Hang On, Another Pothole - Moly, Copper Dings

Morning Miners!

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

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

And,

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

Also Base Metals reports:

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

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

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

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

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


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

London Metal Exchange (LME) Futures Contracts

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

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

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



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

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

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

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

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

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

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

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

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

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

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

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

Cheers,

Colonel Possum

Headline photograph by Mariana Titus

Western Lithium, Gold, Silver, Copper & Oil

Morning Miners!

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

Lithium

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

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

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

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

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

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

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

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

Gold & Silver

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

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

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

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

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

Copper

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

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

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



Oil

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

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

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

Enough talk, let's walk the walk:

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

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

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

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

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

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

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

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

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

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

Cheers,

Colonel Possum

Headline photograph by Mariana Titus

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

Morning Miners!

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

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

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

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

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

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

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

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

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

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


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

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

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

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

Now what about that herd of zebras in Antelope Valley?

Enough talk, let's walk the walk:

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

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

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

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

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

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

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

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

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

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

Cheers,

Colonel Possum

Note 1: More about Black Swan Events









.

Moly Miners Lead the Pack

Morning Miners!

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

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

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

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

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

FCX/Copper = 146.8%/112.5% = 1.31

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

Here's how the gold miners did:

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

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

ABX/Gold = 41.4%/21.1% = 1.96

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

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

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

TC/Moly = 388.3%/102.8% = 3.78

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

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



Enough talk, let's walk the walk:

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

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

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

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

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

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

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

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

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

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

Cheers,

Colonel Possum

Headline photograph by Mariana Titus

General Moly $6.50 Target & Country Roads

Morning Miners!

It is 6:03 AM. Let me pour you a hot one and let's chat about country roads. We'll close on a new CIBC price target for General Moly but first let's checkout the Big Picture. I heard an economist the other day compare the present sovereign debt crisis to traveling on a "country road." Unless you are driving to Austin, Ely or Carlin some may claim you are on country roads in these parts although I can't recall any local folks calling them by that name. "County road" or "Road Not Maintained Beyond This Point - Drive At Your Own Risk" or #@&#! road are more common nomenclature. In Eureka County, Gloria's Country Roads is where you weigh your hay truck or have a cheeseburger.

Anyway, this economist said that when sovereign debt or default becomes an issue (in the past, think Russia and a few Latin American countries) the world moves off the highway onto a "country road." His point was that the global economy eventually gets to where it should but the pace is slow and you feel every bump. In recent times we drove off HWY 50 in late November with the emergence of the Dubai debt crisis (Dubai, A World Away?). Gold, metals and miners hit a pothole then we got a nice stretch of gravel. Further down this road the solvency of Greece came in question and we hit an axle-breaker in mid-January (Hunker Down or Stand and Fight?). The whole commodity reflation story suddenly looked shaky and mining stocks required a Handyman jack (Freeport Broken, Miners in Correction). The European Union reluctantly patched a rescue plan together and we've been back on gravel most of March...until today. Nuts.

As reported in the Wall Street Journal this morning:

NEW YORK—The U.K. pound and the euro plunged early Tuesday in New York as warnings about deteriorating credit quality in Europe by rating firms prompted investors to seek refuge in the dollar and the yen...The flight from riskier assets, including commodities-based currencies, was triggered by comments on the U.K.'s and Portugal's fiscal problems from Fitch Ratings and Moody's Investors Service. Pressure on sterling intensified on the back of weaker U.K. economic data. (WSJ, 3/9/2010)

You guessed it, gold tumbled to $1110/oz on the London spot market and mining stocks hit some Bean Flat spring mud in early trading. It's not too bad; gold is moving back up and the miner's are headed for the sage to gain traction. My point is that the economist's analogy is pretty much spot on. We will continue to be pounded by sovereign debt issues of developed countries for most of this year whether it is Portugal, Italy, Ireland, Greece, Spain, the U.K., Japan or, perhaps, the good ole U.S.A. Hang in there buckaroos, it may be a rough road but we're traveling in a tough truck.

Now for some good news. CIBC raised their price target this morning for General Moly (GMO) from $4.80 to $6.50. Exactly one year ago the S&P 500 hit rock bottom at 666.79 (intraday low) and GMO hit a $0.65 low. I'd say 65 cents to $6.50 is a pretty long stretch of road. Right now, GMO sits at $3.58 on a down day for metals & miners. Say...we're more than half way there, pardner!

Enough talk, let's walk the walk:

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

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

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

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

NYMEX/COMEX: Oil is down $0.59 in early trading to $81.28 (April contract, most active); Gold is down $7.5 to $1116.5 (April contract, most active); Silver is down $0.127 to $17.145 (May contract); Copper is down $0.0230 to $3.3875 (May contract); Western Molybdenum Oxide is steady at $18.25

The DOW is up 11.41 points to 10563.93; the S&P 500 is up 0.79 1139.29. The miners are down today:

Barrick (ABX) $39.45 down 0.58%
Newmont (NEM) $50.85 down 0.41%
US Gold UXG) $2.84 down 1.73%
General Moly (Eureka Moly, LLC) (GMO) $3.58 down 2.85%
Thompson Creek (TC) $14.16 down 1.39%
Freeport-McMoRan (FCX) $80.15 down 0.58% (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $42.26 down 1.68% - global steel producer
POSCO (PKX) $124.49 up 0.13% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.80% to $1,367,311.70 (what is this?).

Cheers,

Colonel Possum

Headline photograph by Colonel Possum of Mariana Titus and the Colonel's truck, "Casper"

A Game Changer for General Moly & Eureka County

Morning Miners!

It is 6:03 AM, grab a cup and let's get to work. Starting this week knowing that our Mt. Hope project is now anticipated to be fully funded is certainly a game changer. Molybdenum production in Eureka County may very well influence our future for the next forty years. It will bring jobs and revenue to the county and state through sales and use tax, property taxes and Nevada Net Proceeds. If you missed General Moly's announcement, we covered the bases Friday in the Report:

General Moly Announces Significant Investment from Hanlong, Stock Surges (Eureka Miner's Market Report, 3/05/10)


Since the press release, the Report received additional detail on the transaction from General Moly. Key to the deal is a $665 million bank loan from a prime Chinese bank sourced and guaranteed by Hanlong Group for the life of the loan. Hanlong is General Moly's new major investor and partner, a private group with both Chinese and international mining interests. General Moly made this important clarification to the Report:

"GMI will continue to operate with its current management team and its largely independent Board of Directors. Our shareholders (post transaction) will be 65% public and based in the USA."

Furthermore it was encouraging to learn that South Korean steelmaker POSCO will retain their 20% Mt. Hope equity interest and was "extremely supportive to General Moly through process." The Report reminds the reader that billionaire investor Warren Buffet, is an enthusiastic shareholder of POSCO and seeks to increase his holdings in the firm. By my calculation, Buffet owns at least 1% of Mt. Hope via his interest in POSCO. If it is good for the "Sage of Omaha", it should be good for Eureka! (Buffet Wants More POSCO, Both Want Lithium, The Eureka Miner's Market Report, 1/19/2010 )

The ole Colonel will continue to keep you updated as this important story develops. What's up with molybdenum?

Latest Molybdenum News

General Moly provided the Report with their most recent view on moly and new partner's unique position in the marketplace,

"...at the end of the day, with half of global steel production currently coming from China, they need natural resources. They are already the largest buyers of Iron Ore and Coal (the two main steel ingredients) and Hanlong sees the Chinese becoming dependent on moly imports to the country."

Last year the Chinese imported roughly 55 metric tons of molybdenum compared to exporting 25 tons in 2008. General Moly explains the change as a "...massive flip that we saw from China being a net exporter of moly to a net importer of moly in 2009. Their steel industry vastly surpassed their moly production capacity. Hanlong has taken note and wants to be a major steel supplier into China."

Another important factor is the percentage "...of steel that China currently alloys; it’s only about 20% [of crude steel production] and will grow as they develop more sophisticated steel mills." Growing alloy and stainless steel production means less alloy containing scrap which in turn equals more primary moly consumption. Things are looking good for Miss Moly, pardner.

As we have seen lately, molybdenum prices are on the rise in both the physical and futures markets. Here is an interesting article on European moly:

EU molybdenum prices likely to increase further

Below is a wrap up of molybdenum prices at the close Friday (3/05):

Western Moly Oxide (FeMo65) $18.25/lb (the price reported by Infomine and tracked by Base Metals on the General Moly Website)

Moly Oxide, Europe (Mo Drummed Molydbic Oxide EU) $18.25/lb (the price reported in the Metals Bulletin)

London Metal Exchange (LME) Futures Contracts

3-Month (Buyer) $39,000/metric ton $17.69/lb
3-Month (Seller)$41,000/metric ton $18.60/lb

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

Here is the price action of the LME 3-month contract (seller) from their 2/22 launch to the present:



Enough talk, let's walk the walk:

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

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

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

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

NYMEX/COMEX: Oil is up $0.60 in early trading to $82.10 (April contract, most active); Gold is down $1.2 to $1134.0 (April contract, most active); Silver is up $0.103 to $17.485 (May contract); Copper is up $$0.0385 to $3.4560 (May contract); Western Molybdenum Oxide is steady at $18.25

The DOW is up 3.25 points to 10569.45; the S&P 500 is up 1.09 1139.79. The miners are mixed today:

Barrick (ABX) $39.84 down 1.04%
Newmont (NEM) $51.17 down 0.74%
US Gold UXG) $2.73 down 1.09%
General Moly (Eureka Moly, LLC) (GMO) $3.91 down 1.95%
Thompson Creek (TC) $14.48 up 0.49%
Freeport-McMoRan (FCX) $80.94 up 0.29% (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $42,52 up 0.50% - global steel producer
POSCO (PKX) $123.70 up 1.95% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down0.30% to $1,383,901.67 (what is this?).

Cheers,

Colonel Possum

Headline photograph by Mariana Titus

General Moly Announces Significant Investment from Hanlong, Stock Surges

*** BREAKING NEWS *** GENERAL MOLY trades over 12 million shares, intraday high is $4.08, closing price is $3.99 (1:00 PM PST)

Morning Miners!

It is 6:53 AM and a major news day for General Moly (GMO) and Eureka County. Grab a cup of that fortifying Raine's TGIF coffee, we've got a lot of work to do. The ole Colonel awoke this morning expecting to digest the Labor Department's monthly jobs report and the General Moly quarterly earnings release. We got a whole lot more, pardner. I'll close on jobs, let's checkout what GMO put on the wires this morning:

GENERAL MOLY ANNOUNCES SIGNIFICANT INVESTMENT FROM HANLONG, POSCO COMMITS TO 20% MT. HOPE EQUITY INTEREST

General Moly Adopts Stockholder Rights Plan

General Moly Announces Fourth Quarter And Full Year 2009 Results

The blockbuster is the first link; General Moly has announced a significant investment and strategic relationship with Hanlong (USA) Mining Investment Inc., a wholly-owned subsidiary of Sichuan Hanlong Group (Hanlong), that is anticipated to provide full project funding for the Company's 80% owned Mt. Hope project.

Holy Cow.

Here is the summary of the investment deal:

1) $665 million bank loan from a Prime Chinese Bank to be procured and guaranteed by Hanlong at an anticipated rate of Libor plus 2%-4%;

2) $80 million equity investment in General Moly through the purchase of 25% of the Company's fully diluted shares, partially contingent upon completion of the $665 million bank loan;

3) $20 million bridge loan to assist in Mt. Hope project restart, repayable from the proceeds of the bank loan; and

4) A long-term molybdenum supply off-take agreement for Hanlong from Mt. Hope production.

Investors went nuts on this release sending GMO stock up more than 35% to $3.52 in early trading.

General Moly CEO, Bruce Hanson, had this to say,

"I am extremely pleased to have Hanlong as a major investor and partner. This transaction with Hanlong provides superior value to our stockholders than alternative transactions we have recently evaluated. Hanlong will, in accordance with the terms and conditions of the agreement, invest $80 million in equity and procure $665 million in senior secured debt, which we believe will fully fund the Mt. Hope project."

And there's more about South Korean steelmaker, POSCO. Mr. Hanson continues,

"We would also like to express our appreciation to POSCO, our Joint Venture partner at Mt. Hope, for its immense support as we have evaluated numerous financing alternatives and its commitment to remain a 20% partner in the Mt. Hope project."

The President of Hanlong (USA) Mining Investment Inc., Hui Xiao (Steven) commented,

"We are extremely pleased to invest in General Moly and we feel their Mt. Hope and Liberty projects are two of the most promising moly assets worldwide. Our investments in General Moly and Moly Mines position Hanlong to be a significant participant in the future of the molybdenum industry, which we find very attractive."

How's that for some Friday news? The second release provides coverage for shareholders followed by a link to their fourth quarter and full year 2009 report. Here are some new dates and status for the Mt. Hope Project:

"The Company currently expects the Bureau of Land Management (BLM) to complete an administrative Draft Environmental Impact Statement (EIS) mid-year and to receive its Record of Decision late in the fourth quarter of this year or early in the first quarter of 2011..The Company continues to believe that these studies confirm that the Mt. Hope project will have minimal long term impact to local ground water."

And an update on Engineering:

"The Company will restart engineering efforts, which had been paused in March 2009 to conserve cash, following stockholder approval of the equity issuances in connection with the Hanlong transaction and publication of the Draft EIS, currently anticipated to occur by mid-year. Equipment procurement efforts, which had also been paused, will resume later in the year. Although the Company has secured orders for most of the milling equipment, firm orders for much of the mobile mine fleet still must be placed."

That's a lot to absorb, give it all a good read on your break buckaroos.

Oh, I almost forgot, there was the monthly jobs report that I listened to on CNBC Business News at 5:30 AM. The weather affected the numbers much less than expected which has sent the broader markets up. The unemployment rate remains steady at 9.7% despite stormy weather on the East Coast last month. Slow but steady improvement, things are looking up.

Enough talk, let's walk the walk:

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

The YELLOW light has returned on our fuel gauge with oil above $80

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

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

NYMEX/COMEX: Oil is up $1.54 in early trading to $81.75 (April contract, most active); Gold is up $6.4 to $1139.5 (April contract, most active); Silver is up $0.264 to $17.440 (May contract); Copper is down $$0.0660 to $3.4415 (May contract); Western Molybdenum Oxide is steady at $18.25, LME Moly 3-month (seller) is up to $19.05

The DOW is up 67.79 points to 10511.93; the S&P 500 is up 8.48 1131.45. The miners are are rocking:

Barrick (ABX) $40.38 up 1.46%
Newmont (NEM) $51.38 up 1.02%
US Gold UXG) $2.73 down 0.73%
General Moly (Eureka Moly, LLC) (GMO) $3.52 up 35.50%
Thompson Creek (TC) $14.36 up 3.38%
Freeport-McMoRan (FCX) $79.86 up 1.30% (a bellwether mining stock spanning gold, copper & molybdenum)

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

ArcelorMittal (MT) $42.16 up 3.46% - global steel producer
POSCO (PKX) $120.85 up 2.27% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 4.63% to $1,362,366.15 (what is this?).

Cheers,

Colonel Possum

Headline photograph by Mariana Titus