Is There Rhenium in Them Thar Hills?

Morning Miners!

It is 5:31 AM. Have a cup of joe and let's look for something other than gold and molybdenum in "them thar hills" to the north of town. Last month I promised to do a followup on one of earth's rarest elements, rhenium. What peaked the ole Colonel's interest was a recent statement by Kennecott project manager, Doug Stauffer, of their Bingham copper mine in Utah, "The rhenium market is a growing high-margin market and we're looking to become a stable and secure producer of that material." (Rhenium - Will the Sun Shine on One of Earth's Rarest Elements?, Eureka Miner's Market Report, 4/29/2010)

Bingham is primarily a copper mine but they boast good prospects for molybdenum and other metals such as rhenium that exist within their copper porphyry. Rhenium is a key ingredient in nickel-based super-alloys used in the components for jet engines. I wondered at the time whether there may be some other uses for this curious transition metal in the emerging alternative energy industry. As the 4/29 article suggests, the Chinese have demonstrated some research interest in rhenium to improve the light absorption properties of organic photovoltaic cells used to convert solar energy to electricity. At that time I wondered if a global expansion of solar farms that use large-scale organic solar arrays may provide another commercial use for rhenium.

When I get this far down on the "what if?" mineshaft, the Colonel likes to ask the experts for a sanity check. This boils down to two basic questions: (1)is there enough rhenium in our backyard to justify commercial exploitation and, (2) what shapes the real future demand for Miss Moly's kissing cousin? (rhenium is a transition metal kitty-corner to molybdenum on the periodic table of the elements)

I asked Tim Arnold, Mt. Hope Project Manager, for his thoughts on question #1. An early assay report on General Moly's Mt. Hope, one of the world’s largest and highest-grade deposits of undeveloped molybdenum (Mo), indicated that rhenium (Re) may exist in parts per million (PPM) concentrations. This may seem insignificant but rhenium has an average concentration of only 1 part per billion (PPB) in the Earth's crust. Along with gold (Au), rhenium belongs to the nine rarest elements on earth. Gold is about 4 times more abundant so PPMs of this stuff is nothing to ignore. This chart shows the relative abundance of Mo, Au and Re in relation to other metals on a logarithmic scale:


This was Tim's response to the Report,

"We very definitely will be looking at Rhenium. It is such a scarce element, that it is hard to identify as an 'ore', because the samples taken are typically in PPM or PPB. That is why we will be doing more investigation once we have a molybdenum concentrate. Rhenium floats along with the moly, so we will be able to see it there, and then extract if it makes sense."

I posed the second question to Dr. Jon Hykawy of Byron Capital Markets, a leading analyst on clean technologies/alternative energy and the metals they employ (see note 1 for a brief resume) We first met Dr. Hykawy in the March 22nd Report - A Third Tank on Our Hill? Lithium & Vanadium Update. He was less enthusiastic about the commercial use of rhenium in organic cells:

"...the [solar photovoltaic] technology used really dictates what other metals are required. Almost every organic cell design needs some form of metal dopant, but I have seen them requiring everything from rhenium to lead to really exotic stuff. I would put my money on something that used lead over something that used rhenium, just on a price basis."

However, Dr. Hykawy offered this valuable insight:

"But, I would also be pretty excited about rhenium anyway. It is refractory as all get out, and as more stringent regs come into effect for jet engines and their fuel efficiency and emissions, the only way to make these things work that much better is to run them at higher and higher temps, and alloys containing rhenium are a big part of that."

A consistent theme of this Report is the importance of strategic metals to the future of Northern Nevada and Eureka County. I think from the above responses we can add rhenium to our watch-list of important metals on our horizon, pardner.

By the by, COMEX gold broke $1220 this morning as concerns about European sovereign debt returned to the marketplace. Silver followed and is now in $19 country. I can collect my bet that the latter would occur before Memorial Day - Yee-ha!

Enough talk, let's walk the walk:

4-WD is ON - rough roads in the marketplace; the VIX or "fear index" is back in 30 territory; metals & miners are on shaky timber with benchmark FCX trading in the low $70s below its 200-day average of $75 (our new warning level), 10-year Treasurys are safely below 4% preserving a low-interest rate environment

The YELLOW light returns for Stable Markets with the VIX above the 30 level again (what's this?)

The GREEN light returns for Investor Confidence with the possibility of a >10% correction in the broader markets possible but less likely

The GREEN light remains turned on our Fuel Gauge with oil below $80 (although this may only be a brief respite)

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions &
General Moly Mt. Hope Water Rights

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

NYMEX/COMEX: Oil is down $0.61 in early trading to $76.19 (June contract, most active); Gold is up $21.8 to $1222.6 (June contract, most active); Silver is up $0.563 to $19.115 (July contract); Copper is down $0.0545 to $3.1735 (July contract)

Western Molybdenum Oxide sits at $17.75, LME moly 3-month seller's contract sits at $18.14

The DOW is down 66.36 points to 10,718.78; the S&P 500 is down 8.82 to 1150.91. The miners are mixed:

Barrick (ABX) $45.91 up 4.55%
Newmont (NEM) $57.66 up 3.91%
US Gold (UXG) $3.84 up 5.21%
General Moly (Eureka Moly, LLC) (GMO) $3.95 down 1.00%
Thompson Creek (TC) $11.28 up 0.18%
Freeport-McMoRan (FCX) $71.36 down 1.57% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $35.69 down 3.54% - global steel producer
POSCO (PKX) $103.33 down 3.52% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.33% to $1,404,773.05 (what's this?).

Cheers,

Colonel Possum

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

Note 1: (Mineweb) Toronto-based Jon Hykawy, who earned his PhD in physics (University of Manitoba, 1991) and an MBA (Queen's University, 1997), spent four years in capital markets as a clean technologies/alternative energy analyst before being named lithium analyst at Byron Capital Markets in August. Jon began his career in the investment industry in 2000, originally working as a technology analyst concentrating on the lithium space. Jon has become a valuable resource on everything about the light, silver-white metal-from supply and demand to exploration and production. He has extensive experience in the solar, wind and battery industries, conducting significant research in the areas of rechargeable batteries, from alkaline to lithium-ion to flow batteries.

Headline photograph by Mariana Titus

"Shock and Awe" Strategy Lifts Metals & Miners

Morning Miners!

It is 6:00 AM sharp. Grab a cup of Monday brew and let's get to work. The hoof steps you hear are the cavalry coming to rescue us from a European financial abyss. As reported by the Wall Street Journal in the wee hours of the morning:

"The European Union agreed on an audacious €750 billion ($955 billion) bailout plan in an effort to stanch a burgeoning sovereign debt crisis that began in Greece but now threatens the stability of financial markets world-wide." (WSJ, 5/10/2010)

Coordinated with the United States and the International Monetary Fund (IMF), the cavalry ride from across the pond was described by Eswar Prasad, a former senior IMF official:

"The European countries and the IMF are putting together a 'shock and awe' strategy involving massive amounts of money to convince markets that they can handle any sovereign debt problem in Europe..." (WSJ, 5/10/2010)

Sounds like the ole Hank Paulson "bazooka" approach to me. Remember Hank's famous explanation of TARP at the 7/15/2008 Senate Banking Committee hearing, "If you have a bazooka in your pocket and people know it, you probably won't have to use it."

History will report the efficacy of all these rescue plans but in this morning's trading it's worth better than a 3.5% bounce in the copper spot market - one of the hardest hit metals by the present sovereign debt crisis:


COMEX oil jumped more than $2 on the news heading towards $80 territory at $77.17. This is one of those rare moments the ole Colonel applauded a move up in the slippery stuff. What about gold? It has moved down from its lofty Friday high of $1215 on the COMEX (June contract) but appears to be stabilizing around $1200 on the COMEX and London spot exchange.


As safe haven players bailed out of gold, silver notched up to $18.5 which gives new hope to breaking the $19 level before Memorial Day (the Colonel's bet, note 1). The broader markets are now open, the DOW is up more than 400 points, the S&P 500 is up a healthy 4.61% and the Eureka Miner's Grubstake Portfolio (what's this?) has added $64,574 for a 4.86% morning move.

So just how scary was last week? The VIX or "fear index" is still above our threshold of 25 bouncing around in the 26-28 range this morning. It is probably too soon for an "all clear" but I am switching our Stable Market and Investor Confidence lights back to GREEN from YELLOW on the Eureka Outlook Dashboard.

To give the "fear index" some perspective, last week's peak level ranks #3 with the other noteworthy calamities of the Great Recession:

05/07/2010 VIX=41.9 10:25 AM, Friday - European sovereign debt crisis

03/17/2008 VIX=35.6 Collapse of Bear Stearns
09/15/2008 VIX=31.9 Collapse of Lehman Brothers
10/23/2008 VIX=96.4 Highest VIX, fear of a run on the banks
03/09/2009 VIX=51.3 S&P 500 March closing low 676.53 ("the bottom")

Phew, hope to get below 25 soon buckaroos - that was a scary ride!

Miss Moly was cool as a cucumber during all of last week's drama:

Western Moly Oxide (FeMo65) unchanged at $17.75/lb (the price reported by Infomine and tracked by Base Metals on the General Moly Website)

Moly Oxide, Europe (Mo Drummed Molydbic Oxide EU) $17.25/lb (the price reported in the Metals Bulletin)

LME Futures Contracts

3-Month (Buyer) $38,000/metric ton $17.24/lb
3-Month (Seller)$40,000/metric ton $18.14/lb

15-Month (Buyer) $38,000/metric ton $17.24/lb
15-Month (Seller)$40,000/metric ton $18.14/lb

Here is a chart of the LME 3-month contract (seller) from the February launch to the present:



Enough bazooka-talk, let's walk the walk:

4-WD is ON - rough roads in the marketplace; the VIX or "fear index" is in 26-28 territory; metals & miners are looking better with benchmark FCX trading in the $70s but still below its 200-day average of $75 (our new warning level), 10-year Treasurys are safely below 4% preserving a low-interest rate environment

The GREEN light returns for Stable Markets with the VIX below the 30 level (what's this?)

The GREEN light returns for Investor Confidence with the possibility of a >10% correction in the broader markets possible but less likely

The GREEN light remains turned on our Fuel Gauge with oil below $80 (although this may only be a brief respite)

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions &
General Moly Mt. Hope Water Rights

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

NYMEX/COMEX: Oil is up $2.06 in early trading to $77.17 (June contract, most active); Gold is down $10.3 to $1200.1 (June contract, most active); Silver is up $0.114 to $18.565 (July contract); Copper is up $0.0895 to $3.2340 (July contract)

Western Molybdenum Oxide sits at $17.75, LME moly 3-month seller's contract sits at $18.14

The DOW is up 432.07 points to 10812.50; the S&P 500 is up 51.20 to 1162.08. The miners are happy campers:

Barrick (ABX) $43.29 up 1.10%
Newmont (NEM) $53.92 up 0.99%
US Gold (UXG) $3.42 up 4.59%
General Moly (Eureka Moly, LLC) (GMO) $3.82 up 12.4%
Thompson Creek (TC) $12.23 up 7.93%
Freeport-McMoRan (FCX) $72.50 up 7.62% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $37.40 up 10.65% - global steel producer
POSCO (PKX) $108.21 up 6.32% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 4.86% to $1,393,762.82 (what's this?).

Cheers,

Colonel Possum

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

Note 1: Friday morning's gold/silver ratio was 67.9; this morning it has fallen back to 64.6. We were in 63 territory before last week's crisis giving silver some headroom to move up to $19/oz if gold stabilizes around $1200/oz.

Headline photograph by Mariana Titus

More Jobs, Markets Rattled, Gold Touches $1211

Morning Miners!

It is 5:54 AM. Top up your thermos with some delicious Raine's TGIF Red Label and let's go kick some cow poop in Kitchen's Meadow. That sure would beat trying to figure out these scary markets. Yesterday jitters returned to the marketplace big time; COMEX gold touched $1211, the the VIX or "fear index" hit 40.7, folks rioted in Greece and the U.K had an election that may result in a hung parliament.


To add to this drama, computers hijacked the broader markets for 5 minutes causing a nearly 1,000 point decline in the DOW - the largest point decline in its history. Nobody has quite figured out what happened at 2:42 PM (EDT) but it appears humans were no longer in charge. The Wall Street Journal reports that the $9.5 billion iShares Russell 1000 Value Index Fund went from $59 to around 8 cents in the blink of an eye. Scott Redler, chief strategic officer at T3 Capital Management said, "It happened so quickly, it was like a torpedo...It was mayhem." The ole Colonel was out walking his sidekick, Loquita, and missed all the excitement - sure doesn't buck up one's confidence in the modern marketplace of automated trading, pardner.

So let's have some good news before we hop in the truck and enjoy the afternoon away from these dad blame computers...as Roger Miller once said in a song, "I say dad blame anything a man can't quit!"


Here's the scoop on this mornings job report:

"The U.S. economy added 290,000 jobs in April, the largest gain since March 2006 and more than Wall Street forecast. That followed an upwardly revised 230,000 increase in March. The unemployment rate, calculated by surveying households instead of employers, rose to 9.9%, a sign that more Americans are starting to look for jobs.

Economists polled by Dow Jones Newswires were expecting payrolls to rise by 180,000. The March figure was originally reported as a 162,000 increase. Economists were expecting the jobless rate to remain at March's 9.7% level. Taking into account revisions to prior months, the U.S. economy added an average of 143,000 jobs a month in the first four months of the year." (WSJ, 5/7/2010)

I guess you have to be an economist to understand how going from 9.7% to 9.9% unemployment is OK but I can relate to all the zeroes behind a positive increase in jobs and that deserves a Colonel Yee-ha!

The broader markets are open now and it looks like another squirrley day. COMEX gold has backed down to $1198/oz which is still slightly up from yesterday's closing number after the dash above $1200/oz. The DOW is off another 62 points but Thompson Creek (TC) and POSCO (PKX) are at least showing some green in an otherwise down morning for the Eureka Miner's Grubstake Portfolio. There's some lunch meat in the frig, grab your hat and let's get rolling to the meadows buckaroos!

Enough talk, let's walk the walk:

4-WD is ON - rough roads in the marketplace; the VIX or "fear index" is in 30-40 territory; metals & miners remain on shaky timber with benchmark FCX still trading in the $60s well below its 200-day average of $75 (our new warning level), 10-year Treasurys are safely below 4% preserving a low-interest rate environment

The YELLOW light is on for Stable Markets with the VIX above the 30 level (what's this?)

The YELLOW light is on for Investor Confidence with the possibility of a >10% correction in the broader markets

The GREEN light remains turned on our Fuel Gauge with oil below $80 (although this may only be a brief respite)

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions &
General Moly Mt. Hope Water Rights

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

NYMEX/COMEX: Oil is down $0.29 in early trading to $76.82 (June contract, most active); Gold is up $1.0 to $1198.3 (June contract, most active); Silver is up $0.135 to $17.650 (July contract); Copper is up $0.0035 to $3.1205 (July contract); Western Molybdenum Oxide sits at $17.75, LME moly 3-month seller's contract moves up to $18.14

The DOW is down 62.65 points to 10457.67; the S&P 500 is down 10.34 to 1117.81. The miners are mostly down:

Barrick (ABX) $43.41 down 0.62%
Newmont (NEM) $54.48 down 0.29%
US Gold (UXG) $3.50 down 0.28%
General Moly (Eureka Moly, LLC) (GMO) $3.69 down 1.60%
Thompson Creek (TC) $10.58 up 2.67%
Freeport-McMoRan (FCX) $66.69 down 3.39% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $34.30 down 0.52% - global steel producer
POSCO (PKX) $101.71 up 0.67% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.52% to $1,343,514.42 (what's this?).

Cheers,

Colonel Possum

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

Headline photograph by Mariana Titus

General Moly & Thompson Creek Report

Morning Miners!

It is 5:55 AM. Have a brimming cup of Thor's java and let's see if things are getting any better for our metals & miners. The euro plumbs a new 14-month low ($1.2702), the greenback is ever stronger and gold has recovered near this Report's nominal of $1180/oz for the month of May (COMEX gold $1180.1/oz in early trading). Strong dollar, strong gold back in the saddle again. Copper is down but stabilizing from its free-fall towards the key $3/lb level yesterday (COMEX copper now at $3.1490/lb). FastMarkets on the floor of the London Metal Exchange (LME) reports, "Premarket trading in base metals was jumpy on the LME on Thursday, with wide price swings in turbulent active conditions as the complex remained buffeted by external influences and waves of investment business." That's a mixed message if I ever heard one, we'll check on Freeport when the market opens. If this benchmark miner is up, I may be inclined to believe we're on the mend from all this week's gloomy-doomy headlines.

While we're waiting here are two good reports to read from General Moly (GMO) and our benchmark molybdenum producer, Thompson Creek (TC):

GENERAL MOLY ANNOUNCES FIRST QUARTER RESULTS (Press release, 5/6/2010)

Thompson Creek announces first-quarter 2010 financial results (Press release, 5/5/2010)

General Moly is on track with their permitting process,

"The Company currently expects the Bureau of Land Management (BLM) to complete an administrative Draft Environmental Impact Statement (EIS) mid-year and to receive its Record of Decision late in the fourth quarter of this year or early in 2011. The two final outstanding technical reports related to regional hydrology and pit lake geochemistry were completed and re-submitted to the BLM in late April and early May addressing comments received from the BLM late last year. The Company believes these reports are now final."

and is optimistic about the eventual outcome of the recent court decision on water rights:

"As announced on April 26, 2010, a Nevada District Court remanded a Nevada State Engineer’s decision to grant water permits to the Company back for a new hearing. A pre-hearing conference has been scheduled by the State Engineer for May 24, where the scope and date of the new hearing will be determined. The Company is working to expedite the schedule to the extent possible and anticipates the re-granting of its water applications to occur in the second half of the year."

Importantly, equipment procurement efforts are expected to resume later in the year and Engineering reports that they have "secured orders for most of the milling equipment, firm orders for much of the mobile mine fleet still must be placed."

Thompson Creek, "achieved excellent operational performance in the first quarter of 2010 as production achieved a quarterly record level of 8.3 million pounds and average production costs were reduced to $5.36 per pound." They noted the benefit of higher moly prices this year although there has been a lag of several weeks between product and market price. This report has noted that molybdenum prices have stabilized in the $17-18/lb range so TC's margins should be fine going forward and the affects of price lag diminished.

I was interested in the mostly positive molybdenum market comments of each company:

General Moly

"Over the first quarter of 2010, spot molybdenum prices traded higher supported by strong demand from global steel producers, particularly in Asia. Reports from a variety of sources indicate that both Korean and Japanese steel mills are running at or near full capacity and that their access to moly is becoming strained. Chinese exports of moly remain at extremely low levels forcing Korean and Japanese steel producers to source moly from the West and providing support to prices. During the quarter, prices averaged approximately $16.50 per pound and are currently at $18 per pound."

Thompson Creek

"For the first quarter of 2010, the average Platts Metals Week published price for molybdenum oxide was $15.73 per pound. The price generally improved throughout the first quarter of 2010, with the Platts Metals Week published prices for molybdenum oxide for the month of January 2010 of $14.51 per pound, $16.24 per pound for the month of February 2010 and $17.42 per pound for the month of March 2010. The Platts Metals Week published price for molybdenum oxide for the month of April 2010 remained essentially unchanged at $17.34 per pound."

This morning Infomine reports Western moly oxide to be $17.75/lb and European moly oxide sits at $17.25/lb. The LME 3-month seller's contarct closed at $17.69/lb yesterday.

OK, markets are open and down but Freeport-McMoRan (FCX) is up. Yee-ha! Hopefully today we can break this important bellwether's 4-day losing streak!

As a point of disclosure, the ole Colonel threw a few shares of Freeport (FCX) and POSCO (PKX) in the buckboard over the last several days.

Enough talk, let's walk the walk:

4-WD is ON - rough roads in the marketplace; the VIX or "fear index" remains in 24-25 territory; metals & miners remain on shaky timber with benchmark FCX still trading below its 200-day average of $75 (our new warning level), 10-year Treasurys are safely below 4% preserving a low-interest rate environment (what's this?)

The GREEN light remains turned on our fuel gauge with oil below $80 (although this may only be a brief respite)

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions &
General Moly Mt. Hope Water Rights

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

NYMEX/COMEX: Oil is down $1.26 in early trading to $78.71 (June contract, most active); Gold is up $5.1 to $1180.1 (June contract, most active); Silver is down $0.059 to $17.475 (July contract); Copper is down $0.0025 to $3.1490 (July contract); Western Molybdenum Oxide sits at $17.75, LME moly 3-month seller's contract drops to $17.69

The DOW is down 15.80 points to 10852.32; the S&P 500 is down 1.02 to 1164.88. The miners are mixed:

Barrick (ABX) $43.34 up 1.07%
Newmont (NEM) $54.38 up 1.61%
US Gold (UXG) $3.57 up 1.13%
General Moly (Eureka Moly, LLC) (GMO) $4.13 down 0.48%
Thompson Creek (TC) $11.00 down 3.34%
Freeport-McMoRan (FCX) $72.13 up 2.40% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $36.57 up 0.44% - global steel producer
POSCO (PKX) $106.65 up 1.31% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.49% to $1,395,800.24 (what's this?).

Cheers,

Colonel Possum

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

Headline photograph by Mariana Titus

Black Hats & White Hats - The Colonel's Miners Roundup for May

Morning Miners!

It is 5:55 AM. This is the first time the ole Colonel has ever brewed Raine's Red Label on a hump day. Grab a cup of the strong stuff, pardner, you may need it. Let's start our day on the floor of the London Metal Exchange (LME). As reported by FastMarkets, "Base metals plunged to fresh intra-day lows and their lowest for several weeks in most cases during the open-outcry sessions..." Why? You guessed it, more bad news from Europe. Portugal expects another credit rating downgrade and many are wondering if Greece can survive a debt-to-GDP ratio of 150% even though the most recent rescue package saves them form near term default. This morning 74% of the Wall Street Journal readers polled believe that the sovereign debt crisis will envelope all of Europe. Dennis Gartman, the "Commodity King", warned on CNBC the other day that we may be witnessing the unwind of the European Union. Nuts.

To add to the pressure on metals & miners, there are recent doubts about Chinese real demand for key metals. The mighty dragon consumes about one-third of the world's refined copper which has propelled the red metal to triple its price since collapsing during 2008's credit crunch. As reported in the Wall Street Journal:

"On Friday, the International Copper Study Group (ICSG) issued its latest forecast, saying Chinese demand for copper could drop as much as 13% in 2010, a sharp reversal from a 38% increase in 2009." (WSJ, 5/4/2010)

The ICSG noted that much of the copper China bought last year went into stockpiling, instead of actual use, which is likely to cap this year's demand. This morning COMEX copper continues in free-fall threatening the $3/lb level.

Have another cup of Red Label my friend. If the price of oil is your only concern, all this bad news is good. COMEX oil fell below $80 in early trading and I'm switching our fuel gauge warning light from YELLOW to GREEN although it may only stay there for a brief while with the outcome of the Gulf spill far from certain.

Time to panic? Nah, but it might be a good time to check who's wearing the white hats in this T.V. Western. At the beginning of the month, this Report gives you an outlook on metals (General Moly Rips, Copper Dives - Metal & Oil Roundup for May) followed by a check on our favorite miners the following day. Last month at this time we were worried about the 10-year Treasury in 4% territory. Maintaining a low interest rate environment at this point of the recovery is important for the metals & miners. At least this fear has abated as the world seeks safe haven in our Treasurys. Here's a 3-month chart to illustrate the improvement in April:


Almost overnight, the world has turned to worrying about deflation on the back of Europe's woes. Since gold is the classic hedge for inflation, the lustrous metal has taken a whack in the markets in reaction to the new worry-du-jour. This morning gold is trading at $1160 after a good run at $1200 just yesterday ($1193 intraday high for the June COMEX contract).

So who's wearing the white hats for the six miners that we track in the Eureka Miner's Grubstake Portfolio (what's this?)? The good news is there are more white than black. The bad news is that the two black hats are sitting squarely on our bellwether miner, Freeport-McMoRan (FCX), and moly benchmark miner, Thompson Creek (TC). This report gives you a black bad guy hat if you fall below your 200-day moving average (solid green line). Here are Freeport and Thompson Creek:



Our junior miners, General Moly (GMO) and US Gold (UXG), continue to be the stars of this Western riding on the high trail above their averages. The investor logic may be that since neither are in production (yet) they will avoid the crush of falling commodity prices and still hold promise for a brighter future down the road:



Our large gold miners are holding up pretty well also but will be under pressure if gold and/or the broader markets continue their correction:



Are we really headed for a shootout at the global O.K. corral? I don't really know but it is encouraging to remember that all of our favorite miner's were in a bearish correction as recently as the tail end of January (Freeport "Broken", Miners in Correction, 1/29/2010). Even if copper falls to $2.90/lb, Freeport can turn a profit. As long as gold remains above $1000/oz, Barrick and Newmont will be printing money. Although copper is falling down the mineshaft, molybdenum price has been very resilient even though the LME futures prices fell a tad yesterday (3-month seller at $17.92 from $18.14). Thompson Creek is fine at these levels. If stock markets are really about earnings, the miners should continue to prosper as long as interest rates remain low (i.e. investment money seeking return) and if fear recedes from the marketplace (i.e. the VIX drops safely below 25 again). Take heart buckaroos!

Enough hand wringing, let's walk the walk:

4-WD is ON - rough roads in the marketplace; the VIX or "fear index" remains in 25 territory; metals & miners remain on shaky timber with benchmark FCX trading well below its 200-day average of $75 (our new warning level), 10-year Treasurys are safely below 4% preserving a low-interest rate environment (what's this?)

The GREEN light is switched back on our fuel gauge with oil below $80 (although this may only be a brief respite)

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions &
General Moly Mt. Hope Water Rights

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

NYMEX/COMEX: Oil is down $3.43 in early trading to $79.31 (June contract, most active); Gold is down $9.1 to $1160.1 (June contract, most active); Silver is down $0.577 to $17.265 (July contract); Copper is down $0.1325 to $3.0460 (July contract); Western Molybdenum Oxide sits at $17.75, LME moly 3-month seller's contract drops to $17.92

The DOW is down 37.64 points to 10889.13; the S&P 500 is down 5.78 to 1167.82. The miners are mixed:

Barrick (ABX) $42.56 down 0.83%
Newmont (NEM) $53.77 down 0.94%
US Gold (UXG) $3.55 up 2.19%%
General Moly (Eureka Moly, LLC) (GMO) $4.20 up 2.19%
Thompson Creek (TC) $11.47 down 0.86%
Freeport-McMoRan (FCX) $71.01 up 0.74% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $36.40 down 0.82% - global steel producer
POSCO (PKX) $106.42 up 0.53% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.16% to $1,397,011.85 (what's this?).

Cheers,

Colonel Possum

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

Headline photograph by Mariana Titus

General Moly Rips, Copper Dives - Metal & Oil Roundup for May

*** BREAKING NEWS *** Fear has returned to the marketplace with the VIX breaking the key 25 level at 11:02 AM (EDT). The DOW has lost more than 200 points; the S&P 500, more than 25. The U.S. Dollar Index is surging as the euro slumps to new 12-month lows.

Morning Miners!

It is 5:59 AM. Have a cup of java and fasten your seat belt, we've got another wild ride in the markets. The U.S. dollar and gold have eloped leaving silver and copper in the dust and oil sinking in the Gulf.




Spot gold charged at $1192/oz in early trading before falling back while the euro fell to a 12-month low against the dollar on continuing doubts about Greece. Silver dropped to $18.32 in the spot market before recovering while copper fell another 3% to $3.24/lb territory. Emerging fears of China tightening have taken a whack at the red metal together with the strong dollar. We'll do our monthly prognostication on these wild desperadoes of the metal & oil frontier but first let's checkout some good news.

General Moly (GMO) has enjoyed a terrific run-up since late last week jumping nearly 15% yesterday to a new 19-month intraday high of $4.36. The GMO closing price was $4.30 on a day when bellwether miner Freeport-McMoRan (FCX) dropped below its 200-day average to close at $73.74. Benchmark moly producer, Thompson Creek (TC), fell 6.2% to close at $12.02. What's up? The catalyst for the GMO rally is most likely insider trading. When the key leadership of a publicly traded company buys or sells stock they are obligated to file an SEC "Form 4 - STATEMENT OF CHANGES IN BENEFICIAL OWNERSHIP". There have been four filings since 4/26; here's a summary of the filing dates and when the purchases hit the news-wires (EDT):

4/26 bought 25,000 shares @ $3.6764 Richard Nanna, Director: news 11:55 AM 4/27
4/28 bought 100,000 shares @ $3.561 Bruce Hansen, CEO: news 12:44 PM 4/29
4/30 bought 5,000 shares @ $3.89 Davis Chaput, CFO: news 11:51 AM 5/3
4/30 bought 50,000 shares @ $3.89 JP Ergas, Director: news 11:52 AM 5/3

At each news-time the GMO share price has jumped. There is no greater show of confidence in a company's future than the purchase of stock by the folks at the top, pardner!

This is the toughest month so far this year to predict what lies ahead for our favorite metals and oil. I chose a gold price nominal of $1120/oz for February and March then moved up to $1150/oz for April. Although gold is trading higher today, the ole Colonel will go for $1180/oz for May. There is enough fear returning to the marketplace to send gold above $1200/oz but the strengthening dollar should provide some headwinds. A May nominal of $1180/oz puts us right back on the 1-yr tend line.

Here are my updated commodity models for the month of May for silver, copper and oil assuming a nominal price for gold of $1180/oz:

The fair value of silver is $19.047 in a range of $18.129 to $19.964

The fair value of copper is $3.6912 in a range of $3.4311 to $3.9512

The fair value of oil is $87.91 in a range of $83.55 to $92.26

COMEX gold this morning is trading at $1184.2

COMEX silver is at $18.410, a level undervalued with respect to a $1180/oz gold nominal. Silver presently has a "beta" of 2.1 so an uptrend in gold should result in a larger bounce for silver. We notice some decoupling of gold and silver this morning, however, which could mute this dynamic (see note 1). The nominal gold/silver ratio for May is 61.95; presently, 64.32.

COMEX Copper dropped below the key $3.50 level last month trading at $3.22 this morning well below my model's lower limit of $3.43. This is a warning sign for the metals & miners. Remember, the statistics of markets follow the bell curve until they don't. When a benchmark base metal like copper breaks from expected ranges, take notice buckaroos! Our rugged canary in the global recovery mineshaft may be telling us something. The beta for copper has dropped from the 2s to 1.76.

NYMEX Oil was barreling towards $90 yesterday. Today, the first contract above $90 has moved out from August to November. Oil will remain volatile until there is more clarity on the Gulf spill impact and a strong dollar presents resistance. At $84.06 this morning, oil is below "fair value" for $1180/oz gold and just above its lower range. The present oil beta is 1.60 falling back from a peak beta of 1.98 in April. $90 oil may or may not be in the cards for May but is now within the upper bound of $92.26.

Molybdenum prices have stabilized in a tight range $17-18 on the spot and the London Metal Exchange futures market. With the dramatic drop in copper, I wouldn't be surprised to see a decline in moly future prices in the near term. The report will launch a molybdenum pricing model next month.

Enough talk, let's walk the walk:

4-WD is ON - rough roads in the marketplace; the VIX or "fear index" broke the key 25 level today; metals & miners remain on shaky timber with benchmark FCX trading below its 200-day average of $75 (our new warning level), 10-year Treasurys are safely below 4% preserving a low-interest rate environment (what's this?)

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

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions &
General Moly Mt. Hope Water Rights

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

NYMEX/COMEX: Oil is down $2.13 in early trading to $84.06 (June contract, most active); Gold is up $0.9 to $1184.2 (June contract, most active); Silver is down $0.450 to $18.410 (July contract); Copper is down $0.0690 to $3.2245 (July contract); Western Molybdenum Oxide sits at $17.75, LME moly 3-month seller's contract remains at $18.14

The DOW is down 234.51 points to 10917.32; the S&P 500 is down 28.30 to 1173.96. The miners are getting clobbered:

Barrick (ABX) $42.36 down 1.07%
Newmont (NEM) $53.65 down 2.33%
US Gold (UXG) $3.39 down 6.61%
General Moly (Eureka Moly, LLC) (GMO) $4.07 down 5.35%
Thompson Creek (TC) $11.60 down 3.49%
Freeport-McMoRan (FCX) $70.25 down 4.74% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $36.68 down 5.95% - global steel producer
POSCO (PKX) $105.12 down 4.74% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down a thundering 4.15% to $1,390,023.36 (what's this?).

Cheers,

Colonel Possum

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

Note 1: Here's a simple way to think of a metal's "beta" with respect to a reference metal such as gold. If beta = 1.0, a 1% move in gold should produce (on average) a 1% move in silver. For beta = 2.0, a 1% move in gold results in a 2% change in silver. Got it, pardner? If beta is greater than 1.0, we say silver is "high beta" and ready trot; if less than 1.0, silver is "low-beta" and headed back to the barn.

Headline photograph by Mariana Titus

Strong Gold & Silver, Strong Dollar, $90 Oil?

Morning Miners!

It is 5:55 AM. Grab a cup and let's get to work. The ole Colonel may need to go up a diopter on his reading glasses because I can't believe my eyes. Be back in a minute, I'm going to check out these prices again. Yup, we got a bass-ackwards day trying to catch a forward gear. The dollar is up, gold is up, silver is up, COMEX oil is down but the August contract just broke $90. Oh-boy, do I have to explain all this?


Let's start with something I predicted that didn't happen. On 4/5 the Report said there was a good chance that silver would break $19 in April ($19 Silver for April...). It didn't but on this first market day of May, London spot silver just took a shot at $18.85/oz; any points for close? At least on a good silver day it makes sense that gold is up too - she is feeling fine and sassy above $1180/oz. Here's a bullish article that explains why from one of my favorite precious metal prognosticators, Lawrence Williams:

If gold poised for take-off then silver should be an even better bet (Mineweb, Lawrence Williams, 05/03/2010)

Digest that for now, pardner; I plan to come up with my own May predictions for the metals tomorrow.

OK, precious metals are up and the dollar should be down...right? Nope, the U.S. Dollar Index (.DXY or "Dixie") is having a great day up 0.4% which is not a bad move in the currency world. The euro-zone countries and the IMF patched together a new €110 billion ($147 billion) rescue package for Greece on Sunday. This has apparently calmed some investors but there is enough residual concern to push the euro down against the dollar this morning. We've noticed this trend before (Gold & the Dollar - Twin sisters on a See-Saw or...?). In fact, for the last 3-months the dollar and gold have both trended up together. In round numbers COMEX gold (orange line) is up about 9% in 6-months and the Dixie is up a respectable 8% (blue line) as shown in this comparison chart:


The sovereign debt crisis started in late November so the comparison suggests a reason for the breakdown in the more typical inverse relation between glitter and greenback. But what about oil? Although the June contract has pulled back a bit this morning it came near 19-month highs, underpinned by positive economic sentiment and uncertainty over the impact of the U.S. Gulf Coast oil spill. Last Friday, the October COMEX contract broke $90; this morning the August contract is trading at $90.43. I'm afraid $90 oil may be coming at us like a runaway rail car buckaroos!

Here is a 6-month comparison chart of oil (blue line) and gold (orange line); oil is up only 4% to gold's rise of 9%. Looks like we're in catch up mode on the slippery side.


And what are those "positive economic sentiments"? The Wall Street Journal reports this morning:

"Consumer spending rose in March by the largest amount in five months but the gains were financed out of savings, which fell to the lowest level in 18 months.

The Commerce Department said Monday that U.S. consumer spending rose twice as fast as income in March, with personal income up 0.3% and spending up 0.6%, in line with the expectations of economists surveyed by Dow Jones Newswires. The personal savings rate slid to 2.7% from 3% the previous month, now at its lowest level in 18 months." (WSJ, 5/03/2010)

Let's see, why does that make me feel good? Maybe all this bass-ackwardness has been with us all along, at least for the last few months. Take a deep breath and catch that forward gear - strong gold and strong dollar look good riding together in the front seat, now if we can just find some cheap gas in the next town.

Miss Moly has been catching up on her beauty sleep most of last week:

Western Moly Oxide (FeMo65) $17.75/lb (the price reported by Infomine and tracked by Base Metals on the General Moly Website)

Moly Oxide, Europe (Mo Drummed Molydbic Oxide EU) $17.60/lb (the price reported in the Metals Bulletin)

LME Futures Contracts

3-Month (Buyer) $38,000/metric ton $17.24/lb
3-Month (Seller)$40,000/metric ton $18.14/lb

15-Month (Buyer) $38,000/metric ton $17.24/lb
15-Month (Seller)$40,000/metric ton $18.14/lb

Here is a chart of the LME 3-month contract (seller) from the February launch to the present:



Looks pretty flat line to me but a $17-18/lb trading range sure beats the $8/lb lows of last year!

Enough talk, let's walk the walk:

4-WD is ON - rough roads in the marketplace; the VIX or "fear index" is up in the 21-22s and too close to 25 for my comfort; metals & miners are on shaky timber with benchmark FCX now trading below its 200-day average of $75 (our new warning level), 10-year Treasurys are safely below 4% preserving a low-interest rate environment (what's this?)

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

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions &
General Moly Mt. Hope Water Rights

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

NYMEX/COMEX: Oil is down $0.13 in early trading to $86.02 (June contract, most active); Gold is up $3.1 to $1183.8 (June contract, most active); Silver is up $0.156 to $18.795 (July contract); Copper is up $0.0360 to $3.3175 (July contract); Western Molybdenum Oxide sits at $17.75, LME moly 3-month seller's contract remains at $18.14

The DOW is up 64.24 points to 11072.85; the S&P 500 is up 5.72 to 1192.41. The miners are mixed:

Barrick (ABX) $42.47 down 2.47%
Newmont (NEM) $54.22 down 3.32%
US Gold (UXG) $3.47 up 1.76%
General Moly (Eureka Moly, LLC) (GMO) $3.71 down 0.80%
Thompson Creek (TC) $12.51 down 2.42%
Freeport-McMoRan (FCX) $72.88 down 3.51% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $39.14 up 0.80% - global steel producer
POSCO (PKX) $109.13 down 2.70% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.84% to $1,412,404.07 (what's this?).

Cheers,

Colonel Possum

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

Headline photograph by Mariana Titus