuesday. London traders were impressed with gold's ability to post gains Monday despite a weaker Euro currency and stronger U.S. dollar." (Kitco Metals, 3/16/2010)

By the by, Jim writes a terrific daily roundup especially on the precious metals. You can read his full piece with this link:

A.M. Kitco Metals Roundup: Gold Higher as U.S. Dollar Weakens (Kitco Metals, 3/16/2010)

Here's London spot gold today:


Not a bad bounce and the S&P 500 has just posted a new intraday high of 1153.85 (7:33 AM PDT). The Federal Reserve's statement this afternoon after their Federal Open Market Committee meeting is not expected to upset the ore cart, we'll see. Stay tuned buckaroos!

Enough talk, let's walk the walk:

4-WD is OFF - the VIX or "fear index" is below 25, improving broader markets are expected; metals & miners have a smoother road with FCX comfortably above $74 (what is this?)

The YELLOW light is switched on our fuel gauge with oil above $80

An ORANGE light is ON for possible adverse regulation/legislation: Miner's claim fee, Miner taxation, Cortez Hills & mercury emissions

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

NYMEX/COMEX: Oil is up $$0.95 in early trading to $80.75 (April contract, most active); Gold is up $17.8 to $1123.1 (April contract, most active); Silver is up $0.332 to $17.440 (May contract); Copper is up $$0.0490 to $3.3640 (May contract); Western Molybdenum Oxide sits at $16.25

The DOW is down 3.78 points to 10620.91; the S&P 500 is down 2.21 1147.78. The miners are mostly up today:

Barrick (ABX) $40.12 up 2.85%
Newmont (NEM) $51.17 up 2.90%%
US Gold UXG) $2.92 up 2.10%
General Moly (Eureka Moly, LLC) (GMO) $3.41 down 1.45%
Thompson Creek (TC) $13.77 up 1.17%
Freeport-McMoRan (FCX) $81.87 up 1.5% (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $42.59 up 1.19% - global steel producer
POSCO (PKX) $120.26 down 1.02% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.85% to $1,363,759.71 (what is this?).

Cheers,

Colonel Possum

Headline photograph by Mariana Titus

Hang On, Another Pothole - Moly, Copper Dings

Morning Miners!

It is 5:53 AM. Have a cup of my "leap-ahead" coffee and see if we can catch up with the time change. Looks like we've hit another pothole on the global recovery trail putting a 15% dent in molybdenum Friday and a sage scratch on copper and other base metals this morning. You guessed it, more hand wringing on sovereign debt issues and China. The Wall Street Journal reports this morning:

"LONDON - A warning by Moody's of the risk to the top credit ratings of the U.S., U.K., France and Germany depressed market sentiment Monday, boosting the dollar and yen as investors turned to safe havens." (WSJ, 3/15/2010)

And,

"China also contributed to the negative mood in financial markets, with Chinese Premier Wen Jiabao indicating that he has little intention of changing China's foreign exchange policy of keeping the yuan pegged to the dollar. He noted that international pressure on China to let the yuan appreciate is counterproductive." (WSJ, 3/15/2010)

Also Base Metals reports:

"Base metals were sullied by rising risk aversion on Monday on the LME, as investor caution grew over China's monetary tightening timetable, while markets ignored falling inventories across most major contracts." (Base Metals, 3/15/2010)

Investors are running (again) from the so-called "risk trade" (metals & miners in our case) to safer investments. Interestingly, gold and silver are showing some resilience trading slightly above Friday's close on the COMEX. In the recent past, precious metals have jumped down the mineshaft with base metals on any murmur of bad news coming from the global front. Gold returning to "safe haven" status is somewhat encouraging as we hit another pothole. As a consequence it looks like our favorite gold miners (ABX, NEM, UXG) are faring better than the other guys with hard hats (FCX, GMO, TC).

What's up with molybdenum? Here's a wrap up of last week's price action at the close, Friday (3/05/2010):

Western Moly Oxide (FeMo65) $15.00/lb (the price reported by Infomine and tracked by Base Metals on the General Moly Website)

This takes us below the Report's "magic number" for moly of $16.50/lb (Molybdenum Bounces Back to Magic Number). Here's a 1-month chart of Miss Moly and Uncle Nickel:


Moly Oxide, Europe (Mo Drummed Molydbic Oxide EU) $17.00/lb (the price reported in the Metals Bulletin)

London Metal Exchange (LME) Futures Contracts

3-Month (Buyer) $37,000/metric ton $16.78/lb
3-Month (Seller)$38,000/metric ton $17.23/lb

15-Month (Buyer) $36,750/metric ton $16.67/lb
15-Month (Seller)$37,750/metric ton $17.12/lb

The LME 3-month contract (seller) is down from the 2/22 launch price, here's a chart from then to Friday's close:



It will be interesting to see how a sudden drop in Western moly oxide will ripple through the LME futures market. This is the first time there has been a greater-than $1.50 difference between the two. On the brighter side Steel Business Briefing reports today that "LME moly trading is picking up" and "moly growth is seen accelerating in 2010."

Enough global hand wringing, let's walk the walk:

4-WD is OFF - the VIX or "fear index" is below 25, improving broader markets are expected; metals & miners have a smoother road with FCX above $74 (what is this?)

The YELLOW light is switched on our fuel gauge with oil above $80

An ORANGE light is ON for possible adverse regulation/legislation: Miner's claim fee, Miner taxation, Cortez Hills & mercury emissions

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

NYMEX/COMEX: Oil is down $0.86 in early trading to $80.38 (April contract, most active); Gold is up $2.4 to $1104.1 (April contract, most active); Silver is up $0.002 to $17.050 (May contract); Copper is down $$0.0540 to $3.33260 (May contract); Western Molybdenum Oxide drops to $15.00

The DOW is down 3.78 points to 10620.91; the S&P 500 is down 2.21 1147.78. The miners are mixed today:

Barrick (ABX) $39.02 down 0.10%
Newmont (NEM) $49.82 down 0.44%
US Gold UXG) $2.93 up 1.73%
General Moly (Eureka Moly, LLC) (GMO) $3.42 down 2.28%
Thompson Creek (TC) $13.54 down 1.02%
Freeport-McMoRan (FCX) $80.07 down 0.58% (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $42.06 down 0.99% - global steel producer
POSCO (PKX) $120.71 down 2.04% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.79% to $1,350,174.51 (what is this?).

Cheers,

Colonel Possum

Headline photograph by Mariana Titus

Western Lithium, Gold, Silver, Copper & Oil

Morning Miners!

It is 5:59 AM. I've got a pot of Raine's Red Label TGIF coffee brewing, let's put a wrap on this week. The Report has been drilling down on on molybdenum lately with its recent launch on the London Metal Exchange (LME) and General Moly's groundbreaking announcement last Friday (A Game Changer for General Moly & Eureka County). It's high time to change bits and catch up with some of our other favorite metals and oil.

Lithium

Mineweb reported yesterday that Western Lithium (WLC.V) is seeking strategic partners to help develop a planned mine in Kings Valley over in Humboldt County. President Jay Chmelauskas says they hope to bring it on line by early 2014. Mineweb reports, "Western Lithium is betting that car makers' plans to develop electric vehicles will prove a boon to the lithium ion battery industry, lifting demand for lithium metal by two- or three-fold in the coming years." The Kings Valley massive lithium carbonate deposits can be exploited by low-cost open pit mining. Here's the latest:

Western Lithium looking for strategic partners for Nevada mine (Mineweb, 3/11/2010)

If you're just catching up with this exciting story here are some background articles on how emerging battery technologies may become very important to our State and County through the mining of lithium together with vanadium and silver:

The Next Big Thing in Northern Nevada (The Eureka Miner's Market Report, 9/28/2009)

A Big Step into the Future for Eureka County (The Eureka Miner's Market Report, 10/23/2009)

A Silver Lining for the Silver State? (The Eureka Miner's Market Report, 11/16/2009)

What's in a Battery for Eureka County? (The Eureka Miner's Market Report, 11/23/2009)

More News on US Gold & Western Lithium (The Eureka Miner's Market Report, 01/12/2010)

Gold & Silver

It is nearly mid-month and gold is trading at $1112/oz on the COMEX this morning. At the beginning of the month, the Colonel picked $1120/oz as a nominal price for March and I see no compelling reason to change it (The Colonel's Outlook for March). Kitco Metals sees a lot of price resistance at $1125/oz and solid support at $1110/oz. Looks like a Goldilocks to "not too hot or not too cold" month so far to me:

Kitco Metals Roundup: Gold Higher as U.S. Dollar Index Slumps (Kitco Metals, 3/12/2010)

For $1120/oz gold, I'll hold on silver price too:

The fair value of silver is $17.184 in a range of $15.944 to $18.423

This morning COMEX silver is sitting at 17.200 just a feather above fair value. Comme ci comme ça, pardner.

Copper

There have been many calling for the demise of copper price recently but it just doesn't happen. Freeport-McMoRan (FCX) keeps on ticking above $80 too, a comfortable margin above the Report's warning level of $74. For $1120/oz gold, the March numbers for copper were:

The fair value of copper is $3.2170 in a range of $2.9363 to $3.4977

COMEX copper is trading at $3.3880, above fair value but hanging comfortably in its range. The March decline in LME copper stocks is price-supportive, reversing the build-up trend earlier this year:



Oil

Oil may very well become the wild card in our deck this month jumping outside its expected range this morning on the upside. Nuts.

The fair value of oil is $76.55 in a range of $70.33 to $82.77

COMEX oil is $83.19, is there a $90 barrel sitting out there this coming Spring? I'll keep my eyes on this bad dog buckaroos.

Enough talk, let's walk the walk:

4-WD is OFF - the VIX or "fear index" is below 25, improving broader markets are expected; metals & miners are headed for smoother roads with FCX above $74 (what is this?)

The YELLOW light is switched on our fuel gauge with oil above $80

An ORANGE light is ON for possible adverse regulation/legislation: Miner's claim fee, Miner taxation, Cortez Hills & mercury emissions

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

NYMEX/COMEX: Oil is up $0.76 in early trading to $83.19 (April contract, most active); Gold is up $3.8 to $1112.0 (April contract, most active); Silver is up $0.040 to $16.995 (May contract); Copper is up $0.0110 to $3.3880 (May contract); Western Molybdenum Oxide is steady at $18.25, LME 3-month futures (seller) is $17.24; 15-month, $17.01

The DOW is up 0.23 points to 10612.07; the S&P 500 is down 1.24 to 1149.00. The miners are mixed today:

Barrick (ABX) $39.04 down 0.36%
Newmont (NEM) $50.16 down 0.52%
US Gold UXG) $2.66 unchanged
General Moly (Eureka Moly, LLC) (GMO) $3.50 unchanged
Thompson Creek (TC) $13.63 up 1.94%
Freeport-McMoRan (FCX) $80.81 up 0.39% (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $42.69 up 1.62% - global steel producer
POSCO (PKX) $123.55 down 0.19% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.34% to $1,360,843.55 (what is this?).

Cheers,

Colonel Possum

Headline photograph by Mariana Titus

What is a Black Swan Event? Does General Moly Qualify?

Morning Miners!

It is 6:00 AM sharp. Have a hot cup of Thor's java and let's talk about unusual events. Wild horses are abundant in Northern Nevada but if I told you I saw a zebra grazing in Antelope Valley, you may offer to drive me to Reno for a brain scan. Horses don't come in black and white stripes, at least in these parts. Up to the 17th Century, Europeans thought all swans were white. After the discovery of black swans in Western Australia in 1697, by a Dutch explorer Willem de Vlamingh, the term "black swan" came to mean that a perceived impossibility may later be found to exist.

Fast forward to this century and a book called The Black Swan (2007) by Nassim Nicholas Taleb. Mr. Taleb regards almost all major scientific discoveries, historical events, and artistic accomplishments as "black swans" — undirected and unpredicted. He gives the rise of the Internet, the personal computer, World War I, and the September 11, 2001 attacks as examples of Black Swan Events (see note 1).

This concept has been extended to markets and the statistical models that attempt to predict their behavior. My experience is that markets behave statistically as physical processes...until they don't. Extreme deviations from normal expectations are when things get exciting and sometimes are also referred to as Black Swan Events. One year ago when the S&P 500 dropped below 670 is an example, one most of us would like to forget.

Mr. Taleb lays out a simple criteria to judge the occurrence of a Black Swan Event:

1.The event is a surprise (to the observer).
2.The event has a major impact.
3.After the fact, the event is rationalized by hindsight, as if it had been expected

Last Friday, General Moly (GMO) announced that they expected full funding of the Mt. Hope project from the Hanlong Group and their share price skyrocketed to $3.99 at the market close (A Game Changer for General Moly & Eureka County). GMO traded a record 12,227,852 shares, sixteen times their average volume. To put this in perspective, major molybdenum producer Thompson Creek Metals (TC) trades an average of 1,773,148 shares per day. Impressive but was Friday a Black Swan Event for General Moly and Eureka County?

Before we answer this question, let's review some statistics. Now don't run out of the break room pardner, this won't hurt and Shaquille O'Neil will give us a hand. The average American male stands 5'10" tall. The heights of males statistically follow a Gaussian or bell-shaped curve. The average height falls in the middle of the curve; short folks are on the left, tall'uns on the right. Two thirds of the population fall within a Standard Deviation of the average which for America is about 3 inches. Standard deviation is also called "sigma" and here's how it works for tall folks:

Average heigth 5'10" +/- 3"
1-sigma group is 6'1" to 6'4"
2-sigma group is 6'4" to 6'7"
3-sigma group is 6'7" to 6'10"
...
5-sigma group is 7'1" to 7'4"

Since most men are within several standard deviations of the average, the "bell-curve" has a peak in the center and then "tails" off dramatically. OK Shaq, help us out. Shaquille O'Neil is 7'1" falling just inside the 5-sigma group and you don't see too many guys his height walking around...get the picture?

The Colonel created a model of General Moly relative to Thompson Creek. The chart below compares the stock price of GMO to Thompson Creek Metals (TC) for the last 3-months (a larger, more readable version, is near the bottom of this blog page). The magenta line is the "fair value" of GMO relative to TC; the aqua lines represent the expected range (+/- 2-standard deviations) for GMO given this 3-month record.


Given last Thursday's (3/04) closing price for TC of $13.94, the fair value of GMO was $2.68 in a range of $2.41 to $2.96. On Thursday GMO's actual price was $2.56, undervalued with respect to TC by 0.9-sigma (standard deviation).

On last Friday (3/5), GMO knocked the cover off the ball with an 8.7-sigma price event. You'll notice that for 3-months, GMO price action has faithfully stayed within the expected range with a tight correlation of 0.877 (one-year correlation is 0.873). The jump Friday definitely qualifies for a "fat tail" in the bell-curve, something that happens very rarely. But is this a Black Swan Event?

Let's answer Taleb's three qualifying questions. First, was the announcement a surprise? Yes, the Hanlong transaction passed under the Wall Street radar; generally someone finds out about such things and the stock price shoots up prior to the press release. This is often called "buy the rumor, sell the news." In our case GMO was undervalued prior to the announcement; no rumors, no bounce. Statistically anything greater tha a 2-sigma move is a "surprise"; 8.7-sigma is a much, much taller Shaq walking down Main Street!

Only time will tell whether this deal will have a "major impact" on Eureka. With a projected mine life of forty years, Mt. Hope should be a significant part of our economy for the kids and grand kids. Unless something upsets the ore cart, I'd give the major-impact-question a resounding "yes." The last question will probably also earn an affirmative once folks see brand new haul trucks rolling down HWY 50 on low-boy trailers destined for Mt. Hope. "Who didn't expect them to get funding?" some will say forgetting the Great Recession, tight credit markets and an uncertain global recovery. Yes, this will all look like a sure bet when little Eureka school kids learn how to spell m-o-l-y-b-d-e-n-u-m right after mastering m-i-s-s-i-s-s-i-p-p-i. I think we have a black swan in our pond buckaroos!

Now what about that herd of zebras in Antelope Valley?

Enough talk, let's walk the walk:

4-WD is OFF - the VIX or "fear index" is below 25, improving broader markets are expected; metals & miners are headed for smoother roads with FCX above $74 (what is this?)

The YELLOW light is switched on our fuel gauge with oil above $80

An ORANGE light is ON for possible adverse regulation/legislation: Miner's claim fee, Miner taxation, Cortez Hills & mercury emissions

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

NYMEX/COMEX: Oil is down $0.09 in early trading to $82.00 (April contract, most active); Gold is down $2.6 to $1105.5 (April contract, most active); Silver is down $0.023 to $16.995 (May contract); Copper is down $0.0070 to $3.3610 (May contract); Western Molybdenum Oxide is steady at $18.25, LME 3-month futures (seller) bumped up to $18.14; 15-month, $17.91

The DOW is down 7.78 points to 10559.55; the S&P 500 is down 1.39 to 1144.22. The miners are mixed today:

Barrick (ABX) $38.85 up 0.26%
Newmont (NEM) $50.12 down 0.30%
US Gold UXG) $2.92 up 2.10%
General Moly (Eureka Moly, LLC) (GMO) $3.50 up 0.29%
Thompson Creek (TC) $13.55 down 0.15%
Freeport-McMoRan (FCX) $79.96 down 0.15% (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $41.87 down 1.34% - global steel producer
POSCO (PKX) $122.99 down 1.58% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.20% to $1,354,654.59 (what is this?).

Cheers,

Colonel Possum

Note 1: More about Black Swan Events









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Moly Miners Lead the Pack

Morning Miners!

It is 5:57 AM. Let's look back a year at our favorite miners while we share a Wednesday cup of coffee. As the Report mentioned yesterday, March 9th of 2009 marked the very bottom of the mineshaft for the S&P 500; it fell during that day to a dismal 666.79 before clawing its way back to close at 676.53. Yesterday the S&P 500 closed at 1140.45, an amazing 68.6% rebound in one year. The ole Colonel thought it would be fun to see how our favorite miners did over that same period. First let's look at gold, copper and molybdenum:

Gold (ETF GLD) $90.57 (3/9/09) to $109.72 (3/9/10) up 21.1%
Copper $1.60/lb (3/9/09) to $3.40/lb (3/9/10) up 112.5%
Molybdenum $9.00/lb (3/9/09) to $18.25/lb (3/9/10) up 102.8%

Freeport McMoRan (FCX) is often regarded as a bellwether miner producing mostly copper but also gold and moly. Here's how FCX fared:

FCX $32.32 (3/9/09) to $79.76 (3/9/10) up 146.8%

Not too bad, pardner. Freeport bounced better than the broader markets and its primary metal (copper) product. The "lever arm" between the mining stock share price and its metal price change is calculated as the following ratio.

FCX/Copper = 146.8%/112.5% = 1.31

Anything greater than 1.00 is "good" - the miner has leverage over its product.

Here's how the gold miners did:

Barrick (ABX) $27.96 (3/9/09) to $39.54 (3/9/10) up 41.4%
Newmont (NEM) $37.79 (3/9/09) to $51.17 (3/9/10) up 35.4%
US Gold (UXG) $1.91 (3/9/09) to $2.94 (3/9/10) up 53.9%

Hmm...all the gold miners lagged the S&P in performance from the bottom. In fairness, some may see this as a strength; gold prices (unlike copper and moly) held up during the bad times keeping the gold miners from plunging to the depths. Using Barrick as the benchmark gold stock let's calculate its lever arm:

ABX/Gold = 41.4%/21.1% = 1.96

Hey that's pretty good compared to copper. Now for the leaders of the pack, moly miners:

Thompson Creek (TC) $2.84 (3/9/09) to $13.87 (3/9/10) up 388.3%
General Moly $0.71 (3/9/09) to $3.37 (3/9/10) up 374.6%

Taking Thompson Creek as the benchmark moly miner, the lever arm is nearly four-to-one:

TC/Moly = 388.3%/102.8% = 3.78

That's pretty awesome buckaroos. Don't you wish you'd tucked a little of that 71-cent General Moly stock under your mattress last March? Shucks, maybe you did!

I got a postcard from Miss Moly yesterday. She said her feet were tired from all that dancing and carousing in London town. The 3-month seller contracts have fallen back to where they started at the molybdenum launch on the London Metal Exchange (LME) - $38,550/metric ton or $17.46/lb. Is the Colonel discouraged? Naw, she'll be back on the floor cutting the rug after at little well deserved rest.



Enough talk, let's walk the walk:

4-WD is OFF - the VIX or "fear index" is below 25, improving broader markets are expected; metals & miners are headed for smoother roads with FCX above $74 (what is this?)

The YELLOW light is switched on our fuel gauge with oil above $80

An ORANGE light is ON for possible adverse regulation/legislation: Miner's claim fee, Miner taxation, Cortez Hills & mercury emissions

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

NYMEX/COMEX: Oil is down $0.17 in early trading to $81.69 (April contract, most active); Gold is up $0.2 to $1122.5 (April contract, most active); Silver is up $0.047 to $17.385 (May contract); Copper is down $0.0095 to $3.4020 (May contract); Western Molybdenum Oxide is steady at $18.25

The DOW is up 30.16 points to 10594.54; the S&P 500 is up 6.52 to 1146.97. The miners are mixed today:

Barrick (ABX) $39.36 down 0.46%
Newmont (NEM) $51.06 down 0.02%
US Gold UXG) $2.94 unchanged
General Moly (Eureka Moly, LLC) (GMO) $3.51 up 4.21%
Thompson Creek (TC) $13.85 down 0.14%
Freeport-McMoRan (FCX) $80.62 up 1.08% (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $42.72 up 1.21% - global steel producer
POSCO (PKX) $124.44 up 0.35% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.81% to $1,372,063.75 (what is this?).

Cheers,

Colonel Possum

Headline photograph by Mariana Titus