Adella Harding Interviews the Colonel

Morning Miners!

It is 5:40 AM. Have a well deserved cup of Scott Raine's delicious TGIF coffee and let me show you something I got in the mail. The ole Colonel just received the Fall 2010 edition of the Mining Quarterly. Adella Harding is the editor of this quarterly magazine that includes her unique "boots-on-the-ground" reporting style that covers every aspect of mining in northern Nevada. She is admired and well known in these parts serving also as mining editor for the Elko Daily Free Press.

Adella contacted me this summer to arrange an interview on the Eureka Miner's Market Report. Unfortunately, I was out of town and we conducted a phone interview July 26th. I am honored to be a part of the Fall 2010 edition of this terrific magazine. Please checkout her report on this Report, pages 34-35. There are also informative updates on our Ruby Hill Mine and Eureka Moly's Mt. Hope Project. You can pick up a copy in town or subscribe to this quarterly or the Elko Daily Free Press via this link:

Mining Quarterly (Elko Daily Free Press), Adella Harding, Mining Editor

Hats off to Adella!

Homestake Mining (revisited)

Before we peak at today's markets, the Colonel would like to make a correction to previously reported commentary on the photograph below. This picture is downtown Lead, South Dakota, and was the last in a seven-part series on their historic Homestake Mine. If you missed any of these mining photographs and stories please checkout Homestake Mining Recap for a complete set of links.


I incorrectly identified the men in this photograph as street workers. This Report's friend and Homestake contributor has since identified the activity as drilling an exploration hole, perhaps above the Homestake main ledge (see note 1). Portions of the Homestake mine extended far below the town and cave-ins were a real hazard for the townsfolk. Our photo contributor was in modern day Lead when a section of main street caved in over an old shaft allowing folks to look down a couple of thousand feet into the mining complex below. This occurred by the best bar in Lead, the Stampmill (Stampmill Restaurant & Saloon 305 W Main St). This popular watering hole was originally an old process building with a 12-stamp stampmill right outside the back door - watch your step!

China Jitters Don't Hold Miners Back

The broader markets are now open and it looks like a good morning for our miners even with a new backdrop of China jitters. Earlier this morning a report that Beijing has moved the release of key economic data for August to Saturday from Monday momentarily whacked spot gold in London:



Prices recovered rapidly and COMEX gold is now trading at $1251.5, up $0.6 from yesterday's close; Silver is above $20 again at $20.035. The concern is that the data will show very high inflation or stronger growth than the Chinese presently desire given their recent moves to cool off the economy. The possible outcome is further monetary tightening which could provide more headwinds for the metals & mining sector. Global investors will now have the weekend to absorb the data. May prove to be a rocky Monday, pardner. Stay tuned.

Daily Market Roundup

Enough talk, let's walk the walk:

The Eureka Miner's Index(EMI) is above-par at 189.93, a thin flat washer down from yesterday's 191.77 and a long way from the 6/7/10 low of 50.7. The EMI high for the year was 259.35 on 4/12/2010 - the same day that COMEX copper peaked. Today's number is just below a lower trend level of 195.39 but comfortably above support at 132.23. Remember an EMI greater than 100 is good times (or at least better times) for the metals & miners relevant to Eureka County.

Eureka Outlook Dashboard

4-WD is OFF - improving roads in the marketplace; The VIX or "fear index" is below 25; metals & miners are on firmer timber with bellwether Freeport-McMoRan (FCX) in the high-$70s above its 200-day average of $74.48 (our new warning level, 9/03 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment but there is some deflationary caution now that we are sub-3%.

The YELLOW light is turned back on for Commodity Reflation. Although copper is trading above $3/lb, the 10-yr T-Note is below 3.00%

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

The YELLOW light is turned on for Inflation/Deflation Watch as the Federal Reserve resumes buying back Treasurys and the 10-yr T-Note remains below 3.00%

The GREEN light is turned back on for Investor Confidence as investment returns to the equity markets but the bond markets still signal trouble ahead

The GREEN light is 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, U.S. House committee debates miner workplace safety bill

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is up $1.88 in early trading to $76.13 (October contract, most active); Gold is up $0.6 to $1251.5 (December contract, most active); Silver is up $0.157 to $20.035 (December contract, most active); Copper is down $0.0115 to $3.4320 (December contract, most active)

Western Molybdenum Oxide is $15.50; European Molybdenum Oxide is $15.80; LME moly 3-month seller's contract is $16.33, LME cash seller is $16.01

Stock Market Morning Update

The DOW is up 36.17 points to 10451.41; the S&P 500 is up 4.99 to 1109.17. Miners are whistling their way to work:

Barrick (ABX) $44.62 up 0.97%
Newmont (NEM) $60.72 up 0.83%
US Gold (UXG) $4.98 up 1.84%
General Moly (Eureka Moly, LLC) (GMO) $3.12 up 0.32%
Thompson Creek (TC) $9.52 up 0.63%
Freeport-McMoRan (FCX) $79.13 up 1.24% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $32.08 up 0.56% - global steel producer
POSCO (PKX) $108.06 up 0.42% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.93% to $1,421,136.40 (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) Photograph of Miners in downtown Lead, South Dakota. This and other old time photos can be seen at the Homestake Visitor Center on 160 West Main Street, Lead, South Dakota. Please pay them a visit on your next pass through.

Headline Photo: Cover of the Fall 2010 edition of the Mining Quarterly, Elko Daily Free Press

The Cold One is Coming - La Niña & San Juan (SJT)

Þūnresdæg
Morning Miners!

It is 5:50 AM. Have a cup of Thor's wickedly thunderous java. I didn't like the mischievous eye of our favorite Norseman when I walked into the break room this morning. He tossed a book at me and laughed, "you're going to freeze your butt off, Colonel!" Catching the Nordic missile coming in my direction, I soon understood what Thor was telling me - it could be a cold one this winter, pardner. Thor has been reading the recently released Old Farmer's Almanac 2011. You can order one on Amazon for $6.95. Here's an AP article this morning on their winter prediction:

'Old Farmer's Almanac' Predicts Frigid Winter (Russell Contreras, AP, 09-09-10)


Being in a northern Nevada county with its fair share of ranchers and farmers, I'm sure there is a range of opinions on this subject. In fact, the Almanac actually says that the West may be spared the worst with only a mild winter and average precipitation (Thor always jumps to conclusions without reading the details). The AP article gives a different spin, "NOAA's Climate Prediction Center anticipates a warmer-than-normal winter for the mid-Atlantic and Southeast and colder-than-normal weather in the Northwest. That puts it at odds with the almanac." Take your pick, the ole Colonel is siding with Thor on a cold'un.


Of course the culprit behind a change in 2011 from last winter is that bad girl La Niña who is chasing her nemesis El Niño out the back door with her unusually cool temperatures in the Pacific. This Report carries a link to the NOAA El Niño website in the Weather & Climate section to the lower right of this blog. It will give you the latest on the adventures of these two children of the sea. Let the Colonel know what you think Ole Man Winter has up his sleeve.

San Juan Basin Royalty Trust (SJT)

I'm betting on cold and threw a few more shares of my favorite land-based natural gas play in the buckboard. San Juan Basin Royalty Trust (SJT) is a trust with natural gas royalty interests in the San Juan Basin of northwestern New Mexico. At this morning's prices ($22.68/share), SJT pays a monthly dividend of 5.32% on an annualized basis. Their dividend typically moves up or down with the price of natural gas (NG). Presently COMEX NG is at low levels not seen in many years trading at $3.822 (October contract); the low for the year was August 30th at $3.693. NG prices tend to peak in January-February during the coldest spell of winter; the February futures contract is now $4.544 or an 18.8% premium to the October price. To put this in perspective, the NG high was $10.80 on 7/1/2008 before the recession really put the brakes on our economy.

Even though domestic NG is currently in over-supply, I think the future energy needs of this country will be served by this most abundant energy source. You should check out the T. Boone Pickens Plan to understand why this is so, you've probably seen the ole boy's adds on television - a great plan to reduce our dependence on foreign oil.

Finally, SJT is just breaking out of its 200-day average. Followers of this Report know that this is often a good time to make a move if the prospects are good for a company moving forward. Here is a one-year chart of SJT:


I plan to use some of that monthly SJT dividend to offset my propane bill this year buckaroos. Get out the long johns.

Daily Market Roundup

Enough talk, let's walk the walk:

The Eureka Miner's Index(EMI) is above-par at 191.77, up from yesterday's 182.43 and a long way from the 6/7/10 low of 50.7. The EMI high for the year was 259.35 on 4/12/2010 - the same day that COMEX copper peaked. Today's number remains above a lower trend level of 186.36 and support is 132.23. Remember an EMI greater than 100 is good times (or at least better times) for the metals & miners relevant to Eureka County.

Eureka Outlook Dashboard

4-WD is OFF - improving roads in the marketplace; The VIX or "fear index" is below 25; metals & miners are on firmer timber with bellwether Freeport-McMoRan (FCX) in the high-$70s above its 200-day average of $74.48 (our new warning level, 9/03 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment but there is some deflationary caution now that we are sub-3%.

The YELLOW light is turned back on for Commodity Reflation. Although copper is trading above $3/lb, the 10-yr T-Note is below 3.00%

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

The YELLOW light is turned on for Inflation/Deflation Watch as the Federal Reserve resumes buying back Treasurys and the 10-yr T-Note remains below 3.00%

The GREEN light is turned back on for Investor Confidence as investment returns to the equity markets but the bond markets still signal trouble ahead

The GREEN light is 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, U.S. House committee debates miner workplace safety bill

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is up $1.06 in early trading to $75.73 (October contract, most active); Gold is down $2.2 to $1255.3 (December contract, most active); Silver is down $0.044 to $19.965 (December contract, most active); Copper is down $0.0430 to $3.4575 (December contract, most active)

Western Molybdenum Oxide is $15.50; European Molybdenum Oxide is $15.80; LME moly 3-month seller's contract is $16.33, LME cash seller is $16.01

Stock Market Morning Update

The DOW is up 57.29 points to 10444.30; the S&P 500 is up 8.82 to 1107.69. Miners are mixed:

Barrick (ABX) $44.87 down 1.27%
Newmont (NEM) $60.71 down 1.40%
US Gold (UXG) $4.98 down 0.40%
General Moly (Eureka Moly, LLC) (GMO) $3.18 up 1.92%
Thompson Creek (TC) $9.62 up 0.94%
Freeport-McMoRan (FCX) $78.92 down 0.28% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $32.00 up 0.09% - global steel producer
POSCO (PKX) $107.68 up 0.30% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.02% to $1,443,658.46 (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

Headline photograph by Mariana Titus

Homestake Mining Recap - Gartman "No Double-Dip"

Wōdnesdæg
Morning Miners!

It is 5:27 AM. Have a cup of Hump Day Glory and let's give Old Miner Woden a hand. He's packed away all our Homestake Mining photos and is fixin' to put them above the tool crib for safe keeping.

The Old Miner got quite a kick out of the headline photo of miners in downtown Lead, South Dakota. This Report's friend and Homestake contributor has identified the activity as drilling an exploration hole, perhaps above the Homestake main ledge (see note 1). Portions of the Homestake mine extended far below the town and cave-ins were a real hazard for the townsfolk. Our photo contributor was in Lead when a section of main street caved in over an old shaft allowing folks to look down a couple of thousand feet into the mining complex below. This occurred by the best bar in Lead, the Stampmill (Stampmill Restaurant & Saloon 305 W Main St.). This local watering hole was originally an old process building, with a 12-stamp stampmill right outside the back door - watch your step!

This photo has other secrets. Woden just borrowed my readers and can make out "Black Hills Candy" on the store front window to the right. The awning above the window presumably has the inscription "B.H. Candy" although some of the letters are obscured by the awning flap. There are also trolley tracks in the cobble stone street. Quite a nice town for the historic Homestake Mine I'd say. If you missed any of this Report's Homestake Mining Series, the ole Colonel has listed links to six previous blogs of photographs and stories below. The series starts out with some memories of Eureka's Homestake Ruby Hill Mine which was acquired by Barrick Gold in 2001.

Our thanks again to the faithful reader that made these wonderful photographs available to the Report.


The Homestake Mining Series

Ruby Hill Homestake Mining Memories (8/25/2010)

Silver Breaks $19... (8/26/2010)

When a Bad Number Seems Good (8/27/2010)

Eureka Miner Weekly Roundup (8/30/2010)

China PMI Rockets Metals & Miners (9/1/2010)

Silver Heads for $20... (9/2/2010)

Dennis Gartman Speaks


Dennis Gartman, the "Commodity King" and the Colonel's hero, spoke on CNBC Business News yesterday. He said that the persistent rally of copper and other base metals takes a double-dip recession off the table. With renewed concerns in Europe, Mr. Gartman also believes that the euro has been diminished "on the margin" as a major reserve currency. Gold, however, has established itself as an important reserve by central banks hedging fiat currencies.

Mr. Gartman also pointed out that China has surpassed the U.S. in auto sales. He sees a bright future for the white metals; platinum and palladium for automotive applications (e.g. catalytic converters) and growth in silver's industrial demand.

This Report looks at the value of commodities with respect to gold, a technique used by Mr. Gartman. He has famously stated that base metals taken collectively have a Ph.D in economics. My kind of guy.

Today, the Portuguese government held a successful bond auction which has eased short-term concerns about euro-zone sovereign debt. Euro-worry plagued the marketpalce yesterday. The broader markets are now open and it looks like metals & miners agree with Mr. Gartman's view, we got us a rally, pardner.

Daily Market Roundup

Enough talk, let's walk the walk:

The Eureka Miner's Index(EMI) is above-par at 182.43, up from yesterday's 178.59 and a long way from the 6/7/10 low of 50.7. The EMI high for the year was 259.35 on 4/12/2010 - the same day that COMEX copper peaked. Today's number remains above a lower trend level of 177.34 and support is 132.23. Remember an EMI greater than 100 is good times (or at least better times) for the metals & miners relevant to Eureka County.

Eureka Outlook Dashboard

4-WD is OFF - improving roads in the marketplace; The VIX or "fear index" is below 25; metals & miners are on firmer timber with bellwether Freeport-McMoRan (FCX) in the high-$70s above its 200-day average of $74.48 (our new warning level, 9/03 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment but there is some deflationary caution now that we are sub-3%.

The YELLOW light is turned back on for Commodity Reflation. Although copper is trading above $3/lb, the 10-yr T-Note is below 3.00%

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

The YELLOW light is turned on for Inflation/Deflation Watch as the Federal Reserve resumes buying back Treasurys and the 10-yr T-Note remains below 3.00%

The GREEN light is turned back on for Investor Confidence as investment returns to the equity markets but the bond markets still signal trouble ahead

The GREEN light is 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, U.S. House committee debates miner workplace safety bill

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is up $0.01 in early trading to $74.10 (October contract, most active); Gold is down $1.7 to $1257.6 (December contract, most active); Silver is up $0.006 to $19.920 (December contract, most active); Copper is up $0.0050 to $3.4755 (December contract, most active)

Western Molybdenum Oxide is $15.50; European Molybdenum Oxide is $15.80; LME moly 3-month seller's contract is $16.33, LME cash seller is $16.01

Stock Market Morning Update

The DOW is up 52.75 points to 10393.44; the S&P 500 is up 5.81 to 1097.65 Miners are happy:

Barrick (ABX) $46.18 up 0.94%
Newmont (NEM) $62.59 up 0.84%
US Gold (UXG) $5.28 up 2.12%
General Moly (Eureka Moly, LLC) (GMO) $3.20 up 1.59%
Thompson Creek (TC) $9.64 up 2.99%
Freeport-McMoRan (FCX) $79.21 up 1.73% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $32.17 up 2.06% - global steel producer
POSCO (PKX) $107.41 up 0.60% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 1.38% to $1,442,172.04 (what's this?).

Cheers,

Colonel Possum

(Note 1) Headline photo: Miners in Lead, South Dakota. This report incorrectly stated that the men in the photo were street workers on the publish date of this blog. The above correction identifies the activity as drilling an exploration hole. The headline and other old time photos can be seen at the Homestake Visitor Center on 160 West Main Street, Lead, South Dakota. Please pay them a visit on your next pass through.

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

Silver Breaks $20, Gold Breaks $1260 - Dollar Bounce

Morning Miners!

It is 5:52 AM. Have a cup of Wish-Labor-Day-was-Labor-Week java and let's get to work. Ruby Tuesday blew through the break room early this morning with some fresh donuts from Ely, she didn't want us to start this week with low blood sugar. Some things in life go away that you are glad to forget until they return to remind you they never left. The European sovereign debt crisis is one example and the Wall Street Journal brought it back to prime time with an article on the much heralded summer "stress tests." Here's the Journal this morning reporting on itself:

"The Journal said Tuesday the recent euro-zone banking stress tests understated some banks' holdings of government debt. European bank shares slumped following the report, while investors dumped risky bonds tied to weaker European economies and crowded into the safe havens of German and British government bonds." (WSJ, 9/7/2010)

Although prices have retreated a bit, that article was enough to push COMEX gold past $1260/oz and COMEX silver over $20/oz in early trading (December contract, most active). The U.S. dollar rallied too - when the greenback runs up with the precious metals it is time to take notice. Unless you are a gold digger, an environment of strong gold/strong dollar is lousy for the metals & miners as we witnessed earlier this year. Predictably, our little red metal canary in the mineshaft of global recovery lost altitude this morning. COMEX copper dropped 1.28% to $3.4550/lb.

All the big investors in the U.S. and Europe are now back from summer break which is another market dynamic. Will they be "risk-on" or "risk-adverse" this autumn? Let's hope this is just one headline driven morning and not a new trend. Stay tuned.

Let's see what's new in this morning's roundups...

Weekly Molybdenum Roundup



Molybdenum prices remain in a stable range with Western moly oxide at $15.50/lb sitting a bit below European moly at $16.08/lb. The LME 3-month seller contracts is now $16.33/lb ($36,000/metric ton). The Report's mid-range price target for 2010 moly prices is $15.71/lb.

Western Moly Oxide (FeMo65) $15.50/lb (the price tracked by Base Metals on the General Moly Website)

Moly Oxide, Europe (Mo Drummed Molydbic Oxide EU) $16.08/lb (the price reported in the Metals Bulletin)

LME Futures Contracts

LME cash seller is at $35,500/metric ton $16.10/lb

3-Month (Buyer) $34,000/metric ton $15.42/lb
3-Month (Seller) $36,000/metric ton $16.33/lb

15-Month (Buyer) $34,000/metric ton $15.42/lb
15-Month (Seller)$36,000/metric ton $16.33/lb

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



Eureka Miner's Index (EMI)

The Eureka Miner's Index (EMI) gives us the market temperature for the sectors that have the greatest impact on mining in Eureka County. Below is a chart of the EMI at Friday's close (9/3/2010). The magenta line is the EMI with a low interest cap of 3% on 10-year Treasurys (LIRC) and adjustments for gold and silver prices (i.e., Au:Ag ratio); the gray line is the EMI without these corrections. A larger more readable chart appears at the bottom of this blog page.


The Eureka Miner's Index(EMI) is above-par at 178.59, a drop from Friday's close at 210.30 but a long way from the 6/7/10 low of 50.7. The EMI high for the year was 259.35 on 4/12/2010 - the same day that COMEX copper peaked. Today's number remains above a lower trend level of 168.32 and support is 132.23. Remember an EMI greater than 100 is good times (or at least better times) for the metals & miners relevant to Eureka County.

Oil & Copper Correlations with Gold

Oil & copper correlations with gold give us insight into what may happen next for the metals & miners. One way to visualize these correlations with gold over time is to plot the "near-term" 3-month versus the "short-term" 1-month correlations (aka "rho") as shown below in these two graphs (ref: China to the Rescue?):



In the case of copper versus gold, we start out on 4/27/10 with both positively correlated (i.e. in the "+,+" or "green" quadrant). This is the day after the 2010 S&P 500 high and shortly after COMEX copper high of $3.5840/lb (4/12/10). Unfortunately we soon descended into negative territory (i.e. in the "-,-" or "red" quadrant) as the financial crisis in Europe worsened (blue line). Presently we are in the "+/-" or "yellow" quadrant - the magenta line and arrow show the most recent data and direction. To sustain optimism for copper prices we need a return trip to the "+,+" good lands via this trip through "+,-" country first.

Oil versus gold has a similar trajectory starting May 4th moving from the "+/+" to "-/-" quadrant. Oil, like copper, needs a breakout to the positive to end the bearish cycle of the past few months. The graphs above are up to Friday's close (9/3/2010). Here are the latest correlations given this morning's COMEX trading:

Oil/Au correlation -0.7300 (1-month) -0.3902 (3-month)
Cu/Au correlation +0.5691 (1-month) -0.0204 (3-month)
Cu/Oil correlation +0.0132 (1-month) +0.1514 (3-month)

Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Outlook Dashboard

4-WD is OFF - improving roads in the marketplace; The VIX or "fear index" is below 25; metals & miners are on firmer timber with bellwether Freeport-McMoRan (FCX) in the mid-$70s above its 200-day average of $74.48 (our new warning level, 9/03 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment but there is some deflationary caution now that we are sub-3%.

The YELLOW light is turned back on for Commodity Reflation. Although copper is trading above $3/lb, the 10-yr T-Note is below 3.00%

The GREEN light is turned on for Stable Markets the VIX below the 30 level (what's this?)

The YELLOW light is turned on for Inflation/Deflation Watch as the Federal Reserves resumes buying back Treasurys and the 10-yr T-Note remains below 3.00%

The GREEN light is turned back on for Investor Confidence as investment returns to the equity markets but the bond markets still signal trouble ahead

The GREEN light is 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, U.S. House committee debates miner workplace safety bill

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is down $1.07 in early trading to $73.53 (October contract, most active); Gold is up $8.2 to $1259.3 (December contract, most active); Silver is up $0.041 to $19.990 (December contract, most active); Copper is down $0.0450 to $3.4550 (December contract, most active)

Western Molybdenum Oxide is $15.50; European Molybdenum Oxide is $16.08; LME moly 3-month seller's contract is $16.33, LME cash seller is $16.10

Stock Market Morning Update

The DOW is down 83.89 points to 10364.04; the S&P 500 is down 10.25 to 1094.26 Miners are mixed:

Barrick (ABX) $46.04 up 1.63%
Newmont (NEM) $62.07 up 1.97%
US Gold (UXG) $5.11 up 0.59%
General Moly (Eureka Moly, LLC) (GMO) $3.19 down 1.85%
Thompson Creek (TC) $9.31 down 3.92%
Freeport-McMoRan (FCX) $76.49 down 2.62% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $31.22 down 1.08% - global steel producer
POSCO (PKX) $106.15 up 3.18% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.25% to $1,419,150.05 (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

Headline photograph by Mariana Titus

Jobs Report Surprise- Gold Down, Silver Steady, Copper Bounces

Morning Miners!

It is 5:40 AM. Have a brimming hot cup of Raine's Holiday Special TGIF coffee! Tastes extra good this morning, pardner. I just watched the U.S. Labor Department's Jobs Report roll out on CNBC Business and you could hear some trader in the pits holler, "Good!" Nowadays "good" is such a relative term that Einstein might be tempted to tweak his theory on the subject if he were alive today. What did our metals say? CLUNK went spot gold in London, clink went silver and BING went copper. These three charts ring the metallic chorus better than words:





So why do we need the metal's Special Theory of Relativity to understand the news? If gold drops and silver remains steady, what market player just headed for the exits?

"Fear!"

Very good class. If gold drops and copper bounces, what just soared?

"Our fearless canary in the global recovery mineshaft?"

Right again. Forget currencies, the value of copper with respect to gold just jumped. That's good! Class dismissed, have a happy and safe Labor Day Weekend!

Oh wait, I forgot to explain how "bad" means "good" in these crazy economic badlands. Nonfarm payrolls fell by 54,000 last month according to U.S. Labor Department early morning report; our economy has now shed jobs for three straight months. That's bad.

These August job losses were less than half the 110,000 predicted by economists in a Dow Jones Newswires survey. That's good!

The unemployment rate edged up to 9.6%, as expected, after holding at 9.5% for previous two months. That's bad.

Private-sector companies added 67,000 jobs, following an upwardly revised 107,000 gain in July. That's good! The ole Colonel is tempted to say "real good" since the job growth in the non-government world is the only thing that will rescue us from this mineshaft.

The big payroll number is negative because private sector hiring isn't enough to offset job losses in the government, which is continuing to let go temporary workers hired for the 2010 census. I can live with that, this goofy census can't last forever. Job cuts by state governments facing budget pressures are more worrisome but if people go back to real jobs that helps state and municipal revenues. Go private sector!

All in all, this report is a lot more good than bad. The broader markets are now open and it looks like they agree with the base metals - the DOW and S&P are both up nicely.

Hmm...there is one more hand up in the back row.

"Hey Colonel, you've been saying for weeks that copper and gold need to move in the same direction to sustain a metals rally. Why are you now happy with gold down and copper up?"

"Great question!"

Gold's drop on today's employment news is fear leaving the marketplace plain and simple. Some of that money went right back into the "risk trade" which includes the base metals. Silver didn't react too negatively because it has a much greater industrial use than gold. If the global recovery is really back on track (i.e. double-dip recession gets out of Dodge), silver as well as copper should benefit. For this scenario, I expect gold to re-correlate with oil and copper similar to its behavior in the second-half of 2009 (until the Dubai credit crisis). Right now, I'd be happy if gold just stabilized and moved sideways for awhile. The ole Colonel will update the correlations of oil and copper with gold after we get back from holiday.

That's it, have a happy!

Daily Market Roundup

Enough talk, let's walk the walk:

The Eureka Miner's Index(EMI) hits an above-par 184.49, moving up from yesterday's 172.66 (see note 1) and a long way up from the 6/7/10 low of 50.7. The EMI high for the year was 259.35 on 4/12/2010 - the same day that COMEX copper peaked. Today's number confirms a new up-trend. Remember an EMI greater than 100 is good times (or at least better times) for the metals & miners relevant to Eureka County.

Eureka Outlook Dashboard

4-WD is OFF - improving roads in the marketplace; The VIX or "fear index" is below 25; metals & miners are on firmer timber, bellwether Freeport-McMoRan (FCX) remains above its 200-day average of $75.3 as of 8/05. The new 200-day average is $74.51 (EMI update pending); 10-year Treasurys are safely below 4% preserving a low-interest rate environment but there is some deflationary caution now that we are sub-3%.

The YELLOW light is turned back on for Commodity Reflation. Although copper is trading above $3/lb, the 10-yr T-Note is below 3.00%

The GREEN light is turned on for Stable Markets the VIX below the 30 level (what's this?)

The YELLOW light is turned on for Inflation/Deflation Watch as the Federal Reserve resumes buying back Treasurys and the 10-yr T-Note remains below 3.00%

The GREEN light is turned back on for Investor Confidence with continuing favorable news on the global recovery although the bond markets still signal trouble ahead

The GREEN light is 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, U.S. House committee debates miner workplace safety bill

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is up $0.05 in early trading to $75.07 (October contract, most active); Gold is down $10.5 to $1242.9 (December contract, most active); Silver is down $0.042 to $19.630 (December contract, most active); Copper is up $0.0340 to $3.5295 (December contract, most active)

Western Molybdenum Oxide is $15.50; European Molybdenum Oxide is $16.08; LME moly 3-month seller's contract is $16.33, LME cash seller is $16.10

Stock Market Morning Update

The DOW is up 68.35 points to 10388.45; the S&P 500 is up 7.83 to 1097.93. Miners are up except for the golds:

Barrick (ABX) $44.98 down 0.52%
Newmont (NEM) $60.20 down 1.92%
US Gold (UXG) $5.04 down 3.08%
General Moly (Eureka Moly, LLC) (GMO) $3.19 up 1.27%
Thompson Creek (TC) $9.37 up 2.74%
Freeport-McMoRan (FCX) $78.06 up 1.10% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $31.56 up 1.25% - global steel producer
POSCO (PKX) $102.38 down 1.04% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.12% to $1,409,519.04 (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: Yesterday, the Report incorrectly reported the EMI to be 200.77 for 9/2/2010. It should have been 172.66 which is the 200.77 number corrected for a low interest rate cap of 3%.

Headline Photo by Mariana Titus, "The Colonel's Flag"

Silver Heads for $20, Gold Holds $1250+, Copper hits $3.50

Þūnresdæg
Morning Miners!

It is 5:52 AM. Have a cup of Thor's thunderous java and help me get our favorite Norseman away from the tube. He's been watching the Weather Channel nonstop since one whopper hurricane and two tropical storms popped up in the Atlantic. Thor always liked a good blow but its been many moons since he's dipped an oar in those waters. I can't even get him to generate a little heat lightening over the Diamonds lately, the poor ole boy has got to get out more.

Silver Rips

Last Thor's Day we were excited to see silver break $19/oz; this morning it looks like we may be headed for $20/oz pasture soon; COMEX silver is presently at $19.63/oz but hit $19.72 in early trading.

The Report suggested it may be time to buy silver last Monday (Good Time to Buy Silver or Sift Sand for Bean Gold?) and COMEX silver dipped to a low of $17.78/oz on Tuesday. Here's the spread from intraday lows to highs for both metals:

COMEX Silver
Tuesday (8/24/10) low $17.78/oz
Today (9/2/10) high $19.72/oz up 10.9%

COMEX Gold
Tuesday (8/24/10) low $1211/oz
Yesterday (9/1/10) high $1255/oz up 3.6%

Now don't you wish you'd listened to the ole Colonel? Maybe you did. A better than 10% gain in a little more than a week sure beats CD rates or a "bean gold" rise of less than 4% (see note 1). The gold-silver ratio (Au:Ag ratio) is presently 63.86 down from 68.21 last Monday. At these levels a decrease in Au:Ag signals that fear is receding from the marketplace (at least for now, watch out for tomorrow's monthly labor report).

Copper Hits $3.50 - Approaches High for the Year

COMEX copper is nearly at its 2010 high on April 12th of $3.5840/lb. This morning it traded up to $3.50/lb before falling back to $3.4935/lb. This is terrific news for the global growth story. Here is an article from Bloomberg London correspondent Anna Stablum explaing South Korea's contribution to the copper bounce:

Copper Climbs to Four-Month High as IMF Raises South Korea Growth Forecast (Anna Stablum, Bloomberg News, 9/2/2010)

With rising expectations for Asia we can reasonably assume brighter days for South Korean steelmaker POSCO who owns 20% of our Mt. Hope project. What's good for POSCO is good for General Moly and that's good for Eureka County. No wonder billionaire investor Warren Buffet is giddy about the Asian steel giant (by my calculation Buffet owns 1% of Mt. Hope via his investment in POSCO).

Homestake Mine Compressed Air Locomotives


Today we look at compressed air locomotives as another part of our continuing series on the Homestake Mine in South Dakota (Ruby Hill & Homestake Mining Memories).

H. K. Porter, Inc. manufactured light-duty railroad locomotives in the U.S., starting in 1866. The company became the largest producer of industrial locomotives and produced almost eight thousand. Their last locomotive rolled out in 1950. In 1890 Porter built their first compressed air locomotive to work in a coalmine in Pennsylvania. Compressed air was stored in a two tanks and used to drive the pistons instead of steam. This allowed locomotive haulage inside mine tunnels without the fumes from burning coal in a boiler or the dangers of high pressure steam.

The Homestake mine came to extensively us compressed air locomotives. This Report's friend and contributor gave us the picture of Porter air locomotive #13 operating in a mineshaft (inset photo) and the giant air compressor at the Homestake Ross Shaft (headline photo). Below is a larger photo of a similar model that I found on the Railway Tourism website, good old #104.



Porter went on to build over 400 compressed air locomotives for use in mines, plants, and even the street railways of New Orleans. One of their largest was used at the Homestake Mine from 1928 to 1961 and is on outside display in Lead, South Dakota.



Maybe Eric can take a ride on one of these beauties next year if he can find one in working condition! (see Eric Rides the Rails).

Daily Market Roundup

Enough talk, let's walk the walk:

The Eureka Miner's Index(EMI) hits an above-par 172.66 (see note 2), moving smartly up from yesterday's 161.58 and a long way up from the 6/7/10 low of 50.7. The EMI high for the year was 259.35 on 4/12/2010 - the same day that COMEX copper peaked. Today's number confirms a new up-trend. Remember an EMI greater than 100 is good times (or at least better times) for the metals & miners relevant to Eureka County.

Eureka Outlook Dashboard

4-WD is OFF (hurrah!) - improving roads in the marketplace; The VIX or "fear index" is below 25; metals & miners are on firmer timber, bellwether Freeport-McMoRan (FCX) remains above its 200-day average of $75.3 as of 8/05. The new 200-day average is $74.51 (EMI update pending); 10-year Treasurys are safely below 4% preserving a low-interest rate environment but there is some deflationary caution now that we are sub-3%.

The YELLOW light is turned back on for Commodity Reflation. Although copper is trading above $3/lb, the 10-yr T-Note is solidly below 3.00%

The GREEN light is turned on for Stable Markets the VIX below the 30 level (what's this?)

The YELLOW light is turned on for Inflation/Deflation Watch as the Federal Reserves resumes buying back Treasurys and the 10-yr T-Note remains below 3.00%

The GREEN light is turned back on for Investor Confidence with favorable news on the global recovery although the bond markets still signal trouble ahead

The GREEN light is 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, U.S. House committee debates miner workplace safety bill

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is down $0.42 in early trading to $73.49 (October contract, most active); Gold is up $5.7 to $1253.8 (December contract, most active); Silver is up $0.242 to $19.635 (December contract, most active); Copper is up $0.0160 to $3.4935 (December contract, most active)

Western Molybdenum Oxide is $15.50; European Molybdenum Oxide is $16.00; LME moly 3-month seller's contract is $16.67, LME cash seller is $16.44

Stock Market Morning Update

The DOW is up 12.83 points to 10282.30; the S&P 500 is up 5.42 to 1085.71. Miners are mostly up:

Barrick (ABX) $45.36 up 0.07%
Newmont (NEM) $60.79 up 0.78%
US Gold (UXG) $5.28 up 0.19%
General Moly (Eureka Moly, LLC) (GMO) $3.14 up 1.29%
Thompson Creek (TC) $9.14 down 0.11%
Freeport-McMoRan (FCX) $76.97 up 1.02% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $31.04 up 1.97% - global steel producer
POSCO (PKX) $103.16 down 1.90% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.42% to $1,411,300.66(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: During the Great Depression many poor miners sifted dry sand for placer gold in hopes that a day's find would be enough to buy a can of beans, hence the name "bean gold."

Note 2: The Report incorrectly reported the EMI to be 200.77 for 9/2/2010. It should have been 172.66 which is the 200.77 number corrected for a low interest rate cap of 3% (correction 9/3/2010 AM).

Headline photo: Air Compressor at the Ross Shaft near Homestake Mine in Lead, South Dakota. The headline and other old time photos can be seen at the Homestake Visitor Center on 160 West Main Street, Lead, South Dakota. Please pay them a visit on your next pass through.

Our thanks again to the faithful reader that made these wonderful photographs available to the Report (Homestake Ross compressor and Porter Locomotive 13)

The Porter Locomotive 104 photograph can be seen at the Railway Tourism website

The large yellow Porter locomotive at Lead, South Dakota, is from Wikipedia.

China PMI Rockets Metals & Miners, Caterpillar & Steels

Wōdnesdæg
Morning Miners!

It is 5:40 AM. The UPS man gave Old Miner Woden a ride in from his Lone Mountain diggings yesterday. Now, I know that's against their company policy but we're in rural Nevada and Old Miner Woden is as familiar to drivers in these parts as Old Man Winter. Besides, UPS had to deliver a package to the break room. A faithful reader up in Washington state sent us some of Seattle's best espresso mix. Pardner, this java will blow you past hump day and into the weekend faster than Woden can spin a yarn. Have a cup and let's checkout what's caught the Old Miner's eye...

Homestake Homestead

Woden was checking out our stack of Homestake Mining photos and got to laughing at today's headline shot of a miner's homestead in the Black Hills of South Dakota (from a continuing series, Ruby Hill & Homestake Mining Memories). "What is it?" I asked, "All those deer or that long rifle or the expression on that little girl's face?"

"Nah, Colonel," Woden replied, "Look how they built this here 2-level porch!"

The old miner jabbed the photo with his index finger, "Them's real miners. That's post and cap timbering with a crib joint on the header!"

That's my old boy. If you are interested in timbering and other early mining technology you may want to check out Drills and Mills, Precious Metal Mining Methods of the Frontier West by Will Meyerriecks (see Note 1).

China Manufacturing Data Rockets Metals & Miners, CAT & Steels

After all that story tellin' the markets are now open and we got us a humdinger rally, buckaroos! The DOW is up over 200 points, Freeport-McMoRan (FCX) has jumped 5% blowing past its 200-day moving average, Caterpillar (CAT) is up 5% too along with steel giant ArcelorMittal (MT). Hold your horses, I've got to compute the Eureka Miner's Index(EMI).

Whoa! The EMI just shot to a new high of 161.6 reversing its downtrend and catching a high gear. What's behind all this joy? Last night China released its latest manufacturing data or PMI (see Note 2) and it's looking good. Here's this morning's Bloomberg story:

China Manufacturing Bounces Back From Low in Stabilization Sign (Chris Anstey, Bloomberg News, 9/1/2010)

Encouragingly, manufacturing in China grew at a faster pace in August after the weakest performance since early 2009 in July. The official PMI rose to 51.7 from 51.2, anything over 50 shows expansion. If you don't believe the Chinese government numbers, HSBC calculates an independent China PMI and it looks promising also increasing 2.5 points to 51.9. The HSBC index hit a 16-month low in July while the official index declined in May, June and July.

The China number was followed by an unexpectedly upbeat PMI for the U.S. As reported by the Wall Street Journal, "The U.S. manufacturing activity expanded in August for the 13th straight month, with the ISM manufacturing PMI defying expectations to rise to 56.3, from 55.5 in July. The encouraging numbers were fueled by strong employment and production data." (WSJ, 9/1/2010)

Correlation Watch

This morning's rally pushed the 1-month copper/gold correlation into positive territory, a bullish sign. Oil/gold correlation improved some too but remains seriously inverted, a bearish sign. Copper/Oil correlation remains positive but low. The best case for the metals & miners is all-positive correlations for these near and midterm correlations.

Here are the latest numbers:

Copper/gold correlation +0.1031 (1-month) -0.2206 (3-month)
Oil/gold correlation -0.8321 (1-month) -0.3793 (3-month)
Copper/oil correlation +0.3618 (1-month) +0.3280 (3-month)

Enjoy this rally while it lasts, pardner - the hombres over in double-dip canyon will not be happy campers with this turn in news. Stay tuned.

Daily Market Roundup

Enough talk, let's walk the walk:

The Eureka Miner's Index(EMI) hits an above-par 161.58, launching from yesterday's 132.23 and a long way up from the 6/7/10 low of 50.7. Today's number breaks resistance levels of 139.53 and then 151.54 to reverse the recent down trend. Remember an EMI greater than 100 is good times (or at least better times) for the metals & miners relevant to Eureka County.

Eureka Outlook Dashboard

4-WD is OFF (for a change!) - improving roads in the marketplace; The VIX or "fear index" is below 25; metals & miners are on firmer timber, bellwether Freeport-McMoRan (FCX) has broken its 200-day average of $75.3 (our new warning level, 8/05 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment but there is some deflationary caution now that we are sub-3%.

The YELLOW light is turned back on for Commodity Reflation. Although copper is trading above $3/lb, the 10-yr T-Note is solidly below 3.00%

The GREEN light is turned on for Stable Markets the VIX below the 30 level (what's this?)

The YELLOW light is turned on for Inflation/Deflation Watch as the Federal Reserves resumes buying back Treasurys and the 10-yr T-Note remains below 3.00%

The GREEN light is turned back on for Investor Confidence with favorable China and domestic manufacturing data although the bond markets still signal trouble ahead

The GREEN light is 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, U.S. House committee debates miner workplace safety bill

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is up $1.17 in early trading to $73.09 (October contract, most active); Gold is up $1.4 to $1251.7 (December contract, most active); Silver is down $0.002 to $19.430 (December contract, most active); Copper is up $0.0675 to $3.43.75 (December contract, most active)

Western Molybdenum Oxide is $15.50; European Molybdenum Oxide is $16.00; LME moly 3-month seller's contract is $16.67, LME cash seller is $16.44

Stock Market Morning Update

The DOW is up 226.75 points to 10241.47; the S&P 500 is up 26.85 to 1076.18. Miners are rocking except for big gold:

Barrick (ABX) $46.17 down 1.26%
Newmont (NEM) $60.92 down 0.65%
US Gold (UXG) $5.29 up 2.32%
General Moly (Eureka Moly, LLC) (GMO) $3.09 up 2.66%
Thompson Creek (TC) $9.01 up 5.01%
Freeport-McMoRan (FCX) $75.64 up 5.07% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $30.40 up 4.86% - global steel producer
POSCO (PKX) $103.86 up 2.87% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 2.16% to $1,404,143.60(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

Note 1: Eureka Opera House Director Wally Cuchine first introduced the ole Colonel to this wonderful book; you can purchase a copy at the gift shop of our Eureka Sentinel Museum. For folks new to our town, the museum is housed in the 1879 Eureka Sentinel Newspaper Building just behind the Chevron Station on South Bateman Street.

Note 2: An important indicator of economic activity is the Purchasing Managers Index (PMI). It gives the percentage of manufacturing purchasing managers that report better business conditions than in the previous month for a certain economic sector. A PMI index over 50 indicates that the economy is expanding while anything below 50 means that the economy is contracting. This is important to the metals & miners because it is another "tell" on the health of our global recovery. As a model of global cooperation, the PMIs are updated at roughly the same time at the beginning of every month.

Headline photo: Homestead near Homestake Mine in Lead, South Dakota. The headline and other old time photos can be seen at the Homestake Visitor Center on 160 West Main Street, Lead, South Dakota. Please pay them a visit on your next pass through.

Our thanks again to the faithful reader that made these wonderful photographs available to the Report.