Equo ne credite, Teucri - Trust the Metals & Miners

*** BREAKING NEWS *** The financial sector led U.S. stocks in a broad and sharp sell-off Friday after the Securities & Exchange Commission charged Goldman Sachs Group with civil fraud. The selloff commenced at 12:38 PM EDT putting additional pressure on the metals & miners who already were suffering an early morning retreat in the commodity space.

Equo ne credite, Teucri. Quidquid id est, timeo Danaos et dona ferentes.
Do not trust the horse, Trojans! Whatever it is, I fear the Greeks, even bringing gifts. (Book II of Virgil's Aeneid, the siege of Troy)

Morning Miners!

It is 5:52 AM and my cup of Raine's Red Label TGIF coffee never tasted so good! Let's take a little quiz. What if the ole Colonel were to tell you the U.S. dollar is as strong as a chain binder in early trading - what's your market outlook for the day? If you've been reading the Report since last December you may provide the following forecast for Friday:

Gold is down
Copper is down
Mining stocks are under pressure
Greece is back in the headlines

We'll check on mining stocks when the exchanges open in a few minutes but you're spot on with three of your answers already. COMEX gold is trading down more than $12, copper has dipped from recent highs to $3.56/lb and the Greeks have again rolled out their debt-filled Trojan Horse. Unlike the days of yore, they aren't bearing gifts but are apparently taking gifts as reported by the Wall Street Journal this Morning:

"A study to be published in coming weeks by the Washington-based Brookings Institution finds that bribery, patronage and other public corruption are major contributors to the country's ballooning debt, depriving the Greek state each year of the equivalent of at least 8% of its gross domestic product, or more than €20 billion (about $27 billion). " (WSJ, 4/16/2010)

Nuts. I wouldn't care what these guys did across the pond if it didn't have such a direct impact on the metals & miners. Once again, investors are questioning the details of the European bailout plan for Greece and wondering what other debt-strapped euro-member countries will be next in line for aid. This ripples into worries about the true health of global recovery and down we go again.

Oh-oh, the NYSE just opened and yup, all our miners are down in early trading. So it goes, some European finance minister will utter a new reassurance over the weekend and we will be back in rally mode Monday. How do you stay sane with all this buckaroos? I wrote a similar story about the fiscal status of Greece in early December (Timeo Donaos et Dona Ferentes, 12/9/2009)and we've been tracking the ups-and-downs of the sovereign debt crisis ever since. Let's see how some of our favorite metals & miners have done. Here is a comparison of prices on the morning of 12/9 and early trading today:

gold 1139.1 (12/9) 1148.5 (today) up 8.2%
copper 3.1640 (12/9) 3.5625 (today) up 12.6%
Western moly oxide 11.15 (12/9) 17.25 (today) up 54.7%

Barrick (ABX) 41.19 (12/9) 39.83 (today) down 3.3%
Newmont (NEM) 51.33 (12/9) 52.59 (today) up 2.4%
Freeport-McMoRan (FCX) 76.86 (12/9) 83.18 (today) up 8.2%
General Moly (GMO) 2.18 (12/9) 3.73 (today) up 71.1%

With the exception of a slight trim on Barrick, I'd say we're not doing too badly. I'll trust the metals & miners before the horse, pardner! I'll stick by what I said in December:

"[The] European Union will no doubt rescue Greece and other errant members. Sovereign debt remains a global issue but isn't going to return us to the level of financial crisis we experienced just one year ago." (The Eureka Miner's Market Report, 12/9/2009)

On another front, there may be some storm clouds coming our way on mining safety. Here's the latest posted on Mineweb:

Obama Orders U.S. Crackdown on Mine Safety Violations (Mineweb, 4/16/2010)

After the Big Branch tragedy there are political winds blowing with a list of the 48 most dangerous U.S. mines at the center of the vortex. Unfortunately of the 32 coal mines and 16 metal and nonmetal mines, two are in Eureka County. Barrick's Meikle Mine and Newmont's Deep Post may be in some politician's cross-hairs soon. The Report will track this development and is unfortunately changing the "Adverse Regulation/Legislation" warning light from YELLOW back to ORANGE on the Eureka Outlook Dashboard (upper right, what's this?).

Enough talk, let's walk the walk:

4-WD is OFF - smoother markets return; the VIX or "fear index" has moved back into the 19s still below 25 but something to monitor; metals & miners are hanging in there with benchmark FCX comfortably above $74, 10-year Treasurys are below 4% preserving a low-interest rate environment (what's this?)

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

A YELLOW light is ON for possible adverse regulation/legislation: Mine Safety Violations, 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 $1.26 in early trading to $85.49 (June contract, most active); Gold is down $12.4 to $1147.9 (June contract, most active); Silver is down $0.263 to $18.170 (May contract); Copper is down $0.0380 to $3.5625 (May contract); Western Molybdenum Oxide moves down to $17.25, LME moly 3-month seller's contract is up at $18.14

The DOW is up 3.25 points to 11147.82; the S&P 500 is down 2.87 to 1208.80. The miners don't like Uzo:

Barrick (ABX) $39.83 down 0.43%
Newmont (NEM) $52.59 down 0.83%
US Gold (UXG) $3.16 down 1.56%
General Moly (Eureka Moly, LLC) (GMO) $3.73 up 2.36%
Thompson Creek (TC) $13.71 down 1.22%
Freeport-McMoRan (FCX) $83.18 down 1.23% (a bellwether mining stock spanning copper, gols & molybdenum)

The Steels don't like Uzo either, (a "tell" for General Moly & Thompson Creek):

ArcelorMittal (MT) $44.92 down 1.69% - global steel producer
POSCO (PKX) $119.63 down 0.80% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 1.07% to $1,436,261.52 (what's this?).

Cheers,

Colonel Possum

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

Headline photograph by Mariana Titus

Barrick Clears Cortez Hurdle, General Moly Pops

Morning Miners!

It is 6:08 AM. Have a cup of Thor's thunderous java and let's enjoy some good news. Yesterday, U.S. District Court Judge Larry Hicks approved a "tailored injunction" for Barrick Gold that allows the company to continue mining at Cortez Hills. Here is the Barrick press release and some discussion of the decision posted on Mineweb this morning.

US Court Allows Continued Mining at Cortez Hills (Barrick Gold Press Release, 4/14/2010)

Cortez Hills gold mine can keep operating with court-ordered conditions (Mineweb, 4/15/2010)

It ain't over 'til it's over but this is a big step in the right direction. The tailored injunction is expected to result in little environmental harm while sheltering Nevada and Lander County from the economic harm a shut down of the massive gold mining operation would cause. Greg Lang, President of Barrick's North America Region, said:

"The court's order is a great relief to all of us at Barrick, especially to the many people who are directly employed at Cortez Hills. The court has affirmed that the supplemental studies can be completed by the Bureau of Land Management without halting our operations."

The Report is changing the "Adverse Regulation/Legislation" warning light from ORANGE to YELLOW on the Eureka Outlook Dashboard (upper right, what's this?). That deserves a Colonel Yee-ha!

OK, the markets are now open and guess what? General Moly (GMO) comes out punching with a pop in share price on high trading volume. Today's opening price jumped to $3.84 (10.4% higher than Monday's open) with a whopping 179,313 shares traded at the bell (335% greater opening volume than Monday morning during the first 15 minutes of trading). We might touch $4 today if this momentum continues, somebody loves us! Benchmark moly producer Thompson Creek (TC) has also opened higher but with less fanfare than GMO on a mixed morning for other miners and the broader markets. As I mentioned Tuesday, General Moly has been on a terrific roll lately (General Moly & US Gold Lead the Pack). It doesn't get much better than this...for a mining stock that is.

Yesterday Western moly oxide also got a little pop in price moving up from $17.50/lb to $17.75/lb. It is closing in on European moly oxide at $18.00/lb and nudging above the LME 3-month futures contact which is sitting at $17.64/lb. I'm sticking with my bet that moly will break $20/lb before the summer (Is Miss Moly Ready for $20 Shoes?). Here's a 1-month chart of Miss Moly, western-style, heading north with her Uncle Nickel:


Dennis Gartman, the Commodity King and my hero, spoke about the recent market rallies yesterday on CNBC Business News. He has advised his team to trade with some caution but not stand in the way of the broader markets' surge. Yesterday, the Dow Jones posted its first triple-digit point gain in three weeks, finishing up 103.61 points to 11123.03. The S&P 500 closed above the key 1200 psychological milestone after early upbeat corporate earnings reports. At 1200 we are only 52 points away from the bull pasture range gate. The Great Recession Bear Market commenced when the S&P dropped and remained below 1252 (i.e. 20% below the October 2007 intraday high of 1565.27, for a fuller discussion of what this means checkout Copper, Freeport & the Devil's Triple-6).

Enough talk, let's walk the walk:

4-WD is OFF - smoother markets return; the VIX or "fear index" is in the 15-16s far below 25 which is good; metals & miners are good with benchmark FCX comfortably above $74, 10-year Treasurys are below 4% preserving a low-interest rate environment (what's this?)

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

A YELLOW 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 $0.28 in early trading to $87.01 (May contract, most active); Gold is down $5.6 to $1154.0 (June contract, most active); Silver is down $0.065 to $18.350 (May contract); Copper is down $0.0170 to $3.5935 (May contract); Western Molybdenum Oxide moves to $17.75, LME moly 3-month seller's contracts is $17.64

The DOW is down 4.08 points to 11119.03; the S&P 500 is up 0.36 to 1211.01. The miners are mixed:

Barrick (ABX) $40.52 down 0.37%
Newmont (NEM) $53.24 down 0.57%
US Gold UXG) $3.22 up 0.92%
General Moly (Eureka Moly, LLC) (GMO) $3.88 up 4.86%
Thompson Creek (TC) $14.06 up 0.79%
Freeport-McMoRan (FCX) $84.97 down 0.46% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $46.22 down 1.13% - global steel producer
POSCO (PKX) $121.26 down 0.53% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.44% to $1,459,662.75 (what's this?).

Cheers,

Colonel Possum

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

Headline photograph by Mariana Titus

The Future Comes to Big Smoky - More Lithium in Northern Nevada

*** BREAKING NEWS *** Barrick Gold Corporation welcomed today a U.S. District Court April 13 decision that mining operations can continue at its Cortez Hills Mine

Morning Miners!

It is 6:04 AM and the coffee's hot, pardner. There are few things I enjoy more than receiving a hot tip from one of our faithful readers. Since last September, the Report has been covering an exciting story on how emerging battery technologies may become very important to our state and county through the mining of lithium, vanadium and silver. The demand for these metals will grow as more and more electric and electric hybrid vehicles pass through our town and the roadways of America. In the coming years they will complement and not replace fossil fuel powered transportation as our country moves to greater energy security. Farther down the road the electrics may dominate the transportation landscape, at least for family and light-haul applications. Transportation will not be the only benefactor; futuristic batteries are expected to dot the landscape storing electricity from wind and solar farms for large capacity, power grid applications.

The speed of this transition has a lot to do with the development of lighter, smaller and more affordable batteries for transportation and more practical storage devices for large scale use. The Report gave an overview of both small and large battery technologies last November, What's in a Battery for Eureka County?. We'll close with a complete list of articles on this developing story.

Fortunately for the mining community, exotic chemistries for futuristic batteries translate to greater demand for metals such as lithium, vanadium and silver - all of which are abundant in our state. To date, lithium has probably attracted much attention from all corners of the global investment community; from billionaire investor Warren Buffet to South Korean steel producer POSCO (Buffet Wants More POSCO, Both Want Lithium).

As previously reported, a low cost source of lithium is available in Kings Valley of nearby Humboldt County. Western Lithium (TSX-V:WLC) is currently developing that site for open pit mining of lithium carbonate. This "clay" extraction approach is an alternative to the more common "brine" technique where lithium is produced by pumping salty water out of dry salt lakes in South America and our own Clayton Valley just west of Goldfield, Nevada.


There is another player seeking lithium in our state. Li3 Energy, Inc. has acquired properties near the Clayton Valley and, most recently, lithium assets in the Big Smoky:

"[Li3 Energy] has acquired a 100% interest in 170,000 acres of a strategically located property prospective for lithium brine, located in Big Smoky Valley near Tonopah, Nevada. The Property shares similar geology to Clayton Valley, which lies a few miles south and contains Rockwood Holdings' Silver Peak Mine, one of the world's leading producers of lithium hydroxide, and currently the only producing lithium mine in the United States of America." (MARKETWIRE, 3/12/2010)

You can read the entire press release on your break:

Li3 Energy Closes Acquisition of Next Lithium Assets at Big Smoky Valley, Nevada (MARKETWIRE, 3/12/2010)

And here's their website:

Li3 Energy, Inc.

Presently Li3 (OTCBB:LIEG) is listed on the OTCBB, an "over the counter" securities market often used by start-up mining companies in the preliminary stages of exploration and acquisition. Western Lithium (TSX-V:WLC) is listed on the Toronto Venture Exchange which serves a similar purpose. As successful mining companies grow to the development/production stage, they typically transition to the larger equity exchanges (e.g. NASDAQ) with more stringent listing requirements. Yesterday LIEG closed at $0.79/share, here is their 3-month chart:


Presently, the ole Colonel does not own shares of either WLC or LIEG but both companies are on my watch list. Potential high rewards travel with high risks, please do your own homework before investing buckaroos!

Below is a complete list of articles by this Report on emerging battery technologies and the related mining important to our State and County:

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)

Buffet Wants More POSCO, Both Want Lithium (The Eureka Miner's Market Report, 03/19/2010)

Western Lithium, Gold, Silver, Copper & Oil (The Eureka Miner's Market Report, 03/12/2010)

A Third Tank on Our Hill? Lithium & Vanadium Update (The Eureka Miner's Market Report, 03/22/2010)

Enough talk, let's walk the walk:

4-WD is OFF - smoother markets return; the VIX or "fear index" is in the 15-16s far below 25 which is good; metals & miners are good with benchmark FCX comfortably above $74, 10-year Treasurys are below 4% preserving a low-interest rate environment (what's this?)

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

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 $1.53 in early trading to $85.58 (May contract, most active); Gold is up $7.0 to $1160.4 (June contract, most active); Silver is up $0.231 to $18.480 (May contract); Copper is up $0.0125 to $3.6130 (May contract); Western Molybdenum Oxide sits at $17.50, LME moly 3-month & 15-month seller's contracts remain at $18.60

The DOW is up 54.26 points to 11073.68; the S&P 500 is up 7.51 to 1204.81. The miners are up except for Newmont:

Barrick (ABX) $40.76 up 0.82%
Newmont (NEM) $53.68 down 0.19%
US Gold UXG) $3.20 up 2.89%
General Moly (Eureka Moly, LLC) (GMO) $3.66 up 2.52%
Thompson Creek (TC) $13.85 up 1.47%
Freeport-McMoRan (FCX) $85.88 up 1.31% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $46.62 up 2.08% - global steel producer
POSCO (PKX) $121.25 up 1.46% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 1.41% to $1,449,121.91 (what's this?).

Cheers,

Colonel Possum

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

Headline photograph by Mariana Titus

General Moly & US Gold Lead the Pack

Morning Miners!

It is 5:56 AM. Have a cup and let me tell you about the most recession-proof job in America. Eureka County, at the heart of North American gold country, has weathered the "Great Recession" much better than most counties but there is no private sector job under our big sky more secure than working for the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER) in Cambridge, Massachusetts.

These are the guys that date the beginnings and endings of big economic events like recessions and in better times, economic expansions. In NBER's words, "Founded in 1920, the National Bureau of Economic Research is a private, nonprofit, nonpartisan research organization dedicated to promoting a greater understanding of how the economy works." Here's their website:

National Bureau of Economic Research

Now, here's the problem. The propeller heads on the panel responsible for deciding when U.S. recessions begin and end said yesterday it’s too soon to declare the current slump is over. Nuts.

It is a similar quandary for the chief executives of major companies as they look down a rough road of sputtering recovery. My favorite big mining boss is Richard Adkerson who runs copper giant Freeport-McMoRan (FCX). He often declares himself an optimist but said in a recent meeting of copper chiefs that he's concerned enough about the US economic recovery to hold off ramping his operations back to full speed. As reported by Reuters Insider TV:

"[What] we are facing is a world where China is very strong and has created a copper price that would justify all of our capital expenditure, but two-thirds of the world's copper markets -- the US, Europe and Japan -- remain weak...And so, when you have the price supported solely by China, we are just not real comfortable in going all out right now." (Mining Weekly, Miners united on copper, split on spending, 4/8/2010)

Alcoa (AA), the largest U.S. aluminum producer, kicked off the quarterly earnings season with similar reflections on the future as they reported lower-than-expected first-quarter sales that show the nation’s recovery remains shaky. As reported by Bloomberg News today:

Alcoa’s Sales Miss Shows U.S. Recovery Isn’t ‘Robust’ (Bloomberg News, 4/13/2010)

POSCO (PKX), South Korean steel producer and 20% investor in our Mt. Hope project, also reported and had a brighter outlook for the steel industry. As reported by the Wall Street Journal, POSCO President Choi Jong-tae said, "Robust demand from carmakers and electronics firms helped buoy the [quarterly] net result but to offset rising raw material costs, we will continue cost-cutting efforts..." Analysts said they expect POSCO to continue its strong run in the next quarter, helped by an expected increase in product prices. Hey, that's good for General Moly and good for Eureka County.

I think that's how you maintain your sanity in this up-and-down recovery - look at the health of those companies that affect your community directly. The Colonel's not aware of any nearby aluminum mines and you've got to head over to Ely to find copper but we've got a lot of gold and molybdenum, pardner. If the future is looking bright for those metals what do investor's think about our local miners?

I thought it might be fun to check our favorite miner's stock performance against benchmarks from two months ago when we reported, Moly Jumps, Metals Dip, Barrick & POSCO Expand, 4/12/2010). Here are the results:

S&P 500 up 12.0%

Alcoa (AA) up 7.3%
Freeport-McMoRan (FCX) up 13.9%
POSCO (PKX) up 5.5%

Copper up 17.2%
Gold up 5.0%
Molybdenum up 9.4%

Gold Miners
Barrick (ABX), benchmark miner - up 10.8%
Newmont (NEM) up 13.3%
U.S. Gold (UXG) up 29.0%

Moly Miners

Thompson Creek (TC), benchmark miner - up 8.5%
General Moly (GMO) up 51.5%

What's the takeaway, Colonel? Major producers Alcoa and POSCO have lagged the S&P 500; bellwether miner Freeport-McMoRan has maintained a leading edge boosted by a rise in copper prices.

The rise in gold and moly prices has been less dramatic than copper. Barrick and Newmont have beat gold price but are roughly in line with the broader markets. Benchmark moly miner Thompson Creek lags both the S&P and the price movement of its product.

So who are our winners? Junior miners General Moly and US Gold have handily beat the broader markets, benchmarks and the price of their metal by wide margins. Of course, neither is in production in Eureka County...yet. That tells you a lot about investment sentiment in our neck of the woods. Investors, hopeful but skittish about the near term, see great promise several years down the road when General Moly and (hopefully) US Gold enter early production (see note 1). That's enough to keep the ole Colonel happy about the future.

Enough talk, let's walk the walk:

4-WD is OFF - smoother markets return; the VIX or "fear index" is in the 16s far below 25 which is good; metals & miners are good with benchmark FCX comfortably above $74, 10-year Treasurys are below 4% preserving a low-interest rate environment (what's this?)

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

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 $0.63 in early trading to $83.71 (May contract, most active); Gold is down $7.0 to $1155.2 (June contract, most active); Silver is down $0.159 to $18.225 (May contract); Copper is up $0.0230 to $3.5875 (May contract); Western Molybdenum Oxide sits at $17.50, LME moly 3-month & 15-month seller's contracts remain at $18.60

The DOW is down 13.38 points to 10992.59; the S&P 500 is down 4.63 to 1191.85. The miners are down except for US Gold:

Barrick (ABX) $39.91 down 2.09%
Newmont (NEM) $52.82 down 1.36%
US Gold UXG) $3.09 up 0.32%
General Moly (Eureka Moly, LLC) (GMO) $3.54 down 1.39%
Thompson Creek (TC) $14.30 up 2.22%
Freeport-McMoRan (FCX) $84.03 down 0.26% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $45.66 down 0.04% - global steel producer
POSCO (PKX) $119.10 down 1.71% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.91% to $1,419,039.31 (what's this?).

Cheers,

Colonel Possum

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

Note 1: In fairness, General Moly (GMO) is much further down the path to production than US Gold (UXG) in terms of permitting, financing etc. US Gold, however, sits on the Eureka-Carlin trend with properties that become more and more valuable as domestic gold production declines in older mines. Whether UXG moves to production from exploration/development or is eventually acquired by a gold major is anyone's guess. In either case, investor's have lately reacted to some positive development they sense down the road for UXG.

Headline photograph by Mariana Titus

Is Miss Moly Ready for $20 Shoes?

Morning Miners!

It is 5:57 AM. Grab a cup and let's get to work. While we're waiting for U.S. markets to open, let's see what we might expect for the week. On Friday European leaders used soothing words to reassure the world that there wouldn't be a Greek financial tragedy and world markets bounced (A Little Greenback with Your Greek Salad?). The S&P closed at 1194.37, a new high topping my prediction of 1193 by Memorial Day. That deserves a Colonel Yee-ha!

Over the weekend they put a little walk with their talk by unveiling a massive €30 billion aid plan for Greece. Predictably, the word "possible" crept into the finance ministers' description of a low-interest (5%) three-year loan program for their ailing euro-zone partner. Nonetheless their plan is expected to lift markets again today.

To bring all this bubbly-bubbly to something we can relate to in Eureka, the ole Colonel decided to take a bird's-eye view of the steel industry - a primary driver of molybdenum prices.

Steel Business Briefing reports today that European steel producers should be able to absorb the higher cost of raw materials later this year. Mathias Carlson, a Deutsche Bank research analyst, said, "We are positive on the European steel fundamentals. I think that 2010 earnings will be driven by volumes and not by the high prices that just offset the higher raw material costs."

OK, that's cool. The big part of raw material costs has been iron ore this year but the producers have been passing those costs on to customers through higher steel prices. Here are the price increases for steel billet in Europe and Asia since February 22, the day molybdenum futures were launched on the London Metal Exchange (LME):

LME Mediterranean steel billet (3-month seller's contract) up 38.0%
LME Far East steel billet (3-month seller's contract) up 32.6%

Again, I believe most of this increase is due to a rise in iron ore. How have some of the specialty metals used in steel alloys fared?

LME molybdenum (3-month seller's contract) up 6.5%
LME nickel (3-month seller's contract) up 19.6%
LME cobalt (3-month seller's contract) up 18.8%

And how much have moly spot prices moved over the same period?

Western moly oxide up 1.4%
European moly oxide up 5.9%

What's your point Colonel? It appears that global steel production is indeed on the mend as predicted by the experts last year. Although input prices have risen there seems to be no significant resistance (yet) to higher steel prices in Europe or Asia. Miss Moly, however, is lagging her metallic cousins in both the spot and futures markets. Although supply and demand set the price for individual metals, I question whether any price can withstand the "reflation" spirit of markets lifting on improved European financial news. I believe there could be a catch-up in moly spot prices in the next several months if global conditions continue to improve. That puts Miss Moly in $20 shoes in my crystal ball, pardner.

Let's have a Colonel beer bet on her new heels (Colonel's Beer Derby, lower right column of this blog):

Western Moly Oxide will break $20/lb before Summer Solstice

OK, the markets are now open and guess what? The S&P 500 is flirting 1200 and the "fear index" is in the 15s, levels not seen since July 2007! (what's a "fear index"?). Fearless markets buckaroos, come on Miss Moly - kick your heels.

Here is a complete summary of last week's moly price action:

Western Moly Oxide (FeMo65) $17.50/lb (the price reported by Infomine and tracked by Base Metals on the General Moly Website)

Moly Oxide, Europe (Mo Drummed Molydbic Oxide EU) $18.00/lb (the price reported in the Metals Bulletin)

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

Here is the price action of the LME 3-month contract (seller) from the February launch:



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

4-WD is OFF - smoother markets return; the VIX or "fear index" is in the 15s for the first time in many moons, far below 25 which is terrific; metals & miners are happy with benchmark FCX comfortably above $74, 10-year Treasurys are below 4% preserving a low-interest environment (what's this?)

The YELLOW light is switched back 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 $0.12 in early trading to $85.04 (May contract, most active); Gold is down $0.7 to $1161.2 (June contract, most active); Silver is up $0.074 to $18.425 (May contract); Copper is up $0.0265 to $3.6165 (May contract); Western Molybdenum Oxide sits at $17.50, LME moly 3-month & 15-month seller's contracts move up to $18.60

The DOW is up 14.89 points to 11012.24; the S&P 500 is up 2.35 to 1196.72. The miners are whistling their way to work:

Barrick (ABX) $41.67 up 0.92%
Newmont (NEM) $54.31 up 0.18%
US Gold UXG) $3.23 up 2.86%
General Moly (Eureka Moly, LLC) (GMO) $3.53 unchanged
Thompson Creek (TC) $14.30 up 2.22%
Freeport-McMoRan (FCX) $85.83 down 0.19% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $46.11 up 0.72% - global steel producer
POSCO (PKX) $121.11 down 0.81% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.83% to $1,445,557.98 (what's this?).

Cheers,

Colonel Possum

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

Headline photograph by Mariana Titus

A Little Greenback with Your Greek Salad?

χωριάτικη σαλάτα
Morning Miners!

It is 6:01 AM and high-time for a little Raine's Red Label TGIF coffee! I think I've got it figured out. If you want the price of gold or copper to go up and the dollar to go down, just wait for a European leader to tell the world that the solvency of Greece is not a problem. It just takes words. The folks in the EU castle were a little light on words this week so markets shuddered as yields exploded on Greek bonds, the U.S. dollar enjoyed a 4-day rally and gold started to look like a good bomb shelter to escape the next financial crisis. Things got so out of hand that someone across the pond decided it might take two leaders and an EU President to generate enough words to spare us Armageddon.

Yesterday at a special bilateral summit French President Nicholas Sarkozy and Italian Prime Minister Silvio Berlusconi spoke at a joint news conference. As reported this morning in the Wall Street Journal the leaders said they, "...are ready to aid Greece...a failure to support the country would be bad for the euro and euro-zone economy." and to make us feel extra good Mr. Sarkozy added that, "[our] position on Greece has not changed", without providing details.


And to make the world feel even mo' better, EU President Herman Van Rompuy said in a French newspaper interview published this morning, "The EU is prepared to intervene to help Greece out of its financial crisis."

Boy that's tellin' em! In early trading the U.S. dollar fell against the euro like a rock in a mineshaft, gold hit a 3-month high and copper got back up in the giddy-up go saddle. Haven't we been to this rodeo before?

Let's break these rocks down to something we can haul. In early morning trading, Barrick Gold (ABX) market capitalization increased $414,000,000 on the "euro-words." By my count there were 41 reassuring words between two leaders and one president which works out to be $10 million per word for one mining company alone. Those are some pretty fancy words, pardner. Sure is easier money than busting rocks for gold.

I think it is time for the weekend. Make sure you pack some "euro-words" in case you run into trouble on the road to Ely.

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

4-WD is OFF - smoother markets return; the VIX or "fear index" is in the 16s, far below 25 which is good; metals & miners hang are happy with benchmark FCX comfortably above $74 (what's this?)

The YELLOW light is switched back 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 $0.38 in early trading to $85.77 (May contract, most active); Gold is up $3.4 to $1156.3 (June contract, most active); Silver is up $0.188 to $18.315 (May contract); Copper is up $0.0155 to $3.6020 (May contract); Western Molybdenum Oxide sits at $17.45, LME moly 3-month & 15-month seller's contracts remain at $18.14

The DOW is up 41.79 points to 10968.86; the S&P 500 is up 3.80 to 1190.24. The miners are mixed:

Barrick (ABX) $41.37 up 1.03%
Newmont (NEM) $53.98 up 0.15%
US Gold UXG) $3.15 up 0.96%
General Moly (Eureka Moly, LLC) (GMO) $3.52 down 0.28%
Thompson Creek (TC) $14.12 down 0.07%
Freeport-McMoRan (FCX) $86.04 down 0.01% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $45.67 down 0.26% - global steel producer
POSCO (PKX) $121.96 down 2.28% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.09% to $1,434,987.02 (what's this?).

Cheers,

Colonel Possum

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

Headline photograph by Mariana Titus

Gold & the Dollar - Twin Sisters on a See-Saw or...?

Morning Miners!

It is 6:16 AM. Have a brimming cup of Thor's java and let's see if we can figure out some "confusement" on gold and the dollar. This is the second morning the ole Colonel has awoke to rising gold on the London spot market and a rising U.S. dollar. As I write, COMEX gold is falling back a bit but still very close to my March nominal price ($1148.8/oz versus $1150/oz) and the "Dixie" (U.S. Dollar index, .DXY) continues her 4-day rally. These two usually move in price like twin sisters on a see-saw but lately have been happily sitting in the same swing.

Let's return once more to our thoughts on March 2, "Gold really needs to sort out what its role will be in the coming months - a fellow traveler with the metals and oil or safe haven play for investors fleeing the commodity space" (The Colonel's Outlook for March). Nobody is fleeing the commodity space buckaroos but there are some signs that the recent run-up is feeling a little tired. Oil has thankfully pulled back from a dash to $90 and copper looks like she needs some R&R. Lawrence Williams reports a London-based metals consultancy, GFMS, opinion on copper today in Mineweb:

Copper price hiatus predicted then $8,000/tonne by year end - GFMS (Mineweb, 4/8/2010)

$8,000/tonne is $3.63/lb over her in the Colonies which is about where COMEX copper opened yesterday. If GFMS is correct, copper could move sideways or down with increased volatility before regaining her mojo.

I think we're still at an inflection point and the answer to our question about gold remains unclear. One thing for sure is the impact sovereign debt has had on both the U.S. dollar and gold. Checkout this chart of both for the last 6-months:


The debt crisis began with Dubai's problems in late November (Dubai World, A World Away?, 11/29/2009). By the first week of December gold was north of $1200 at its peak (blue line) and the dollar was at its bottom (red line); two sisters on the big risk/reward see-saw. With similar sovereign debt problems surfacing in Europe, the dollar strengthened and gold faltered. More recently the sisters jumped in the same swing as Greece's woes continue to dominate the headlines. In fact, gold and the dollar have both moved up roughly the same amount from where they were six-months ago (gold up 8.5%, Dixie up 6.0%). On average, this may suggest that the "safe haven" aspect of gold is trumping its black leather jacket role as a "risk trade" with commodities. It is tempting to breakdown the gold uptrend as a 2.5% commodity reflation and a 6% safe haven play. In truth, the answer is not clear.

Let's checkout 10-year Treasurys for another piece to this puzzle:


There has been great media hullabaloo that our national borrowing frenzy would cause the benchmark 10-year to collapse in price and jump in yield. Yesterday's 10-year auction was a big success; foreigners scooped up more of our notes like high grade in the mine pit. Our 10-year yields are dropping safely below 4% as Greek 2-year notes blow past a scary 8% yield this morning. Strong dollar, strong Treasurys; maybe we're not so bad off as everyone thinks! Will gold continue to move with the dollar or rest a bit on the bench with copper? Stay tuned.

Ending on a positive note, Western moly oxide ticked up to $17.45 and there is a buzz that demand for ferro-molydenum in Europe may further support prices. Here is a one-month chart of Miss Moly and Uncle Nickel:


Enough talk, let's walk the walk:

4-WD is ON - unsettled markets may persist; the VIX or "fear index" is in the 17s but below 25 which is good; metals & miners hang in there with benchmark FCX comfortably above $74 (what's this?)

The YELLOW light is switched back 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 $0.94 in early trading to $84.94 (May contract, most active); Gold is down $0.6 to $1148.8 (June contract, most active); Silver is down $0.209 to $17.990 (May contract); Copper is down $0.0380 to $3.5595 (May contract); Western Molybdenum Oxide ticks up to $17.45, LME moly 3-month & 15-month seller's contracts remain at $18.14

The DOW is down 20.41 points to 10877.11; the S&P 500 is down 2.27 to 1180.18. The miners are mixed:

Barrick (ABX) $40.89 up 0.47%
Newmont (NEM) $53.98 down 0.20%
US Gold UXG) $3.10 down 0.64%
General Moly (Eureka Moly, LLC) (GMO) $3.58 down 0.56%
Thompson Creek (TC) $14.04 down 0.32%
Freeport-McMoRan (FCX) $84.99 down 1.09% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $45.24 down 1.61% - global steel producer
POSCO (PKX) $123.38 up 0.64% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.21% to $1,428,328.88 (what's this?).

Cheers,

Colonel Possum

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

Headline photograph by Mariana Titus