It's All About Oil, Gold, Copper...and Libor?

Morning Miners!

It is 5:30 AM and the Diamond Valley holds a dusty rose. I said that last spring about this time and she is no less pretty today, grab a cup and let's get to work. We have been through some tough times over the last several weeks with the metals & miners and the whole commodity space has suffered on deteriorating financial news from Europe. We'll scratch our heads on oil, gold and copper in a moment but first let's look at another key indicator of where the markets may be headed.

After living through 2008 you may not have a lot of trust in big banks but what happens when banks don't trust each other? One indication is the interest rate they charge for short term loans amongst themselves: the three-month U.S. dollar London interbank offered rate — or Libor. You may have run into Libor if you got a bank loan since it is often a benchmark for setting retail lending rates. It has been creeping up steadily through the European debt crisis and has hit a new high of 0.51% this morning as attention turns from Greece to Spain. The health of European banks was shaken over the weekend on news that the Bank of Spain had decided to take control of CajaSur, a regional savings bank. The Wall Street Journal reports a summation by Giles Watts, head of equities at City Index:

“The nationalization over the weekend of Spanish bank CajaSur serves as a stark warning to the markets and there is the fear that further bailouts could become a theme should governments not get a grip on sovereign debt quickly...” (WSJ, 5/24/2010)

Libor has been a lot higher during our own financial woes (single digits) but its recent rise is not a good omen. Something new to track, pardner. Now let's look at more familiar indicators.

This report tracks the movement of oil and copper relative to gold. Asking the question, "how many barrels of oil or pounds of copper can I buy for an ounce of gold?" is a good way to monitor the value of oil and copper in terms other than currency. One troubling sign is that oil/gold and copper/gold are presently negatively correlated. That's a fancy way of saying that when gold goes up (on average) oil and copper go down. The 3-month correlation of both went negative around the 12th of this month and we watched copper drop below the key $3/lb level last week as oil struggled to stay above $70/bbl (July NYMEX contract). The same negative correlation happened in January and the metals & miners got hammered. Fortunately, the period of this inverse relation was short and we enjoyed a nice rally until this month. Ironically, a much longer period occurred last May. I thought it might be instructive to compare prices now and then; 5/11/09 was the peak of the negative correlation one year ago:

Oil $57.7 (5/11/09) $70.68 (5/24/10) up 22.4%
Gold $913.0 (5/11/09) $1187.8 (5/24/10) up 30.1%
Copper $2.0745 (5/11/09) $3.1130 (5/24/10) up 50.1%

and our other favorites:

Silver $13.855 (5/11/09) $17.845 (5/24/10) up 28.8%
Moly (W) $9.25 (5/11/09) $17.00 (5/24/10) up 83.8%

To answer our question,"how many barrels of oil or pounds of copper can I buy for an ounce of gold?"

Oil

15.8 bbl (5/11/09) 16.8 bbl (5/24/10) up 6.3%

Copper

440 lbs (5/11/09) 381 lbs (5/24/10) down 13.4%

And the closely watched gold/silver ratio (or "how many ounces of silver can I buy for an ounce of gold?" :

Silver

65.90 oz (5/11/09) 66.56 oz (5/24/10) up 1.0%

Hmm...not too bad when you see how far we've come in a year. With respect to gold, oil is a little cheaper; copper, a bit more expensive. Silver is roughly the same value. When times were good earlier this year silver came in at roughly 63 ounces; historically in non-recessionary times this can fall to 50. A higher number usually denotes fear in the marketplace.

In dollar terms all of our favorite commodities have "reflated" 20% to 80%. There are further positive signs that copper is moving back up and the negative correlation with gold may soon be over. Checkout this article:

Copper Jumps Most in Three Months on Signs of Ample Chinese Use (Bloomberg News, Millie Munshi, 5/21/2010)

Molybdenum price has held up pretty well through all this turbulence although there are some negative signs on the steel front with global hot rolled coil (HRC) and rebar prices declining after a mostly steady rise this year. Here is a headline from this morning's Steel Business Briefing (SBB) on the primary input price to steel production:

"Iron ore reference price fell 9% last week - The Steel Index

Spot iron ore prices dropped sharply last week, according to the latest report from The Steel Index, following on from the 5% fall the previous week." (SBB, 5/24/2010)

Here is how Miss Moly fared last week:

Western Moly Oxide (FeMo65) down $0.25 to $17.00/lb (the price reported by Infomine and tracked by Base Metals on the General Moly Website)

Moly Oxide, Europe (Mo Drummed Molydbic Oxide EU) $16.82/lb (the price reported in the Metals Bulletin)

LME Futures Contracts

3-Month (Buyer) $37,500/metric ton $17.01/lb
3-Month (Seller) $38,500/metric ton $17.46/lb

15-Month (Buyer) $37,500/metric ton $17.01/lb
15-Month (Seller)$38,500/metric ton $17.46/lb

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



Enough talk, let's walk the walk:

4-WD is ON - rough roads in the marketplace; The VIX or "fear index" is in the 30-40s well above our 25 level threshold; metals & miners remain on shaky timber with benchmark FCX trading in the high 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 GREEN light has returned for Commodity Reflation with copper trading above $3/lb

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

The YELLOW light returns for Investor Confidence with the possibility of a greater than 10% correction in the broader markets possible

The GREEN light remains turned on our Fuel Gauge with oil below $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 up $0.64 in early trading to $70.68 (July contract, most active); Gold is up $11.7 to $1187.8 (June contract, most active); Silver is up $0.172 to $17.845 (July contract); Copper is downup $0.0520 to $3.1130 (July contract)

Western Molybdenum Oxide is at $17.00, LME moly 3-month seller's contract sits at $17.46

The DOW is down 121.01 points to 10172.38; the S&P 500 is down 0.978 to 1086.72. The miners are mostly happy campers:

Barrick (ABX) $41.50 up 1.17%
Newmont (NEM) $53.24 up 1.72%
US Gold (UXG) $3.60 up 2.86%
General Moly (Eureka Moly, LLC) (GMO) $3.34 down 0.89%
Thompson Creek (TC) $9.47 up 0.32%
Freeport-McMoRan (FCX) $67.10 up 0.13% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $29.54 down 3.50% - global steel producer
POSCO (PKX) $94.20 up 2.03% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.41% to $1,286,962.71 (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

Local Thumbs Up for General Moly - The Colonel's on the Road!

Morning Miners!

It is 5:55 AM. Have a cup of java on the ole Colonel. I'll be on the road again soon and be back at ya' bright and early Monday morning, 5/24. We've got great local news from General Moly (GMO); don't miss their 11:30am luncheon at the Opera House to discuss the results of an independent poll of Eureka County residents. Here's a link to the invitation and poll results:

GENERAL MOLY ANNOUNCES STRONG SUPPORT FOR MT. HOPE PROJECT AMONG EUREKA COUNTY RESIDENTS (Press Release, 5/18/2010)

Bruce D. Hansen, Chief Executive Officer, said:

"The results of this survey are extremely encouraging. That 74% of Eureka County residents support the development of the Mt. Hope project and 60% have a positive impression of our Company are phenomenal results for a modern greenfield mining project and speak to the importance of doing things right and maintaining open and honest communication with the community."


This Report gives a hats off to Tim Arnold, Mt. Hope Project Manager, who has worked long and hard to get the facts out to Eureka County residents.

Full details of the survey will be discussed at the luncheon but here's a quick summary:

Importance and Support of Mining Industry

• 89% of respondents are supportive or very supportive of mining in Eureka County with only 8% opposed;
• 65% of respondents believe mining is the most important industry in Eureka County, followed by agriculture/ranching at 25%.

Support/Opposition to Mt. Hope

• Of residents aware of General Moly's plans to open the Mt. Hope project, 59% had a positive view of the Company and explained their support by citing benefits to the economy that the company would bring and the positive personal impressions of General Moly employees;
• 74% of residents were supportive of the development of the Mt. Hope mine, including 33% who were very supportive compared to 15% of residents that were opposed;
• Among those supportive, the most important factor was high-paying jobs to the area (42%) followed by increased revenues for local businesses (27%);
• 79% believed that Eureka County should work cooperatively with General Moly in its efforts to open the Mt. Hope mine while only 8% disagreed.

Water Usage

• Just 37% of respondents knew that Mt. Hope will draw its water from the Kobeh Valley, 15 miles north-west of the agricultural community of Eureka while 14% mentioned Diamond Valley and 47% didn't know.

Mt. Hope molybdenum production in Eureka County may very well influence our future for the next forty years. It will bring jobs and revenue to the county and state through sales and use tax, property taxes and Nevada Net Proceeds (A Game Changer for General Moly & Eureka County). That deserves a Colonel Yee-ha!

German moves on short-selling have got the markets in a dither again with the euro plumbing new depths. The related strengthening of the U.S. dollar has taken a another whack at the commodity space including metals & miners with COMEX copper trading below $3. There are some new warning lights coming on our Eureka Outlook Dashboard buckaroos...stay tuned.

Before I fire up my rig, let's walk the walk:

4-WD is ON - rough roads in the marketplace; The VIX or "fear index" returns to the 30s but above our 25 level threshold; metals & miners remain on shaky timber with benchmark FCX trading in the high 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 has just been turned on for Commodity Reflation with copper trading below $3/lb and the U.S. dollar index (.DXY) trading above 86

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

The YELLOW light returns for Investor Confidence with the possibility of a 10% correction in the broader markets possible and more 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 $0.09 in early trading to $72.79 (July contract, most active); Gold is down $6.3 to $1208.3 (June contract, most active); Silver is down $0.534 to $18.345 (July contract); Copper is down $0.0460 to $2.9850 (July contract)

Western Molybdenum Oxide remains at $17.25, LME moly 3-month seller's contract remains at $18.14

The DOW is down 131.95 points to 10379.00; the S&P 500 is down 13.78 to 1107.02. The miners are mostly are unhappy campers:

Barrick (ABX) $42.87 down 3.62%
Newmont (NEM) $54.65 down 2.52%
US Gold (UXG) $3.74 up 6.03%
General Moly (Eureka Moly, LLC) (GMO) $3.67 unchanged
Thompson Creek (TC) $9.61 down 2.24%
Freeport-McMoRan (FCX) $67.21 down 0.21% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $30.88 down 1.34% - global steel producer
POSCO (PKX) $95.42 down 1.95% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 1.93% to $1,331,636.74 (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

The Gold & Oil Gunfight at the O.K. Corral

Morning Miners!

It is 6:00 AM sharp. Let me pour you a hot one and let's see if there are any good Westerns on the tube. Oh yeah, I've seen this one before. Marshal Gold Bar and Deputy Dollar have a gunfight with Black Oil at the O.K. Corral. Of course in this movie the O.K. corral is in Cushing, Oklahoma, where Black Oil has been squirreling away record levels of his gooey stuff. Old rivals Gold and Dollar who usually travel in opposite directions have teamed up this month to track down that nasty villain Blackie. They've done a pretty decent job. On May 3rd Blackie hijacked a $90/bbl August contract on the NYMEX Futures Market (Strong Gold & Silver, Strong Dollar, $90 Oil?). Today you have to go all the way to December 2016 to find that price for this outlaw as his fortunes have dropped to a lowly $75/bbl in this morning's trading (July contract).

Actually that's up a couple of bucks from yesterday's oil shootout and Marshall Gold Bar and Deputy Dollar are taking a needed rest. Phew, this old Colonel needs a rest too. I'll leave my market metaphor alone for now but am more than happy to see some stability return to these crazy markets: Gold and the dollar down...oil and copper up (finally). It looks like Asian and European markets are a lot happier too and the U.S. just opened positive. Our embattled bellwether Freeport McMoRan (FCX) and moly benchmark Thompson Creek (TC) are up nicely. In fact all our favorite miners are in the green this morning except for Newmont (NEM) which is down just a thin flat washer.

Did everything suddenly get better in Europe? Has China recovered her voracious appetite for natural resources? Nobody knows for sure, let's just enjoy a little break in the action. The Colonel does know that to sustain a rebound in the metals & miners our poor little canary in the global mineshaft, copper, better keep flying above the $3/lb clouds. COMEX copper dipped to scary low altitude of $2.91 yesterday before climbing back to $3.03 this morning. Stay tuned buckaroos, this Western ain't over til' it's over.

Enough talk, let's walk the walk:

4-WD is ON - rough roads in the marketplace; The VIX or "fear index" returns to the high 20s but still above our 25 level threshold; metals & miners remain on shaky timber with benchmark FCX trading in the low $70s 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 YELLOW light returns for Investor Confidence with the possibility of a 10% correction in the broader markets possible and more 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 $2.17 in early trading to $75.02 (July contract, most active); Gold is down $14.5 to $1213.6 (June contract, most active); Silver is up $0.061 to $18.920 (July contract); Copper is up $0.0909 to $3.0310 (July contract)

Western Molybdenum Oxide remains at $17.25, LME moly 3-month seller's contract remains at $18.14

The DOW is up 80.86 points to 10706.69; the S&P 500 is up 7.10 to 1144.04. The miners are mostly up:

Barrick (ABX) $44.79 up 0.81%
Newmont (NEM) $56.99 down 0.09%
US Gold (UXG) $4.15 up 2.47%
General Moly (Eureka Moly, LLC) (GMO) $3.82 unchanged
Thompson Creek (TC) $10.31 up 2.28%
Freeport-McMoRan (FCX) $70.13 up 3.18% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $32.66 up 1.49% - global steel producer
POSCO (PKX) $99.25 down 2.71% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 1.28% to $1,392,573.44 (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

Thomas Paine and Miner's Pain - What's Next?

Morning Miners!

It is 6:00 AM sharp and time to get to work. Have a Monday cup of java and let's try to figure out what's down the road for our favorite miner's. I received my hard-copy annual report for Thompson Creek Metals (TC) this weekend and it is a dandy. Maybe the Colonel is old fashioned but I'd rather sit in my favorite rocker with something good to read than look at this infernal computer screen. Both our moly miners, Thompson Creek and General Moly (GMO), reported earlier this month and you can find links to their annual summaries in our blog General Moly & Thompson Creek Report.

If you want a great bird's-eye view of the moly mining world, checkout the Thompson report one-page pictorial summaries, "Molybdenum Market Developments" and "Molybdenum Products and Uses". Molybdenum is a versatile alloying agent for a variety of steels but did you know that ammonium molybdates are used in smoke suppressants or that sodium molybdates are used in health micronutrients (see note 1)? It's all there, pardner.

Kevin Loughrey, Chairman and CEO, begins his Letter to Shareholders with a quote from American writer Thomas Paine. Paine began his 1776 pamphlet, The Crisis, with the memorable words, "these are the times that try men's souls." Amen, brother - 2009 was a rough-tough for a lot of folks...especially miners. However, most mining companies have had a stellar recovery since the March lows of last year. With the latest ups and downs, it's not unreasonable to doubt whether this trend is in trouble for the remainder of the year. This morning's headlines from across the pond set the stage. First, from one of this Report's favorite London correspondents, Claudia Carpenter:

Commodities Decline for a Third Day, Led by Metals, on Outlook (Claudia Carpenter, Bloomberg News - LONDON, 5/17/2010)

And from the floor of the London Metal Exchange (LME)...

"Base metals started the week under severe downward pressure, with many plummeting to new multi-month lows amid a broad market sell-off." (Perrine Faye, FastMarkets, 5/17/2010)

Or new Canadian jitters about the Chinese...

China could be the next big challenge for Canadian resources stocks (Ka Yan Ng, Reuters - TORONTO, 5/17/2010)

Times that try our miner's souls at the very least, buckaroos. But we still have a mixed bag compared to similar fears this January (Freeport "Broken", Miners in Correction, 1/29/2010) when all six of our miners in the Eureka Miner's Grubstake Portfolio were in a bearish correction (i.e., greater than 20% decline from recent highs). From Friday's close we only have two of the six in bear country - unfortunately, they are our bellwether Freeport-McMoRan and moly benchmark Thompson Creek. Here are the latest intraday highs and closing price as of last Friday, 5/14/2010:

Freeport-McMoRan (FCX) $88.3 (4/6/10) $69.72 (5/14/10) -21.0%
Thompson Creek (TC) $14.65 (4/5/10) $10.50 (5/14/10) -28.3%

And our other four are looking fairly chipper by comparison:

General Moly (GMO) $4.45 (5/13/10) $4.01 (5/14/10) -9.9%

Barrick (ABX) $47.21 (5/12/2010) $45.62 (5/14/10) -3.4%
Newmont (NEM) $59.57 (5/12/2010) $57.68 (5/14/10) -3.2%
US Gold (UXG) $4.31 (5/12/2010) $4.12 (5/14/10) -4.4%

Friday's S&P 500 was down 6.9% from its closing high of 1219.8 on the 26th of April. The gold miners are beating the broader market high-to-close spread; General Moly lags by only 3%.

This split in the herd was discussed at the beginning of this month (Black Hats & White Hats - The Colonel's Miner's Roundup for May). I'd like to see everyone crossing the same river but the risk trade of commodities and commodity-sensitive stocks is D.O.A. with the VIX or "fear index" remaining in the 30s this morning. If marketplace fear diminishes, money will return to the metals & miners as long as the U.S. maintains a low interest rate environment (e.g., unchanged Fed target rate, 10-year Treasury below 4%).

I am confident that we still have a shot above S&P 500 1,251 this year in concert with a metal & miner sector rebound. Wishful thinking? Investment strategist Abby Cohen of Goldman Sachs told CNBC Business last Thursday (5/13) that S&P 1,250 was in the cards based on fundamentals alone. Regardless how you might perceive Goldman, they are still the smartest kids (or little devil's) in the Wall Street schoolyard. The Colonel is betting our miner's pain is temporary - there is a growing world out there seeking resources my friend.

Molybdenum Weekly Roundup

Miss Moly mostly whistled past last week's continuing euro-drama:

Western Moly Oxide (FeMo65) down $0.50 to $17.25/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 unchanged (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 talk, let's walk the walk:

4-WD is ON - rough roads in the marketplace; The VIX or "fear index" is in the low 30s, well above our 25 level threshold; metals & miners are back on shaky timber with benchmark FCX trading in the high $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 returns for Stable Markets with the VIX above the 30 level (what's this?)

The YELLOW light returns for Investor Confidence with the possibility of a 10% correction in the broader markets possible and more 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 $0.44 in early trading to $71.17 (June contract, most active); Gold is up $1.3 to $1229.1 (June contract, most active); Silver is up $0.095 to $19.320 (July contract); Copper is down $0.0515 to $3.0825 (July contract)

Western Molybdenum Oxide moves down to $17.25, LME moly 3-month seller's contract remains at $18.14

The DOW is down 28.49 points to 10591.67; the S&P 500 is down 2.43 to 1133.25. The miners are mixed:

Barrick (ABX) $44.85 down 1.69%
Newmont (NEM) $57.42 down 0.45%
US Gold (UXG) $4.12 unchanged
General Moly (Eureka Moly, LLC) (GMO) $4.07 up 1.50%
Thompson Creek (TC) $10.08 down 4.00%
Freeport-McMoRan (FCX) $67.64 down 2.98% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $32.20 down 1.11% - global steel producer
POSCO (PKX) $97.03 down 2.64% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.79% to $1,399,336.46 (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: (Wikipedia) Micronutrients are nutrients needed throughout life in small quantities. They are dietary minerals needed by the human body in very small quantities (generally less than 100micrograms/day) as opposed to macrominerals which are required in larger quantities. The Microminerals or trace elements include at least iron, cobalt, chromium, copper, iodine, manganese, selenium, zinc and molybdenum. Note that the use of the term "mineral" here is distinct from the usage in the geological sciences.

Headline photograph by Mariana Titus

Green Light for General Moly Hanlong Deal

Morning Miners!

It is 6:01 AM. Have a brimming cup of Raine's Vintage TGIF coffee. Scott says it is freshly ground but he's been aging the beans in the old cellar beneath the floor boards. We might need some of this brew given how the European and Asian markets are behaving this morning. Before the U.S. opens, let's check out some good news. General Moly held their annual meeting yesterday and the shareholders gave the green light to the recent Hanlong deal (A Game Changer for General Moly & Eureka County):

GENERAL MOLY ANNOUNCES RESULTS OF ANNUAL MEETING (5/13/2010)

Bruce D. Hansen, Chief Executive Officer, said:

"I am pleased our shareholders approved the Hanlong transaction. This paves the way for Hanlong to begin the process of seeking necessary Chinese government approvals to invest in General Moly. We expect that Hanlong will receive these approvals within three months, about the same time our Draft Environmental Impact Statement is published, and anticipate closing the first $40 million tranche of equity funding in the second half of this year."

The deal, announced March 5th, gives Hanlong more than 20% of General Moly's shares in exchange for a $745 million debt and equity investment anticipated to fully fund the Mt. Hope project.


Now back to the world of fear and loathing as the father of Gonzo journalism, Hunter S. Thompson, might say if he were still with us on this planet. A sample from this morning's news wires:

LME MORNING - Metals fall to session lows as sentiment sours on EU concerns (FastMarkets, 5/14/2010)

LONDON—The euro fell to a new 17-month low on fears of public unrest in the euro zone and on growing concern over the credibility of the European Central Bank. (WSJ, 5/14/2010)

SINGAPORE—Most Asian markets declined Friday, with Japanese shares pulling back as Sony Corp.'s poor earnings outlook and the euro's weakness against the yen damped sentiment toward exporters. (WSJ, 5/14/2010)

Our broader markets nave now been open for a few minutes and it looks pretty ugly. The DOW is down 100 and change and the VIX or "fear index" has is above the 30-level prompting me to turn the Stable Markets YELLOW light back on Eureka's Outlook Dashboard (upper right column of this blog). COMEX gold has bounced back up over $1245/oz and copper is headed downhill below $3.20/lb mark so the ole Colonel is going to turn on another YELLOW for Investor Confidence. Last year the news was China; this year, debt-ridden Europe. The former put some air in the global commodity tire, the latter is a big leaky valve stem. Nuts.

But are things all that bad? Here are some contrary morning headlines:

"European automotive production could reach pre-economic crisis levels by 2014, according to a report commissioned by the UK’s Society of Motor Manufacturers and Traders." (Steel Business Briefing, 5/14/2010)

Hmm...that doesn't sound like the end to Western Civilization, and...

"Chinese FeSi, Mn alloy export prices hold up..." (Steel Business Briefing, 5/14/2010)

"Expectations are that Aluminium prices could increase if Chinese electricity price rises lower metal supply..." (Base Metals, 5/14/2010)

And that doesn't ring too deflationary in Metalsville. What about moly? Yesterday I said, "The Colonel is also happy to see molybdenum prices haven't budged two-bits during the recent fall of the euro, copper belly flops and choppy global markets." When you say such things you're asking for trouble and Western moly oxide just notched down four-bits to $17.25/lb. Before we get all weepy-eyed, we're still well above the key $16.50/lb level, the LME futures prices are holding and Miss Moly's Uncle Nickel is on the rise. Here's a chart of both over the last 7-days:


Hang in there buckaroos, have a good weekend.

Enough boo-hooing on a Friday, let's walk the walk:

4-WD is ON - rough roads in the marketplace; The VIX or "fear index" is in the low 30s, well above our 25 level threshold; metals & miners are back on shaky timber with benchmark FCX trading in the high $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 returns for Stable Markets with the VIX above the 30 level (what's this?)

The YELLOW light returns for Investor Confidence with the possibility of a 10% correction in the broader markets possible and more 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 $0.91 in early trading to $73.49 (June contract, most active); Gold is up $17.7 to $1246.9 (June contract, most active); Silver is up $0.171 to $19.670 (July contract); Copper is down $0.0535 to $3.1780 (July contract)

Western Molybdenum Oxide moves down to $17.25, LME moly 3-month seller's contract remains at $18.14

The DOW is down 111.63 points to 10671.32; the S&P 500 is down 16.93 to 1140.51. The miners are mixed:

Barrick (ABX) $45.35 up 1.21%
Newmont (NEM) $57.76 up 1.10%
US Gold (UXG) $4.00 up 0.76%
General Moly (Eureka Moly, LLC) (GMO) $3.99 down 5.45%
Thompson Creek (TC) $10.52 down 3.84%
Freeport-McMoRan (FCX) $69.40 down 3.22% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $32.77 down 6.29% - global steel producer
POSCO (PKX) $100.02 down 1.46% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 1.93% to $1,404,452.91 (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

Why Mine for Moly in Eureka When You Can Go to Malmbjerg?

Morning Miners!

It is 6:13 AM on May 13. Whoa, too many thirteens to start my day! Let's ditch the markets for a minute. Pour some of that Thor's java in our thermos and let's see what's happening in Ely then take quick flight to Reykjavik (if Eyjafjallajökull isn't blowing her top).

What's up in Ely, you say? Lots of copper coming out of the old Robinson mine again, pardner. Checkout the annual report just released by their owner/operator Quadra Mining Ltd. (QUA.TSX):

Quadra Mining Ltd. Announces Strong 2010 First Quarter Financial Results (05/13/2010)

I always like to hear Ely folks are doing well again but what really caught my eye was Quadra's molybdenum project up in Greenland.


Yup, we need to first fly to Reykjavik, Iceland, then take a quick hop to the world's largest island which is 80% covered in ice. Once in Greenland its a run to Scoresbysund, the nearest settlement to the Quadra project. That's a good place to suit up in our arctic long johns and drive another 125 miles northwest to the Malmbjerg moly deposit in our specially equipped 4-WD ice-cap bomber. Here's some of the Quadra guys busting rocks now!


Makes General Moly's Mt. Hope look like a horseback ride in the sage, pardner, and we don't have active volcanoes nearby. Mt. Hope is also expected to be fully funded (A Game Changer for General Moly & Eureka County) while Quadra is still looking for a backer to continue development. To be fair, I don't think Malmbjerg has any water right issues (maybe ice rights?) and it is among one of the highest grade molybdenum projects amenable to open pit mining that is being considered for development. If things get rolling for International Molybdenum plc ("Intermoly"), 98% owned by Quadra, they expect a production rate of approximately 25 million pounds of molybdenum per year. This compares to an estimated 40 million pounds of molybdenum mined annually in the first five years of Mt. Hope production.

I wish them well up in the chilly north and it is encouraging that future moly demand has got miners looking in the far reaches of our globe. The Colonel is also happy to see molybdenum prices haven't budged two-bits during the recent fall of the euro, copper belly flops and choppy global markets. Quadra's stock (QUA.TSX)is doing pretty well too although they have experienced a pullback similar to copper giant Freeport-McMoRan (FCX) in the last several weeks:




Enough globe-trotting, let's walk the walk:

4-WD is ON - rough roads in the marketplace; the VIX or "fear index" is in the 26s near our 25 level threshold but still too high for me; 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 down $1.36 in early trading to $74.29 (June contract, most active); Gold is down $3.4 to $1239.7 (June contract, most active); Silver is down $0.028 to $19.635 (July contract); Copper is down $0.0045 to $3.1925 (July contract)

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

The DOW is down 15.49 points to 10881.42; the S&P 500 is down 3.42 to 1168.25. The miners are mixed:

Barrick (ABX) $45.60 down 0.13%
Newmont (NEM) $58.65 down 0.10%
US Gold (UXG) $4.22 up 1.20%
General Moly (Eureka Moly, LLC) (GMO) $4.40 up 2.33%
Thompson Creek (TC) $11.10 up 0.18%
Freeport-McMoRan (FCX) $73.36 up 0.49% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $35.61 down 0.28% - global steel producer
POSCO (PKX) $102.35 up 0.71% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.69% to $1,469,566.60 (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

Gold Breaks $1245 - General Moly, Barrick & US Gold Rock

Morning Miners!

It is 5:57 AM. Have a cup of java with the ole Colonel and let's checkout the camel's humps. Last hump day COMEX gold was trading around $1160/oz when I wrote my morning article; today it broke $1245/oz in early trading. An $85 dollar move in a week is nothing to ignore. Of course we've been on a wild & woolly ride for a week with the market fear index topping levels not seen since the collapse of Bear Sterns and Lehman Brothers. A European sovereign debt crisis, their plummeting currency, a wobbly U.K. election outcome and an inexplicable glitch in the broader markets have shaken investors around the world. A safe haven rush to gold is certainly reasonable but there are some funnies between this camel's humps.

How has all this commotion affected our metals & miners? The broader markets have opened and The Eureka Miner's Grubstake Portfolio is presently up 4% from last Wednesday with General Moly GMO), Barrick (ABX) and US Gold (UXG) leading the pack one, two, three. If the Grubstake is a barometer for mining in our area, I'd say we're weathering this storm pretty durn well, pardner...or are we?

It is no surprise that gold miners are up on $1200+ gold but why is General Moly on fire? Interestingly, moly prices have been essentially unchanged through this period (spot & LME futures) while copper has stumbled. Giant copper miner Freeport-McMoRan (FCX) has had a horrible time but our benchmark moly producer Thompson Creek (TC) has suffered too even though moly price is high and stable. Here's a comparison of our two junior miners versus the seniors over a one month period:

Junior miners

General Moly (GMO) up 19%
US Gold (UXG) up 37%

Senior benchmark miners

Barrick (ABX) up 15%
Freeport McMoRan (FCX) down 14%
Thompson Creek (TC) down 20%


This is certainly a mixed bag and I'm more than a little nervous about what copper and Freeport might be signaling. The Colonel likes it when metal & miners move as a group and not a herd of camels. Taken all together our Grubstake barometer signals clear skies - we might want to go outside and check for gathering clouds.

I'll close with one last oddity. As the Report has pointed out before, gold and the US dollar index are trending up together. Defying their historic inverse relation, both are now both up 12% over the six months spanning the sovereign debt crisis which started in November with Dubai. Gold is the blue line; the U.S. Dollar Index, the orange line:


I'm starting to miss those simple days last spring when a dollar down meant metals & miners up! Stay tuned.

Enough talk, let's walk the walk:

4-WD is ON - rough roads in the marketplace; the VIX or "fear index" heading back down to our 25 level but still to high for me; 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 $0.05 in early trading to $76.42 (June contract, most active); Gold is up $16.4 to $1236.7 (June contract, most active); Silver is up $0.186 to $19.480 (July contract); Copper is down $0.0145 to $3.1920 (July contract)

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

The DOW is up 48.78 points to 10795.04; the S&P 500 is up 5.19 to 1160.98. The miners are happy campers again:

Barrick (ABX) $47.11 up 2.69%
Newmont (NEM) $59.39 up 2.04%
US Gold (UXG) $4.11 up 3.53%
General Moly (Eureka Moly, LLC) (GMO) $4.23 up 2.92%
Thompson Creek (TC) $11.12 up 1.65%
Freeport-McMoRan (FCX) $72.21 up 2.80% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $35.78 up 0.59% - global steel producer
POSCO (PKX) $101.40 down 1.35% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 1.83% to $1,452,987.01 (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