General Moly (GMO) Update & The $20 Moly Camp

Asdzání

*** A special thanks for the input provided to today's report by Seth Foreman, Director of Investor Relations, General Moly ***


Morning Miners!

It is 5:51 AM. Grab a cup of hump day java. I've got Old Miner Woden counting on all fingers and toes trying to figure out the latest General Moly timing for Mt. Hope...

Mt. Hope Permitting Progress

General Moly (GMO) updated their permitting progress in a yesterday afternoon press release:

GENERAL MOLY UPDATES MT. HOPE PROJECT PERMITTING PROGRESS (Press release, 02/08/2011, 2:10 PM PT)

Things are taking a little longer than expected, pardner. Investment Relations Director Seth Foreman explained it to me this way, "...the review and edit process with the BLM and its independent EIS contractor is flat taking longer than we thought and longer than they indicated it would." Also he added, "...the BLM has decided, based on the scope of the comments that we received on the PDEIS (August last year) that there needs to be another round of review before we get to the DEIS publication. So they have inserted another review period into the draft/edit cycle, creating more delay. Frustrating, but something we will deal with."

Nuts. My sympathy goes out for the GMO team, there must be a lot of frustration for those anxious to put on the Carhartts and begin doing what they do best - mining!

I believe Old Miner Woden has got it figured. Let's look at the pieces and come up with a rough new schedule. The Draft EIS (DEIS) is now expected to be released for publication in the second quarter of this year. At the earliest, the ole Colonel doesn't think that means April Fool's Day, let's say mid-April just for fun. The latest would be the end-of-June.

After DEIS release there are two additional steps:

DEIS publication = 1 to 2+ months
Record of Decision (ROD) = 6 to 9 months

If we assume GMO starts digging right at ROD time, then we have 7 to 11+ months to go to mine construction from mid-April to late-June of this year. Woden tells me that gives us mid-November 2011 at the earliest; late-May+ 2012 at the latest. We put a "+" on the later time because the 1-2 month DEIS publication estimate is qualified in the press release, "...other DEIS publications have taken longer."

Last year I believe General Moly was expecting mine construction to begin this summer, now it looks as though it is pushed out to the end of the year at the earliest. Unfortunately, GMO has little influence over these delays.

One thing that is in General Moly's control is time-to-first production once mine construction has started. Their estimate in the press release is 20 months which I believe is unchanged from earlier estimates. That schedules the first pound of moly for mid-July 2013 to late-January+ 2014. Nuts, I thought we'd see Miss Moly before the ole Colonel turns eligible for Medicare. Looks like we're now a few months beyond that milestone at best.

The $20 Moly Camp

The Report has been talking about $20+/lb molybdenum oxide for some time, my mid-range 2011 target is $20.12/lb. I look at the spot markets and the relatively new London Metal Exchange (LME) molybdenum futures market for clues in future pricing. These are reported in detail in our molybdenum roundup bright and early every Monday morning.

In all honesty, the LME futures trading is still very thin and investment interest in this minor metal is dwarfed by such speculation favorites as gold and copper. Here is a quick look at metal inventories* related to some popular speculative investments compared to LME molybdenum warehouse stores:

SPDR Gold Trust ETF (GLD) 1,200 tonnes $52.5 billion (@$1360/oz)
LME Copper 394,000 tonnes $3.9 billion (@$10,000/tonne)
LME Molybdenum 282 tonnes $10.6 million (@$37,500/tonne)

(*approximate inventories & pricing for comparison purposes)

Get the picture? For now, moly prices are driven primarily by supply and demand not speculative interest. I asked Seth Foreman for his opinion on the future prices expected in the physical market. He gave me this comprehensive overview that supports $20/lb moly with some interesting comments on timing:

"Yes, we are in the $20/lb camp. We are already at about $18/lb and the trend has been slowly, but steadily climbing for a couple months now, as you note [yesterday's blog on spot & LME futures].

A couple factors that we are seeing. First, global steel production has reached pre-crash levels. That said, China represents about 50% of that steel production whereas pre-crash they were closer to 40% or even lower. Chinese steel, in general, doesn’t contain that much moly. So I think that globally, the average moly content per ton of steel is lower now than it was pre-crash (based on country-specific product mix). That helps explain why steel production is at pre-crash levels but moly prices are not at pre-crash levels.

Second, although this is nearly impossible to estimate, I think there are some existing moly inventories that may be still being worked through. That, and I do not believe that all Chinese domestic production is back on line yet. I think those two factors are mitigating the potential for a price spike in moly, compared to what has happened in the Copper market. However, those two mitigating factors are both temporary in nature. It will not be long before Chinese mines are back online nor will it be long before any existing inventories are worked through. At that point we see the potential (no guarantees) for a positive price reaction, assuming global economic growth holds." (Seth Foreman, Director of Investor Relations, General Moly)

So there you have it pardner. Be a little patient, Mt. Hope is coming and moly prices are trending higher (Euro moly nudged up to $17.92/lb yesterday). That doggone Woden just stirred my coffee with his Medicare card - stop it you old fool...I'll have mine before you know it!

Daily Oil Watch

Last week we identified North Sea Brent crude oil as a good barometer for the developing crisis in Egypt. The most active front month contract has moved above $100/bbl again with a growing spread from the North American benchmark, Western Texas Intermediate or "Texas light sweet crude", traded on the NYMEX (see note 1). The Report normally follows the latter but will track both until things settle out in the Middle East.

Here are the most active March contracts as of this morning:

NYMEX light sweet crude $87.23
ICE North Sea Brent crude $100.48
Spread (ICE- NYMEX) = $13.25 (yesterday $12.28)

Here are the June contracts with a narrower spread:

NYMEX light sweet crude $94.85
ICE North Sea Brent crude $101.71
Spread (ICE- NYMEX) = $6.86 (yesterday $5.86)

Although prices are still off their crisis highs, we have $100+ Brent and mid-$90 NYMEX in June favoring higher oil prices for the summer. I'll stick with my December prediction that we will see NYMEX $100/bbl oil before the Fourth of July.

Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Miner's Index(EMI)

This morning the Eureka Miner's Index(EMI) is above-par at 571.31, down from from yesterday's 584.86 sitting just below the 1-month moving average of 580.79. The EMI continues to trend down from the high set on January 4th.

The record high for the EMI is 816.78 set 01/04/2011; the low was set 6/7/2010 at 50.7. An EMI greater than 100 signals better times for the metals & miners relevant to Eureka County.

200-day averages are used in the EMI to normalize current mining company share price and are updated monthly. Upper and lower trend lines are updated weekly.

Eureka Outlook Dashboard

4-WD is ON - The metals & miners have hit a rough patch; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) is below its 50-day moving average headed for its 100-day average but still well above its 200-day average of $43.06 (our new warning level, 02/02 update after the FCX 2:1 stock split); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

The GREEN light is turned back on for Commodity Reflation with copper trading comfortably above $3.50/lb

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 Watch as the Federal Reserve resumes buying Treasurys (aka QE2)

The GREEN light is turned back on for Investor Confidence as investment returns to the equity markets

The YELLOW light is turned on our Fuel Gauge with oil above $80

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions , General Moly Mt. Hope Water Rights, U.S. House committee debates miner workplace safety bill, R&R Partners parts ways with Nevada Mining Association

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is up $0.29 in early trading at $87.23 (March contract, most active); Gold is up $0.2 to $1364.3 (April contract, most active); Silver is up $0.009 to $30.280 (March contract, most active); Copper is down $0.0140 to $4.5600 (March contract, most active)

Western Molybdenum Oxide is $17.00; European Molybdenum Oxide is $17.92; LME moly 3-month seller's contract is $18.14, LME cash seller is $17.96

Stock Market Morning Update

The DOW is down 6.51 points to 12,226.64; the S&P 500 is down 3.75 at 1320.82. Miners are down:

Barrick (ABX) $48.21 down 0.99%
Newmont (NEM) $58.14 down 0.22%
US Gold (UXG) $7.48 down 2.22%
General Moly (Eureka Moly, LLC) (GMO) $5.46 down 3.19%
Thompson Creek (TC) $13.83 down 1.50%
Freeport-McMoRan (FCX) $54.74 down 1.63% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $37.82 down 1.28% - global steel producer
POSCO (PKX) $108.06 down 2.03% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 1.26% at $1,781,290.21(what's this?).

Cheers,

Colonel Possum

Note 1 - West Texas intermediate (WTI), also known as Texas light sweet, is a type of crude oil used as a benchmark in oil pricing and is the underlying commodity of New York Mercantile Exchange's (NYMEX) oil futures contracts. The price of WTI is often referenced in North American news reports on oil prices, alongside the price of North Sea Brent crude (Wiki).

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 Pops, Copper Falls, Moly Up - China, China

Shá
Walk on a rainbow trail; walk on a trail of song, and all about you will be beauty. There is a way out of every dark mist, over a rainbow trail. - Navajo Song


Morning Miners!

It is 5:50 AM. Have a cup of Tuesday joe. Sweet Ruby T is full of Navajo song and it looks like we're in for a good'un, pardner...

Gold Pops, Copper Falls

The Chinese returned from their lunar holiday with an interest rate surprise. Actually, it was expected that China's central bank would do something soon to combat rising inflation. Today they raised their benchmark deposit and lending rates by 0.25 percentage point each, the first rate increase this year. The People's Bank of China (PBOC) said they will raise the one-year yuan lending rate to 6.06% from 5.81%.

COMEX copper stumbled on the announcement, falling sharply at 05:30 ET to $4.5060/lb. Yesterday the red metal had posted another record high at $4.6375/lb. Copper futures are back up a bit to $4.5505/lb. Nothing to get too teary-eyed about when we remember that the price of copper has tripled from its December 2008 lows. The ole Colonel thinks this is a good response, daily metal records just ain't natural (although tin managed another high)!

Thankfully gold and silver headed the other direction from copper. Our two favorite PMs started their move at 08:20 ET and popped to $1365.90/oz for gold and $29.790/oz for silver by 08:35 ET. They are now trading slightly below their morning highs at $1,361.1/oz and $29.650/oz respectively.

The gold move is very important. Dennis Gartman, "Commodity King" and author of the respected Gartman Letter, said previously that gold may have bottomed just prior to the Egypt flare up (COMEX gold $1309.1/oz intraday low on 1/28/2011). As reported by Kitco News, Gartman had this to say just prior to today's gold move:

Gold’s recent performance has been “impressive’ given that the dollar has been largely steady lately, says Dennis Gartman, publisher of The Gartman Letter. This is especially the case since the Chinese and other Asian buyers have been out of the gold market in recent days due to Chinese New Year celebrations. “We get the sense that when the Asian buyers return from holiday that prices will firm up even more and we are prepared to be therefore even more bullish than we have been thus far,” Gartman says. Technically, he said, a move by gold through 850 sterling would be “quite impressive,” and rise through here coupled with a break above $1,360 “would be even more so,” Gartman concludes. (Kitco News Nugget, 02/08/2011)

Happy New Year Dennis, COMEX broke and is presently trading above $1,360/oz. Yee-ha!

Miss Moly on the march

Molybdenum futures nudged up again yesterday with an across-the-board move of 2.5%. Spot prices and the London Metal Exchange (LME) futures are in textbook contango* with both the 3-month and 15-month contracts in $18/lb territory:

Western moly oxide $17.00/lb
European Moly oxide $17.68/lb

LME 3-month cash seller $17.96/lb
LME 3-month seller $18.14/lb
LME 15-month seller $18.71/lb

(*contango occurs when the price of a commodity for future delivery is higher than the spot price, or a far future delivery price is higher than a nearer future delivery; backwardation is the opposite of contango)

The 3-month seller at $18.14/lb is comfortably above the Colonel's mid-range moly price target for 2010 of $15.71/lb but below my target of $20.21/lb for 2011. Look for spot prices to make a move up soon. Go Miss Moly.

What about the Miners?

The broader markets are now open and predictably Barrick Gold (ABX), Newmont (NEM) and US Gold (UXG) are up for the morning on the gold move jumping 1%, 1.5% and 4%. With a drop in copper prices, bellwether miner Freeport-McMoRan (FCX) struggles again below its 50-day moving average. A setback of less than 1% from yesterday's FCX close is, however, reassuring.

As we'll see below, the Eureka Miner's Index(EMI) is off from yesterday's number a bit and now sits right at its 1-month moving average. If the EMI can move back up from its average in the next several days, we may be emerging from the corrective phase for the miners. If so, January 28th marks the bottom of the recent correction. If everything moves south, the correction may be quite a bit longer. It will be important to watch the correlation of copper and gold prices going forward - if the 3-month correlation remains negative, the latter case for the miners is more likely.

Daily Oil Watch

Last week we identified North Sea Brent crude oil as a good barometer for the developing crisis in Egypt. As tensions ease a bit, the most active front month contract has fallen below $100/bbl with a growing spread from the North American benchmark, Western Texas Intermediate or "Texas light sweet crude", traded on the NYMEX (see note 1). The Report normally follows the latter but will track both until things settle out in the Middle East.

Here are the most active March contracts as of this morning:

NYMEX light sweet crude $86.53
ICE North Sea Brent crude $98.81
Spread (ICE- NYMEX) = $12.28 (yesterday $11.51)

Here are the June contracts with a narrower spread:

NYMEX light sweet crude $94.12
ICE North Sea Brent crude $100.26
Spread (ICE- NYMEX) = $6.14 (yesterday $5.86)

Although prices have fallen we still see $100+ Brent and mid-$90 NYMEX in June favoring higher oil prices for the summer. I'll stick with my December prediction that we will see NYMEX $100/bbl oil before the Fourth of July.

Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Miner's Index(EMI)

This morning the Eureka Miner's Index(EMI) is above-par at 584.86, down from from yesterday's 607.25 sitting just a thin flat washer above the 1-month moving average of 584.33. Although a bullish sign, the EMI continues to trend down from the high set on January 4th.

The record high for the EMI is 816.78 set 01/04/2011; the low was set 6/7/2010 at 50.7. An EMI greater than 100 signals better times for the metals & miners relevant to Eureka County.

200-day averages are used in the EMI to normalize current mining company share price and are updated monthly. Upper and lower trend lines are updated weekly.

Eureka Outlook Dashboard

4-WD is ON - The metals & miners have hit a rough patch; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) is below its 50-day moving average but still well above its 200-day average of $43.06 (our new warning level, 02/02 update after the FCX 2:1 stock split); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

The GREEN light is turned back on for Commodity Reflation with copper trading comfortably above $3.50/lb

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 Watch as the Federal Reserve resumes buying Treasurys (aka QE2)

The GREEN light is turned back on for Investor Confidence as investment returns to the equity markets

The YELLOW light is turned on our Fuel Gauge with oil above $80

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions , General Moly Mt. Hope Water Rights, U.S. House committee debates miner workplace safety bill, R&R Partners parts ways with Nevada Mining Association

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is down $0.95 in early trading at $86.53 (March contract, most active); Gold is up $14.9 to $1363.1 (April contract, most active); Silver is up $0.307 to $29.650 (March contract, most active); Copper is down $0.0245 to $4.5505 (March contract, most active)

Western Molybdenum Oxide is $17.00; European Molybdenum Oxide is $17.68; LME moly 3-month seller's contract is $18.14, LME cash seller is $17.96

Stock Market Morning Update

The DOW is up 16.88 points to 12,178.51; the S&P 500 is up 0.69 at 1319.74. Miners are mixed:

Barrick (ABX) $48.34 up 1.07%
Newmont (NEM) $58.01 up 1.50%
US Gold (UXG) $7.39 up 3.94%
General Moly (Eureka Moly, LLC) (GMO) $5.52 unchanged
Thompson Creek (TC) $14.15 down 0.56%
Freeport-McMoRan (FCX) $55.14 down 0.86% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $38.14 up 3.70% - global steel producer
POSCO (PKX) $108.34 up 1.19% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.99% at $1,779,687.41(what's this?).

Cheers,

Colonel Possum

Note 1 - West Texas intermediate (WTI), also known as Texas light sweet, is a type of crude oil used as a benchmark in oil pricing and is the underlying commodity of New York Mercantile Exchange's (NYMEX) oil futures contracts. The price of WTI is often referenced in North American news reports on oil prices, alongside the price of North Sea Brent crude (Wiki).

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

Copper & Gold Flip-Flop - Metals & Miners Weekly Roundup

hózhó


Morning Miners!

It is 5:53 AM. Super Bowl is over, pardner. Have a cup of Monday cold-start and let's get to work...

Copper & Gold Flip-Flop

We're stating this week with yet another COMEX copper record pegging $4.6375/lb in the early hours. COMEX gold is pretty much where we left it at $1351.3/oz and silver has stepped up slightly to 29.190/oz.

The beginning of 2011 continues to be period of rising copper, falling-to-sideways gold and resilient silver. Silver, although down with gold, has some of the same attractiveness as the base metals due to growing industrial applications (e.g., high energy density batteries).

The closely watched gold/silver ratio is evidence of silver's resilience. The ratio is compressing a bit more today to 46.3 from Friday's 46.4; it has been below 50 since December 1st - a sign of weak gold, stronger silver. By comparison the gold/silver ratio was in a range of 50-56 before the collapse of Lehman Brothers and at the height of the financial crisis the ratio spiked above the 80s.

Copper is now negatively correlated with gold over the last 3-months given the recent inverse relation of copper and gold prices (see below). This bearish flip-flop and a very low silver/gold ratio are not sustainable patterns in my view. It is certainly not a good environment for mining stocks which remain in a corrective phase while the broader markets soar. The mining companies do best as a sector when gold and the metals all move together which was the condition during the impressive mining rally at the end of last year. LOGIC Advisor's Bill O'Neill commented last week, "Gold is a psychological market, and right now the psychology is neutral at best."

Thankfully there has has been some pickup in the Eureka Miner's Index (EMI) which has climbed above its 1-month moving average for the second consecutive day (below) and it looks like a good morning for the miners. A copper/gold inversion of short duration would be supportive of future EMI improvement.

Let's update our record books. Here's where we stand for the big three:

COMEX Gold $1432.5/oz 08:25:00 ET 12/7/2010, February contract most active
COMEX Silver $31.275/oz 08:15:00 ET 01/03/2011, March contract most active
COMEX Copper $4.6375/lb 06:15:00 ET 02/04/2011, March contract most active

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. 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). A 1-month moving average is given by the blue line. A larger and more readable chart appears near the bottom of this blog page.


This morning the Eureka Miner's Index(EMI) is above-par at 607.25, slightly up from from Friday's 605.31 and breaking above the 1-month moving average of 587.38. Although a bulllish sign, the EMI continues to trend down from the high set on January 4th.

The 2011 record high for the EMI is now 816.78 set 01/04/2011; the 52-week low was set 6/7/2010 at 50.7. An EMI of 100 is the boundary between good lands and bad lands for the metals & miners relevant to Eureka County.

200-day averages are used in the EMI to normalize current mining company share price and are updated monthly. Upper and lower trend lines are updated weekly.

Daily Oil Watch

Last week we identified North Sea Brent crude oil as a good barometer for the developing crisis in Egypt. It is above $100/bbl with a large spread from the North American benchmark, Western Texas Intermediate or "Texas light sweet crude", traded on the NYMEX (see note 1). The Report normally follows the latter but will track both until things settle out in the Middle East.

Here are the most active March contracts as of this morning:

NYMEX light sweet crude $88.79
ICE North Sea Brent crude $100.33
Spread (ICE- NYMEX) = $11.51 (Friday $10.54)

Here are the June contracts with a narrower spread:

NYMEX light sweet crude $95.73
ICE North Sea Brent crude $101.59
Spread (ICE- NYMEX) = $5.86 (Friday $5.80)

Both NYMEX & Brent crude prices are decreasing with a reduction in tensions in Egypt but the spreads are still in favor of higher oil prices for the summer. I'll stick with my December prediction that we will see NYMEX $100/bbl oil before the Fourth of July.

Oil & Copper Correlations with Gold

Oil & copper correlations with gold give us insight into what may happen next for the metals & miners. With supply and demand fundamentals driving the commodity space, diminishing correlations between key commodities are less alarming but trends should still be carefully monitored.

Here are the latest correlations given this morning's NYMEX/COMEX trading:

Oil/Au correlation +0.5239 (1-month) +0.2739 (3-month)
Cu/Au correlation -0.0465 (1-month) -0.1026 (3-month)
Cu/Oil correlation +0.4785 (1-month) +0.8548 (3-month)

Here are the numbers from the last roundup (01/31/2011):

Oil/Au correlation +0.6964 (1-month) +0.4173 (3-month)
Cu/Au correlation +0.4981 (1-month) +0.0844 (3-month)
Cu/Oil correlation +0.5874 (1-month) +0.8662 (3-month)


All these correlations remain positive except copper and gold which have started a bearish "inversion" with negative one- and three-month values. Copper continues to exhibit an over-valued state with respect to gold (2.2-standard deviations above the new February model "fair value" line). The following updated chart of copper versus gold shows a much flatter slope and wider separation between the upper and lower range than January's model (ranges shown by aqua lines, the yellow line shows the most recent data, the blue line is a 1-month moving average and the dark blue line is older data - a larger and more readable chart appears near the bottom of this blog page):



Oil and gold are showing more weakening in their correlations although oil is presently closer to fair value with respect to gold by 0.9-standard deviations. The 3-month correlations of copper & oil remains remain below 0.9 suggesting copper and oil price correlation have weakened but are still above 0.8. Copper is presently overvalued with respect to oil by 3.5-standard deviations.

One way to visualize these correlations over time is to plot the "near-term" 3-month versus the "short-term" 1-month correlations (aka "rho") as shown below in a graph of oil versus gold and copper versus gold. The blue line indicates the correlation trajectory since October 1st; the magenta line is recent data since December 1st (ref: China to the Rescue?):



In the case of oil versus gold, we start out on 10/1/10 in the "+,-" or "yellow" quadrant and move upward until both are positively correlated (i.e. in the "+,+" or "green" quadrant). Copper correlated positively faster than oil and has been in the green quadrant longer. Correlation data in this region is typically considered bullish. The trend toward the "-,+" quadrant for oil is a bearish trend; copper moving into the "-.-" region with respect to gold is very bearish..

Gold/Oil, Oil/Copper & Gold/Copper Ratios

The Report has been tracking the stability of the gold/oil, oil/copper & gold/copper ratios. Although they ended last year rock solid (<3% variation, 1-standard deviation/mean) the ratios continue to diverge. This is what prompted my January 14th comment to Adella Harding, Elko Daily Free Press, "The recent divergence of our lustrous friend [gold] from copper and oil...may signal a near-term correction for the overall metals and mining sector.".

Here is a plot of the variation for both ratios as well as the copper/oil ratio (a larger and more readable chart is given at the bottom of the blog page):



Once the ratios exceed 3% error, they become less useful in predicting the price moves of one commodity with respect to another in the ratio pair.

For the past 3-months we have these statistics given this mornings' numbers:

Au/Oil ratio

mean 15.61 bbl/oz
variation > 3.0% limit at 3.52% (1-standard deviation/mean)

Oil/Copper ratio

mean 21.11 lbs/bbl
variation > 3.0% limit at 3.41% (1-standard deviation/mean)

Au/Copper ratio

mean 329.8 lbs/oz
variation > 3.0% limit at 6.45% (1-standard deviation/mean)

Weekly Molybdenum Roundup



Spot prices for molybdenum oxide remain in $17/lb territory out West and in Europe. Moly futures are in a mild contango between spot prices and the London Metal Exchange (LME) 3-month and 15-month contracts (contango occurs when the price of a commodity for future delivery is higher than the spot price, or a far future delivery price is higher than a nearer future delivery; backwardation is the opposite of contango).

The 3-month seller at $17.69/lb is comfortably above the Colonel's mid-range moly price target for 2010 of $15.71/lb but below my target of $20.21/lb for 2011. The Report will give moly prices a "yellow-green" light on the Eureka Outlook Dashboard for now because I do believe we could see much higher prices this year.

Here is a detailed pricing summary for last week:

Western Moly Oxide $17.00/lb (the price tracked by Base Metals on the General Moly Website)

Moly Oxide, Europe (Mo Drummed Molydbic Oxide EU) $17.68/lb (the price reported in the Metals Bulletin)

LME Futures Contracts

LME cash seller is at $38600/metric ton $17.51/lb

3-Month (Buyer) $38,600/metric ton $17.51/lb
3-Month (Seller) $39,000/metric ton $17.69/lb

15-Month (Buyer) $38,250/metric ton $17.35/lb
15-Month (Seller) $40250/metric ton $18.26/lb

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


Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Outlook Dashboard

4-WD is ON - The metals & miners have hit a rough patch; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) is just above its 50-day moving average and still well above its 200-day average of $43.06 (our new warning level, 02/02 update after the FCX 2:1 stock split); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

The GREEN light is turned back on for Commodity Reflation with copper trading comfortably above $3.50/lb

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 Watch as the Federal Reserve resumes buying Treasurys (aka QE2)

The GREEN light is turned back on for Investor Confidence as investment returns to the equity markets

The YELLOW light is turned on our Fuel Gauge with oil above $80

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions , General Moly Mt. Hope Water Rights, U.S. House committee debates miner workplace safety bill, R&R Partners parts ways with Nevada Mining Association

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is down $0.24 in early trading at $88.79 (March contract, most active); Gold is up $2.3 to $1351.3 (April contract, most active); Silver is up $0.131 to $29.190 (March contract, most active); Copper is up $0.0350 to $4.6145 (March contract, most active)

Western Molybdenum Oxide is $17.00; European Molybdenum Oxide is $17.50; LME moly 3-month seller's contract is $17.69, LME cash seller is $17.51

Stock Market Morning Update

The DOW is up 49.80 points to 12,141.95; the S&P 500 is up 5.40 to 1316.27. Miners are mixed:

Barrick (ABX) $48.08 down 0.06%
Newmont (NEM) $57.53 up 0.98%
US Gold (UXG) $6.99 up 1.01%
General Moly (Eureka Moly, LLC) (GMO) $5.46 down 0.44%
Thompson Creek (TC) $14.33 up 0.63%
Freeport-McMoRan (FCX) $57.42 up 1.16% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $36.59 up 1.25% - global steel producer
POSCO (PKX) $107.16 up 1.01% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.52% at $1,760,100.38 (what's this?).

Cheers,

Colonel Possum

Note 1 - West Texas intermediate (WTI), also known as Texas light sweet, is a type of crude oil used as a benchmark in oil pricing and is the underlying commodity of New York Mercantile Exchange's (NYMEX) oil futures contracts. The price of WTI is often referenced in North American news reports on oil prices, alongside the price of North Sea Brent crude (Wiki).

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, Nevada Mining Tax Clouds & Newmont-Fronteer

Łáá'íí


Morning Miners!

It is 5:23 AM. Grab a cup of Raine's Friday Red Label and let's get to work, we've got a lot of news on the wire. The U.S. Labor Department will release their monthly report in seven minutes, be right back...

Jobs, Jobs, Jobs & Kool-Aid


The ole Colonel wishes he'd caught a few more winks and skipped the unemployment report. The world is waiting for that break-away moment when the unemployment numbers in the U.S. show a dramatic drop and all is better again. This morning was not that moment. On the surface, the unemployment rate looked quite encouraging dropping from a December 9.4% to a January 9.0%. However, the nonfarm payroll number increased only by 36,000 last month, far below a Dow Jones Newswires survey of leading economists who had forecast 136,000. Nuts.

The unemployment rate is taken from a household survey and represents different data than that used to compile nonfarm payrolls. The two surveys can give conflicting views of the jobs market, the low payroll number is being blamed by bad weather in January. The December payroll number was revised to show an increase of 121,000 jobs, from a previous estimate of 103,000 - either estimate a lot bigger than January's 36,000. Nuts.


CNBC bond market reporter Rick Santelli can always be counted on for a memorable comment after these monthly reports. This morning he wadded up some paper and threw it at the camera. Rick then made the observation that despite evidence to the contrary, the "people" somehow know that inflation has arrived and the jobs situation "stinks." He then implied economists/analysts of the opposing view were a bunch of "Kool-Aid drinkers." You gotta love that Santelli.

More red metal déjà vu

COMEX copper bested yesterday's morning record (yet again) with a pop to $4.5975/lb, now the 15th record since the Pearl Harbor Day highs of last December. COMEX gold went up, then down, then settled close to where it was before the release of the labor report. Silver is again showing strength against gold with the gold/silver ratio dropping to 46.7 from yesterday's 47.1. Gold is presently at $1352.7/oz; silver at 28.945/oz. The moves of all three metals reinforce the Report's theme of "rising copper, falling gold & resilient silver" for the price action since mid-December.

For the record keepers, here's where we stand for the big three:

COMEX Gold $1432.5/oz 08:25:00 ET 12/7/2010, February contract most active
COMEX Silver $31.275/oz 08:15:00 ET 01/03/2011, March contract most active
COMEX Copper $4.5975/lb 09:10:00 ET 02/04/2011, March contract most active

The following chart (red line, far-right) shows the little up-down-sideways blip in London spot gold price following the release of the labor report, ho-hum:



European Molybdenum Oxide nudged up another 8 cents to $17.68/lb - Go Miss Moly!

Nevada Mining Tax - Gathering Clouds

A faithful reader of the Report informed me that lobbying firm R&R Partners has ended its relationship with the Nevada Mining Association. R&R president and principal Pete Ernaut has been particularly helpful keeping a lot of the "higher mining tax" discussions at bay as Nevada tries to address its looming budget problems. Here is a link to Benjamin Spillman's report for the Las Vegas Review-Journal:

R&R Partners parts ways with Nevada Mining Association (Benjamin Spillman, Las Vegas Review-Journal,
Wednesday, Feb. 02, 2011 at 07:43 PM)

Gathering clouds, pardner.

Newmont to aquire Fronteer Gold

After jobs and taxes we need some good news to start the weekend! Adella Harding, mining editor for the Elko Daily Free Press, wrote a terrific article on the Newmont Mining Corp. (NEM) planned acquisition of Fronteer Gold (FRG) for its late-stage Long Canyon Project in Elko County and two other Nevada projects:

Newmont to aquire Fronteer Gold (Adella Harding, Elko Daily Free Press, Thursday, February 3, 2011 5:31 pm)

FRG had a nice pop on the news from $10.4/share on the close yesterday to an open of $14.5/share on the open this morning. The Colonel has been high on Newmont (NEM) since my January 19th blog Buy Barrick? Buy Newmont?. Presently NEM is trading at $57.3/share compared to its closing price of $55.46/share on 1/19/2011, up 3.9% with a 1.05% dividend yield. I see a lot more coming Newmont's way, please do your own research buckaroos. Newmont is bullish on gold prices going forward - like our buddy Santelli, ya gotta love'em.

Daily Oil Watch

On Tuesday we identified North Sea Brent crude oil as a good barometer for the developing crisis in Egypt. It is above $100/bbl with a large spread from the North American benchmark, Western Texas Intermediate or "Texas light sweet crude", traded on the NYMEX (see note 1). The Report normally follows the latter but will track both until things settle out in the Middle East (which may not be for a long, long time).

Here are the most active March contracts as of this morning:

NYMEX light sweet crude $91.59 up $1.05
ICE North Sea Brent crude $102.13 up $0.37
Spread (ICE- NYMEX) = $10.54 (yesterday $11.62)

Here are the June contracts with a narrower spread:

NYMEX light sweet crude $97.30 up $0.64
ICE North Sea Brent crude $103.10 up $0.34
Spread (ICE- NYMEX) = $5.80 (yesterday $6.26)

The spreads are narrowing from yesterday but still in favor of higher oil prices for the summer. I'll stick with my December prediction that we will see NYMEX $100/bbl oil before the Fourth of July.

Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Miner's Index(EMI)

This morning the Eureka Miner's Index(EMI) is above-par at 594.82, up from from yesterday's 532.52 and breaking above the 1-month moving average of 588.60. Although a bulllish sign, the EMI continues to trend down from the high set on January 4th.

The record high for the EMI is 816.78 set 01/04/2011; the low was set 6/7/2010 at 50.7. An EMI greater than 100 signals better times for the metals & miners relevant to Eureka County.

200-day averages are used in the EMI to normalize current mining company share price and are updated monthly. Upper and lower trend lines are updated weekly.

Eureka Outlook Dashboard

4-WD is ON - The metals & miners have hit a rough patch; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) is just above its 50-day moving average and still well above its 200-day average of $43.06 (our new warning level, 02/02 update after the FCX 2:1 stock split); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

The GREEN light is turned back on for Commodity Reflation with copper trading comfortably above $3.50/lb

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 Watch as the Federal Reserve resumes buying Treasurys (aka QE2)

The GREEN light is turned back on for Investor Confidence as investment returns to the equity markets

The ORANGE light is turned on our Fuel Gauge with oil above $90

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, R&R Partners parts ways with Nevada Mining Association

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

Commodity Market Morning Update

SPECIAL NOTE: The Report will track both NYMEX Western Texas Intermediate and ICE Brent crude oil prices until things settle down in the Middle East. WTI is a benchmark for North America; North Sea Brent, for Europe (see note 1).

NYMEX/COMEX: WTI Oil is up $0.32 in early trading at $91.18 (March contract, most active); Gold is up $2.0 to $1334.1 (April contract, most active); Silver is up $0.061 to $28.350 (March contract, most active); Copper is down $0.0060 to $4.5380 (March contract, most active)

Brent Crude is up $0.37 at $102.13 (March contract, most active)

Western Molybdenum Oxide is $17.00; European Molybdenum Oxide is $17.68; LME moly 3-month seller's contract is $17.69, LME cash seller is $17.51

Stock Market Morning Update

The DOW is down 7.27 points to 12,054.99; the S&P 500 is down 0.85 at 1306.25. Miners are mixed:

Barrick (ABX) $48.60 down 0.15%
Newmont (NEM) $57.63 up 0.52%
US Gold (UXG) $7.14 down 0.56%
General Moly (Eureka Moly, LLC) (GMO) $5.60 down 0.36%
Thompson Creek (TC) $14.38 down 0.14%
Freeport-McMoRan (FCX) $57.10 up 0.37% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $36.25 down 0.44% - global steel producer
POSCO (PKX) $106.53 up 0.17% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.06% at $1,7770,935.52(what's this?).

Cheers,

Colonel Possum

Note 1 - West Texas intermediate (WTI), also known as Texas light sweet, is a type of crude oil used as a benchmark in oil pricing and is the underlying commodity of New York Mercantile Exchange's (NYMEX) oil futures contracts. The price of WTI is often referenced in North American news reports on oil prices, alongside the price of North Sea Brent crude (Wiki).

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

It's Déjà Vu All Over Again!

Łichíí'

*** BREAKING NEWS *** COMEX gold popped to $1,355.80/oz at 12:30:00 ET, the move started at 11:55:00 ET


Þūnresdæg
Morning Miners!

It is 5:49 AM. Have a cup of Thursday thunder. I've got Thor and Old Miner Woden in the break room looking at more of Mariana's Navajo Nation photographs, they don't give a hoot about the price of copper...or oil...

It's déjà vu all over again!

Borrowing a Yogi Berra quote to explain the red metal rise, COMEX copper bested yesterday's morning record with a very late evening rush to $4.58/lb, now the 14th record since the Pearl Harbor Day highs of last December. The reader may tire from all this emphasis on copper with our largest mine for the stuff in Ely, not Eureka. The ole Colonel reminds the faithful reader that the red metal and oil pretty much paint the picture for the metals & miners...oh, did I forget to mention gold?

That's right, gold does provide the bulk of wealth for our County but may soon need a performance review at the next Commissioners meeting - gold has been the lazy metal most of this new year. Since late January copper, aluminum, nickel, zinc, lead and tin have all had a lots of giddy-up go. Even molybdenum has been moving steadily higher with the European flavor popping another 10 cents to $17.60/lb yesterday.

Silver, which has been down with gold, has been a more resilient precious metal buoyed by a greater industrial use than her more glamorous sister. The closely watched gold/silver ratio has been below 50 since December 1st, it was in a range of 50-56 before the collapse of Lehman Brothers. At the height of the financial crisis the ratio spiked above the 80s; today it sits at a lowly 47.1 - weak gold, stronger silver.

Let's update our record books and then do a quick calculation. Here's where we stand for the big three:

COMEX Gold $1432.5/oz 08:25:00 ET 12/7/2010, February contract most active
COMEX Silver $31.275/oz 08:15:00 ET 01/03/2011, March contract most active
COMEX Copper $4.580/lb 19:30:00 ET 02/02/2011, March contract most active

This morning these metals are trading at the following levels with respect to their recent highs:

COMEX gold 1334.1/oz down 6.9%
COMEX silver 28.350/oz down 9.4%
COMEX copper 4.5380/lb down 0.9%

Hmm, that's a surprise, silver looks like its down more than gold! You may want to look at the ratio of the gold silver highs to explain this seeming contradiction. Record-to-record the gold/silver ratio is a very low 45.8 which I read as strong gold, even stronger silver. I'm willing to say that silver got a little ahead of itself at the beginning of the year but doesn't change my mantra for the first quarter of 2011, "Rising copper on falling gold, resilient silver."

Here's another good copper update from Bloomberg this morning:

Copper Rises to $10,000 on Speculation Recovery Will Spur Demand (Maria Kolesnikova and Glenys Sim, Bloomberg News, 2/3/2011 4:09 AM PT)

And on the good fortunes of the entire commodity space:

Commodities Reach Two-Year High as Global Growth Drives Demand (Stuart Wallace and Claudia Carpenter, Bloomberg News, 2/3/2011 3:39 AM PT)

Oil Watch

On Tuesday we identified North Sea Brent crude oil as a good barometer for the developing crisis in Egypt. It is above $100/bbl with a growing spread from the North American benchmark, Western Texas Intermediate or "Texas light sweet crude", traded on the NYMEX (see note 1). The Report normally follows the latter but will track both until things settle out in the Middle East (which may not be for a long, long time).

Here are the most active March contracts as of this morning:

NYMEX light sweet crude $91.18 up $0.13
ICE North Sea Brent crude $102.8 up $0.46
Spread (ICE- NYMEX) = $11.62

Here are the June contracts with a narrower spread:

NYMEX light sweet crude $97.36 up $0.35
ICE North Sea Brent crude $103.62 up $0.41
Spread (ICE- NYMEX) = $6.26

The take-away is this pardner: the spreads are narrowing in favor of higher oil prices for the summer. I'll stick with my December prediction that we will see NYMEX $100/bbl oil before the Fourth of July.

What about your $1570/oz gold prediction before fireworks day, Colonel? I'm sticking to my guns, gold will get back to work after a good kick in the pants from the Eureka County Commissioners!

Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Miner's Index(EMI)

This morning the Eureka Miner's Index(EMI) is above-par at 532.52, down a bit from from yesterday's 541.72. We are below the 1-month moving average of 598.69 and the the EMI continues to trend down from the high set on January 4th.

The record high for the EMI is 816.78 set 01/04/2011; the low was set 6/7/2010 at 50.7. An EMI greater than 100 signals better times for the metals & miners relevant to Eureka County.

200-day averages are used in the EMI to normalize current mining company share price and are updated monthly. Upper and lower trend lines are updated weekly.

Eureka Outlook Dashboard

4-WD is ON - The metals & miners have hit a rough patch; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) is just below its 50-day moving average but still well above its 200-day average of $43.06 (our new warning level, 02/02 update after the FCX 2:1 stock split); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

The GREEN light is turned back on for Commodity Reflation with copper trading comfortably above $3.50/lb

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 Watch as the Federal Reserve resumes buying Treasurys (aka QE2)

The GREEN light is turned back on for Investor Confidence as investment returns to the equity markets

The ORANGE light is turned on our Fuel Gauge with oil above $90

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

SPECIAL NOTE: The Report will track both NYMEX Western Texas Intermediate and ICE Brent crude oil prices until things settle down in the Middle East. WTI is a benchmark for North America; North Sea Brent, for Europe (see note 1).

NYMEX/COMEX: WTI Oil is up $0.32 in early trading at $91.18 (March contract, most active); Gold is up $2.0 to $1334.1 (April contract, most active); Silver is up $0.061 to $28.350 (March contract, most active); Copper is down $0.0060 to $4.5380 (March contract, most active)

Brent Crude is up $0.46 at $102.8 (March contract, most active)

Western Molybdenum Oxide is $17.00; European Molybdenum Oxide is $17.60; LME moly 3-month seller's contract is $17.69, LME cash seller is $17.51

Stock Market Morning Update

The DOW is down 23.53 points to 12,018.44; the S&P 500 is down 2.46 at 1301.57. Miners are mixed:

Barrick (ABX) $47.63 up 0.21%
Newmont (NEM) $56.20 up 0.99%
US Gold (UXG) $6.66 up 1.33%
General Moly (Eureka Moly, LLC) (GMO) $5.60 up 0.90%
Thompson Creek (TC) $14.03 down 0.43%
Freeport-McMoRan (FCX) $56.01 down 0.45% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $36.10 down 1.45% - global steel producer
POSCO (PKX) $106.32 up 0.21% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.21% at $1,734,945.66(what's this?).

Cheers,

Colonel Possum

Note 1 - West Texas intermediate (WTI), also known as Texas light sweet, is a type of crude oil used as a benchmark in oil pricing and is the underlying commodity of New York Mercantile Exchange's (NYMEX) oil futures contracts. The price of WTI is often referenced in North American news reports on oil prices, alongside the price of North Sea Brent crude (Wiki).

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

Metals Soar - What's Up (or Down) with Miners?

Navajo Nation Series First in a series of headline photographs taken by Mariana Titus on a trip through Navajo Nation with the Colonel - November 2010


Wōdnesdæg
Morning Miners!

It is 5:50 AM. Have a cup of hump day java and join us by the stove. Old Miner Woden and I were just looking through some travel pictures that Mariana took in Navajo country this fall. It seems my sidekick Loquita is as interested in that old red rock as much as the photographer. Speaking of the color red, that red metal copper is off setting records again...

COMEX copper sets yet another record

COMEX copper bested yesterday's record in the early hours touching $4.5620/lb, the 13th record since the Pearl Harbor Day highs of last December. COMEX gold remains wishy-washy at $1337.2/oz barely budging from its price yesterday at this time and a long way down from its record high in December. Does this all seem a bit déjà vu?

For the record keepers, here's where we stand for the big three:

COMEX Gold $1432.5/oz 08:25:00 ET 12/7/2010, February contract most active
COMEX Silver $31.275/oz 08:15:00 ET 01/03/2011, March contract most active
COMEX Copper $4.5620/lb 02:45:00 ET 02/02/2011, March contract most active

Even though gold can't get out of its own shadow, all the base metals have been in rally mode with copper and tin setting new records daily. Respected commodity trader Bill O'Neill, partner of LOGIC Advisors, says, "We just have a base metals blitz to the upside...In a certain sense, it's similar to the agricultural commodities in that it's a demand-based rally, and there's nothing more bullish than a cyclical demand rally."

Gee, that's great. I just wish the miners would get a little more zip, we'll check on them in a minute when the broader markets open.

Stainless Steel on the move

Miss Moly should be happy to read this article in Kitco News:

World Stainless Steel Output Hits Record High In 2010; Another Expected in 2011: MEPS (Kitco News, Montréal, 02/02/2011)

Molybdenum is a key alloying metal in the production of stainless steel. Kitco reports, "Countries on a global scale all increased output significantly after shaking off the remnants of the 2008 economic crisis." Global crude stainless steel output hit an all-time high of 30.45 million metric tons in 2010 and 31 million metric tons is forecast for 2011 by the U.K.-based steel consultancy MEPS.

Moly prices haven't rallied like the base metals but have been climbing steadily up in the last few months. As we reported in the Monday roundup, spot moly prices are now in $17/lb territory out West and in Europe. CPM Group is estimates an average price of $21.75/lb for 2011; the Colonel's mid-range target is $20.21/lb.

So what's up (or down) with the miners?

The broader markets are now open and it looks like a pretty crummy day for the poor old miners. By the way, don't have a heart attack when you see the share price for copper giant Freeport-McMoRan (FCX). They just had a 2:1 stock split so today's price is roughly half of yesterday's. This is just zero-sum accounting my friend, if you invest in these guys you now have twice as many shares at half the price.

Since FCX is an input to the Eureka Miner's Index(EMI), I've adjusted the calculation to compensate for the split.

OK, the EMI is down a bit today from yesterday at 541.7 (see below) and a whole lot down from the January high of 816.8. The Index has been trending south since January 4th. The gold miners have an excuse because their product has lost some shine but what about Freeport and General Moly (GMO)? Copper is in a major rally mode and things are positive for molybdenum prices - what's up?

Freeport is coming off its 50-day average ($56.34 versus $56.22) but GMO is still below at $5.36 compared to an average of $5.77. Similar to FCX, benchmark moly producer Thompson Creek (TC), is just above the 50-day at $14.01 versus $13.8. All three are looking better than Barrick Gold (ABX) which is barely making it above its 150-day average of $47.24 at this morning's price of $47.66. Here's how the three EMI benchmark miners and General Moly compare to their January 3rd share prices:

Freeport-McMoRan (FCX) $59.79 (1/3/2011) $56.34 (today) down 5.8%
Barrick Gold (ABX) $52.59 (1/3/2011) $47.66 (today) down 9.4%
Thompson Creek (TC) $15.38 (1/3/2011) $14.01 (today) down 8.9%
General Moly (GM0) $6.48 (1/3/2011) $5.36 (today) down 17.3%

As the broader markets and base metals hit new highs the miners are still in correction, pardner. There is some signs of hope seeing Freeport and Thompson creek moving up from there 50-day averages but there is a lot to go from here to reach the highs of early January. I'm still long term bullish on this sector but we may not get back to the promised land until later this spring. As I have said before - rising copper prices on falling gold is a red flag in my world. More on this when we do our metals outlook for February, stay tuned.

Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Miner's Index(EMI)

This morning the Eureka Miner's Index(EMI) is above-par at 541.72, down a bit from from yesterday's 559.19. We are below the 1-month moving average of 610.67 and the the EMI is now trending down from the high set on January 4th.

The record high for the EMI is 816.78 set 01/04/2011; the low was set 6/7/2010 at 50.7. An EMI greater than 100 signals better times for the metals & miners relevant to Eureka County.

200-day averages are used in the EMI to normalize current mining company share price and are updated monthly. Upper and lower trend lines are updated weekly.

Eureka Outlook Dashboard

4-WD is ON - The metals & miners have hit a rough patch; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) is just above its 50-day moving average but still well above its 200-day average of $43.06 (our new warning level, 02/02 update after the FCX 2:1 stock split); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

The GREEN light is turned back on for Commodity Reflation with copper trading comfortably above $3.50/lb

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 Watch as the Federal Reserve resumes buying Treasurys (aka QE2)

The GREEN light is turned back on for Investor Confidence as investment returns to the equity markets

The ORANGE light is turned on our Fuel Gauge with oil above $90

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

SPECIAL NOTE: The Report will track both NYMEX Western Texas Intermidiate and ICE Brent crude oil prices until things settle down in the Middle East. WTI is a benchmark for North America; North Sea Brent, for Europe (see note 1).

NYMEX/COMEX: WTI Oil is down $0.04 in early trading at $90.73 (March contract, most active); Gold is up $2.8 to $1337.3 (April contract, most active); Silver is up $0.181 to $28.350 (March contract, most active); Copper is up $0.0365 to $4.4950 (March contract, most active)

Brent Crude is down $0.01 at $101.73(March contract, most active)

Western Molybdenum Oxide is $17.00; European Molybdenum Oxide is $17.50; LME moly 3-month seller's contract is $17.69, LME cash seller is $17.51

Stock Market Morning Update

The DOW is up 2.42 points to 12,042.58; the S&P 500 is down 1.67 at 1305.92. Miners are down:

Barrick (ABX) $47.66 down 1.24%
Newmont (NEM) $56.00 down 0.90%
US Gold (UXG) $6.42 down 3.02%
General Moly (Eureka Moly, LLC) (GMO) $5.36 down 0.92%
Thompson Creek (TC) $14.01 down 1.34%
Freeport-McMoRan (FCX) $56.34 down 1.22% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $36.46 down 1.98% - global steel producer
POSCO (PKX) $105.24 up 0.49% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 1.01% at $1,712,716.28(what's this?).

Cheers,

Colonel Possum

Note 1 - West Texas intermediate (WTI), also known as Texas light sweet, is a type of crude oil used as a benchmark in oil pricing and is the underlying commodity of New York Mercantile Exchange's (NYMEX) oil futures contracts. The price of WTI is often referenced in North American news reports on oil prices, alongside the price of North Sea Brent crude (Wiki).

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

New Record for Copper, Is $100 Oil Next?

*** BREAKING NEWS *** The S&P 500 has again broken the psychologically important level of 1,300 hitting 1,301.07 at 10:41 AM ET


Morning Miners!

It is 5:55 AM. Have a cup of Tuesday brew - I'm drinking a cup of crow. Sweet Ruby T reminded me that the new moon is Thursday and scolded me for celebrating Chinese New Year a few days early. For penance the ole Colonel hung up the Marlboro Man sign she found at a Battle Mountain yard sale this weekend. Ruby is in good spirits, let's check out the new copper record she just hauled in on her lo-boy trailer...

COMEX copper sets a new record

COMEX copper broke above $4.50/lb in the wee morning hours reaching $4.5135/lb; the 12th record since the Pearl Harbor Day highs of last December. COMEX gold wishes it could boast a new record trading at $1337.3/oz, a long way down from its high of $1432.5/oz set on 12/7/2010.

For the record keepers, here's where we stand for the big three:

COMEX Gold $1432.5/oz 08:25:00 ET 12/7/2010, February contract most active
COMEX Silver $31.275/oz 08:15:00 ET 01/03/2011, March contract most active
COMEX Copper $4.5135/lb 03:00:00 ET 02/01/2011, March contract most active

Our favorite London correspondent Claudia Carpenter reports a boost to the red metal as well as aluminum and nickel as base metals continue to be devoured by the insatiable dragon:

Copper Rises to Record, Aluminum, Nickel Climb as China Grows (Claudia Carpenter, Bloomberg News, 02/01/2011 5:45 AM PT)

Is $100/bbl oil next?

If you live in Europe the answer is yes, you're already there. The unfolding crisis in Egypt has pushed North Sea Brent crude over the $100/bbl mark trading today at $100.83/bbl on the ICE exchange. A difference in inventories has kept the U.S. benchmark oil price below par with NYMEX Oil now at $91.58/bbl. NYMEX uses West Texas intermediate (WTI) or Texas "light sweet crude oil" as the underlying commodity for oil futures contracts (see note 1).


Brent and light sweet crude are typically closer in price, an escalation in geo-political tensions could easily close the gap to $100/bbl oil for North America. Dr. Mohamed Abdulla El-Erian, CEO and co-CIO of PIMCO, warned CNBC Business News yesterday that the developments in his native country could be more far-reaching than many assume. His voice is important in markets because PIMCO is the world’s largest bond investor with over $1 trillion of assets under management. Dr. El-Erian said that classical analysis would say the Egyptian crisis is contained but that it ignores Egypt's role as an "enabler" for the region with respect to regional economics and as a peace-maker between Israel and the Arab world. He offered both a best and worst case scenario. Restoration of democracy in Egypt may serve as a good example and stabilizing influence for the entire region; a descent into chaos may become a real threat to the global economic recovery.

On December 10th of last year, I said that the we could very well see $100/bbl oil before mid-year. Last Friday's flare up in Egypt served as an example that gold remains a safe-haven play even though it has been abandoned lately by investors seeking interest bearing alternatives. If things begin to unwind abroad, it is not unrealistic to think that gold could recover some of its luster and head for $1400/oz or even $1500/oz territory.

This morning the 3-month gold/oil ratio is 15.67 with a 3.35% error (see note 2). If we apply $100/bbl oil to the present ratio we get $1,567/oz gold. I have cautioned that using commodity ratios to predict future prices is not reliable when the error exceeds 3% so we shouldn't take this calculation to the bank. The present ratio is 14.60 which gives us $1,460/oz gold with a 1-month oil-gold correlation of 0.68. Although accuracy is an issue, these simple calculations hopefully illustrate where gold may be headed on an oil spike. I intend to update my more detailed oil/gold models for February in the next several days.

The Colonel's 12/10/2010 price prediction for gold was $1,570/oz by the Fourth of July. Stay tuned buckaroos.

Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Miner's Index(EMI)

This morning the Eureka Miner's Index(EMI) is above-par at 559.19, up from yesterday's 471.91. We are below the 1-month moving average of 622.23 and the the EMI is now trending down from the high set on January 4th.

The record high for the EMI is 816.78 set 01/04/2011; the low was set 6/7/2010 at 50.7. An EMI greater than 100 signals better times for the metals & miners relevant to Eureka County.

200-day averages are used in the EMI to normalize current mining company share price and are updated monthly. Upper and lower trend lines are updated weekly.

Eureka Outlook Dashboard

4-WD is ON - The metals & miners have hit a rough patch; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) is just at its 50-day moving average but still well above its 200-day average of $83.07 (our new warning level, 01/05 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

The GREEN light is turned back on for Commodity Reflation with copper trading comfortably above $3.50/lb

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 Watch as the Federal Reserve resumes buying Treasurys (aka QE2)

The GREEN light is turned back on for Investor Confidence as investment returns to the equity markets

The ORANGE light is turned on our Fuel Gauge with oil above $90

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 $0.61 in early trading at $91.58 (March contract, most active); Gold is up $2.8 to $1337.3 (April contract, most active); Silver is up $0.181 to $28.350 (March contract, most active); Copper is up $0.0365 to $4.4950 (March contract, most active)

Western Molybdenum Oxide is $17.00; European Molybdenum Oxide is $17.50; LME moly 3-month seller's contract is $17.69, LME cash seller is $17.51

Stock Market Morning Update

The DOW is up 69.29 points to 11,961.22; the S&P 500 is up 11.60 at 1297.72. Miners are up:

Barrick (ABX) $48.02 up 1.07%
Newmont (NEM) $55.70 up 1.14%
US Gold (UXG) $6.53 up 2.03%
General Moly (Eureka Moly, LLC) (GMO) $5.14 up 0.98%
Thompson Creek (TC) $14.11 up 4.21%
Freeport-McMoRan (FCX) $111.90 up 2.90% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $36.87 up 1.07% - global steel producer
POSCO (PKX) $104.15 up 1.97% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 1.31% at $1,794,903.40(what's this?).

Cheers,

Colonel Possum

Note 1 - West Texas intermediate (WTI), also known as Texas light sweet, is a type of crude oil used as a benchmark in oil pricing and is the underlying commodity of New York Mercantile Exchange's oil futures contracts. The price of WTI is often referenced in North American news reports on oil prices, alongside the price of North Sea Brent crude (Wiki).

Note 2 - In this case "error" refers to the oil/gold ratio standard deviation divided by its mean over a 3-month record.

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