Fear Recedes - LME Moly Gets a Bounce

Morning Miners!

It is 5:34 AM. Mother Nature brings us a new day in Diamond Valley wrapped in pink and gray silk scarves. I think we're going to have a good'un, pardner. There seems like there is a change of sentiment in the markets too. Copper, our battered canary in the global mineshaft, took a few passes above the $3/lb clouds this morning but couldn't quite keep her altitude. She's getting stronger every day and should be in the blue sky soon - that's a good sign for metals & miners. Here's copper spot prices this morning:


Oil is showing some resilience in the mid-$70/bbl range too. No one likes high priced oil (except oil traders) but, like copper, it is another good measure of global growth. Rising oil prices in this environment of concern about global recovery is a good sign.

In the May market doldrums, this Report suggested that 2010 may become a year of gold and currencies:

"In late November [2009], the storm center moved to the Sovereign Debt Sea with the emerging Dubai crisis. It rolled over Greece and entered the Gold & Currency Ocean as worries turned from the fiscal health of individual countries to the wisdom of central bank solutions and the potential adverse impact on their currencies; stronger gold, weaker currencies. Metals & miners pitched and rolled, volatility returned." (The Eureka Miner's Market Report, 5/27/2010)

There hasn't been much to challenge this assertion in recent news; almost every market headline lately has some mention of the euro, gold or the U.S. dollar. I thought it might be fun to test the relative value of copper with respect to the dollar, gold and a barrel of oil from its high of $3.5840/lb (COMEX intraday high) on 4/12 to this mornings price. Here are the results:

lbs of copper/ barrel of oil 24.00 (4/21) 25.38 (6/15 AM) up 5.7%
lbs of copper/ ounce of gold 326.3 (4/21) 413.3 (6/15 AM) up 26.6%
lbs of copper/ U.S. dollar 0.279 (4/21) 0.334 (6/15 AM) up 19.9%

What's all this blamed number crunching prove Colonel? OK, if you buy copper with greenbacks you can buy about 20% more these days than in April. If you happen to pack gold, there's a better deal - your buckboard will weigh in with more copper than that feller with all the dollars. You can both feel sorry for the guy toting all those barrels of oil. He can trade for just a little more copper than he did several months ago.

If you're buying commodities the dollar is strong, gold is stronger and oil has been beaten down in value with its global growth companion, copper. The tide may be turning now as fear is starting to leave the marketplace. Here's a chart of the VIX or "fear index" (what's this?) for this morning as we inch further below 30 at 27.4; still above a comfort level of 25 but much better than the harrowing days of the last several weeks. The broader markets are now open and it looks like the metals & miners are fixing to have a good'un too.


Miss Moly is showing some giddy-up-go at the London Metal Exchange (LME) with a reversal in her downward trend yesterday. The cash seller has moved up to $15.76 from $14,60; the 3-month seller, $15.88 from $14.74.

Enough talk, let's walk the walk:

Our newly minted Eureka Miner's Index (EMI - what's this?) steps up to 84.48 this morning, rebounding from last Monday's low of 50.7. Remember an EMI greater than 100 is good times for metals & miners - we're getting even closer!

4-WD is ON - rough roads in the marketplace; The VIX or "fear index" is below 30, still above our 25 level threshold; metals & miners remain remain on shaky timber with benchmark FCX in the mid-$60s well below its 200-day average of $76 (our new warning level), 10-year Treasurys are safely below 4% preserving a low-interest rate environment

The YELLOW light is turned on for Commodity Reflation with copper trading below $3/lb

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

The YELLOW light is turned back on for Investor Confidence with the possibility of a 20% correction in the broader markets appearing less likely

The GREEN light remains turned on our Fuel Gauge with oil below $80

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions &
General Moly Mt. Hope Water Rights

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

NYMEX/COMEX: Oil is up $0.77 in early trading to $75.89 (July contract, most active); Gold is up $2.5 to $1227.0 (August contract, most active); Silver is up $0.029 to $18.47040 (July contract); Copper is down $0.0130 to $2.9905 (July contract)

Western Molybdenum Oxide remains at $14.00; LME moly 3-month seller's contract is at $15.88, LME cash seller moves to $15.76, Euro moly oxide sits at $14.00.

The DOW is up 93.41 points to 10,284.30; the S&P 500 is up 10.94 to 1100.57. The miners are mostly happy:

Barrick (ABX) $41.98 down 0.05%
Newmont (NEM) $55.31 up 0.61%
US Gold (UXG) $4.30 up 1.18%
General Moly (Eureka Moly, LLC) (GMO) $3.69 up 2.78%
Thompson Creek (TC) $9.68 up 1.68%
Freeport-McMoRan (FCX) $65.75 up 0.75% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $30.39 up 2.15% - global steel producer
POSCO (PKX) $95.25 down 0.03% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 1.05% to $1,356,419,91 (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

No News is Good News - Copper & Oil Rebound

Morning Miners!

It is 5:24 AM. Have a simmering cup of Monday java and let's get to work. There is an article in the Wall Street Journal that pretty well sums up the market climate these days in its opening sentence:

LONDON—The dollar sank in European trading hours Monday as the lack of any fresh negative news on euro-area banks and finances sent traders back to the euro. (WSJ, 6/14/2010)

If this is the first verse in a song, readers of this Report know the chorus: "Euro up, gold & dollar down/ Come'on oil & copper rebound!". Pretty dumb song but it's what's playing on the charts, pardner. NYMEX Oil is trading in the mid-$70s again while COMEX copper flirts with the key $3/lb level, a jump of more than 10% in a week. Nobody is really complaining about gold either as it takes a pause on its $1225/oz perch.

The broader markets will be open soon and I'll bet metals & miners will be singing a happy chorus too. While we're waiting, allow the ole Colonel to point out a commodity sleeper that doesn't give a hoot about the perils of foreign currency - domestic natural gas. I believe one of the fallouts of the BP Gulf disaster will be a move to more land-based production of natural gas. With new shale extraction techniques the United States has moved from a nine to ninety-nine year reserve estimate in the last several years for this important fuel. I predict the Gulf disaster will give new energy to the "T. Boone Picken's Plan" that promotes wind, solar and natural gas as the bridging domestic energy sources to greatly reduce our dependence on foreign oil. That oil-savy old timer has often pointed out that you need a fuel like natural gas to do the heavy hauling; a fancy battery won't move a Peterbilt down the highway. Yee-ha!

Since May's lows, natural gas has moved from $3.9 to $4.9 territory and natural gas stocks are in rally mode. My three favorites are EnCana (ECA), San Juan Basin Royalty Trust(SJT) and EOG Resources (EOG) which is the only oil & gas stock in the Eureka Miner's Grubstake Portfolio (what's this?). Why do we care about land-based oil & gas exploration in Eureka County? Although production has decreased over the past several years, Pine Valley is the second largest producer of oil in Nevada and some believe has the greatest future production potential. Just stuff to watch for buckaroos.

San Juan Basin is primarily a New Mexico play but shows the new interest emerging for land-based natural gas. SJT presently pays a monthly dividend with a 8.9% annualized return - that beats CD rates! Here's a one-year chart to illustrate the turnaround in stock price:


OK, the markets are open and the metals & miners are clearing their throats for song. Looks like a good'un so far.

Here's our molybdenum summary for last week which shows a convergence of spot and futures prices to $14 territory.

Western Moly Oxide (FeMo65) remains at $14.00/lb (the price reported by Infomine and tracked by Base Metals on the General Moly Website)

Moly Oxide, Europe (Mo Drummed Molydbic Oxide EU) falls to $14.00/lb (the price reported in the Metals Bulletin)

LME Futures Contracts

LME cash seller moves to $14.60

3-Month (Buyer) $32,200/metric ton $14.60/lb
3-Month (Seller) $32,500/metric ton $13.83/lb

15-Month (Buyer) $32,200/metric ton $14.60/lb
15-Month (Seller)$32,500/metric ton $13.83/lb

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



This 1-month chart of Western moly oxide shows the recent downward pressure on price:



Enough talk, let's walk the walk:

Our newly minted Eureka Miner's Index (EMI - what's this?) popped up to 81.65 this morning, rebounding from last Monday's low of 50.7. Remember an EMI greater than 100 is good times for metals & miners - we're getting closer!

4-WD is ON - rough roads in the marketplace; The VIX or "fear index" is below 30, still above our 25 level threshold; metals & miners remain remain on shaky timber with benchmark FCX in the mid-$60s well below its 200-day average of $76 (our new warning level), 10-year Treasurys are safely below 4% preserving a low-interest rate environment

The YELLOW light is turned on for Commodity Reflation with copper trading below $3/lb

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

The YELLOW light is turned back on for Investor Confidence with the possibility of a 20% correction in the broader markets appearing less likely

The GREEN light remains turned on our Fuel Gauge with oil below $80

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions &
General Moly Mt. Hope Water Rights

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

NYMEX/COMEX: Oil is up $1.92 in early trading to $75.70 (July contract, most active); Gold is down $4.3 to $1225.9 (August contract, most active); Silver is up $0.239 to $18.470 (July contract); Copper is up $0.0775 to $2.9815 (July contract)

Western Molybdenum Oxide remains at $14.00; LME moly 3-month seller's contract is at $14.74, LME cash seller moves to $14.60, Euro moly oxide sits at $14.00.

The DOW is up 62.27 points to 10,273.34; the S&P 500 is up 7.58 to 1099.18. The miners are mostly happy:

Barrick (ABX) $42.98 down 0.30%
Newmont (NEM) $55.87 down 0.68%
US Gold (UXG) $4.25 up 0.95%
General Moly (Eureka Moly, LLC) (GMO) $3.49 up 0.29%
Thompson Creek (TC) $9.43 up 3.17%
Freeport-McMoRan (FCX) $66.47 up 2.37% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $30.07 up 4.01% - global steel producer
POSCO (PKX) $96.99 up 2.48% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 1.32% to $1,356,113.71 (what's this?).

Cheers,

Colonel Possum

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


Headline photograph by Mariana Titus

The Colonel Visits Eureka Moly LLC (GMO)

Morning Miners!

It is 5:46 AM. Let me pour you a welcome cup of Raine's Red Label TGIF coffee. Yesterday, I shared a cup with Tim Arnold, General Manager of our Mt. Hope project, and got the latest updates on Eureka Moly LLC (subsidiary of General Moly NYSE:GMO). After the Hanlong announcement in early March things have been really moving out for Tim and his crew. The Hanlong Investment Group provides the important financial bridge to full funding for the Mt. Hope molybdenum mine (A Game Changer for General Moly & Eureka County). If all goes as planned, mine construction should begin next summer then it's 20 months to first production. There are some remaining challenges which we will touch on in a few moments.

Tim continues to work with the community to ensure that this mining project is "done right". I shared a few laughs with him about the Atlas Mine days in Eureka during the late 1980s and early 1990s. As a young feller then, I enjoyed the "wild west" atmosphere of those days but in hindsight it was a trying time for the Eureka community. Poor mine planning and inadequate infrastructure to support the influx of new folks left mixed memories of new mine operations in our county. Tim is determined not to repeat the Atlas Gold Bar Mine mistakes. There was a luncheon this May to explain General Moly's approach (Local Thumbs Up for General Moly) which I unfortunately missed because I was on the road.

One of the most exciting aspects of the planning process is bringing in consultant Elaine Barkdull Spencer to do a business readiness assessment. Barkdull Spencer comes with terrific credentials for this job being the former executive director of the Elko County Economic Diversification Authority (ECEDA). She has the experience to understand the proper integration of mining and communities and will work closely with our own Economic Development folks, Wally Cuchine and Trish Reynolds. This Report first became aware of her talents last August when we covered a Fortune Magazine article on Elko surviving the recession (Elko Makes Fortune!). The Christopher LaMarca photograph below from that article shows Barkdull Spencer standing with Elko Mayor Mike Franzoia (see note 1).


One of Barkdull Spencer's first tasks will be a face-to-face survey with local business owners. According to Tim, this will include her explanation of the "mining cycle" and an open ear to the special needs of our community. I attended the latest Commissioner's meeting on June 7th and heard a debrief on some of the planning that is already underway from the Eureka EIS Coodinator, Abby Johnson. I am sure that Bardull Spencer and Johnson will be working together soon to prepare for the housing and infrastructure challenges ahead.

Tim reminded me that although there will be peaks in the mining employment it will not all happen at once. In her presentation for the Commissioners, Johnson estimated that there may be times when Mt. Hope will employ 800-1,000 workers but only about 30% are expected to reside in the Eureka town-site and nearby Diamond Valley. Tim's example was a mine construction contractor who may work 12-hour shifts for 2-weeks the go home to Elko. The important takeaway is there will be varying levels of employment based on the mining cycle. The Commissioner's were very appreciative of Johnson's initial report and demonstrated an understanding and willingness to plan and prepare for the Mt. Hope development.

One of the remaining challenges for Eureka Moly is the water rights issue which has diminished as an obstacle to the current Mt. Hope plan. As we reported in April (General Moly Water Rights Decision, Bridge Loan) the water rights issue has left the courtroom and is now solely in the hands of the Sate Engineer. Tim believes the only remaining concern is the water model and is confident that a new updated model will pass the muster. The State Engineer is in charge of both schedule and hearings and Eureka Moly is expecting those to move expeditiously in their favor.

The Colonel wishes Tim, his crew and Elaine Barkdull Spencer the best of luck on their journey to bring molybdenum mining to Eureka County in a manner that benefits not only General Moly but the local community. In these trying economic times it is important to remember that Mt. Hope will bring jobs and revenue to the county and state through sales and use tax, property taxes and Nevada Net Proceeds.

Enough talk, let's walk the walk:

Our newly minted Eureka Miner's Index (EMI - what's this?) stepped up to 72.99 this morning, marching from Monday's low of 50.7. Remember an EMI greater than 100 is good times for metals & miners - we're still moving in the right direction.

4-WD is ON - rough roads in the marketplace; The VIX or "fear index" moves to just below 30, still above our 25 level threshold; metals & miners remain remain on shaky timber with benchmark FCX in the mid-$60s well below its 200-day average of $76 (our new warning level), 10-year Treasurys are safely below 4% preserving a low-interest rate environment

The YELLOW light is turned on for Commodity Reflation with copper trading below $3/lb

The YELLOW light remains on for Stable Markets with the VIX too close to 30 level for my comfort (what's this?)

The ORANGE light remains on for Investor Confidence the possibility of a 20% correction in the broader markets

The GREEN light remains turned on our Fuel Gauge with oil below $80

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions &
General Moly Mt. Hope Water Rights

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

NYMEX/COMEX: Oil is down $1.58 in early trading to $73.90 (July contract, most active); Gold is dup $4.6 to $1225.8 (August contract, most active); Silver is down $0.026 to $18.325 (July contract); Copper is up $0.0350 to $2.8975 (July contract)

Western Molybdenum Oxide drops to $14.00; LME moly 3-month seller's contract is at $14.29, LME cash seller moves to $14.15, Euro moly oxide sits at $14.00.

The DOW is down 40.21 points to 10,132,32; the S&P 500 is down 4.52 to 1082.32. The miners are mostly happy:

Barrick (ABX) $43.09 up 0.40%
Newmont (NEM) $55.96 down 0.09%
US Gold (UXG) $4.13 up 2.99%
General Moly (Eureka Moly, LLC) (GMO) $3.49 up 0.29%
Thompson Creek (TC) $9.05 up 1.66%
Freeport-McMoRan (FCX) $65.01 up 1.01% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $28.61 down 0.66% - global steel producer
POSCO (PKX) $94.08 up 0.59% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0,53% to $1,326,613.01 (what's this?).

Cheers,

Colonel Possum

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

Note 1: Photograph of Barkdull Spencer standing with Elko Mayor Mike Franzoia by Christopher LaMarca (Redux Pictures)

As I wrote last August "A second enjoyable aspect of the Fortune article are the images by San Fransisco photographer, Christopher LaMarca (Redux Pictures). There is a photo gallery of 14 terrific pictures of Elko's folks and environs including today's headline image of White King. In addition to Curtis Calder some of those photographed you may know: Mayor Mike Franzoia, Elaine Spencer (Economic Diversification Authority), rancher Jimmy Elison with his sons Josh and Jared, local bikers 'Biggin' and 'ZZ', and Madame 'Victoria'."

Headline photograph by Mariana Titus

One Dog's View of the Markets - LME Moly Drops

Morning Miners!

It is 5:23 AM. Have a brimming cup of Thor's java and let's checkout what my dog, Loquita, thinks of the markets. Not much - Loquita believes my time would be better spent on longer walks with her than all this worry about the global marketplace. To prove her point she suggested that I checkout this Report at the same date last year (One-Armed Bandits & $71 Oil, 6/10/2009).

At that time the buzz was that the economy was coming out of recession but speculative money was driving up the price of oil to a shocking $71/bbl. Surely inflation would soon be on the horizon with all the new government stimulus money pouring into the economy. Today the talking heads are nervous that oil is plunging to the low-$70s/bbl, that speculative money is fleeing commodities and a double-dip recession is just around the corner. Deflation worry is now the bugaboo du jour.

Hmmm...maybe Loquita has a point.

I will point out to her that oil is at least back in the mid-$70s this morning (NYMEX $75.25/bbl) and although copper is still below the key $3/lb level (COMEX Cu $2.8575/lb), it is a good dime above its lows earlier this week. Oh, she's not listening - time for her morning pee.

I plan to do something constructive today. The Colonel has a 9:00am appointment with Tim Arnold, General Manager of our Mt. Hope project, to see how things are going with General Moly (GMO). I'm sure we'll talk about water rights and kick around the price of molybdenum - look for a debrief in tomorrow's Report.

Speaking of moly prices, the London Metal Exchange (LME) futures prices took a notch down after Euro moly oxide dipped to $14/lb yesterday. The LME cash seller dropped to $13.70/lb and the 3-month seller contract is now $13.83/lb. Western moly oxide is still sitting at $16/lb but may be the next to head south. It's funny that a year ago we were cheering moly prices cresting $10/lb as a sign of good times in the mineshaft (why is Loquita looking at me with that smug Chihuahua grin?). I guess it's time for a quick walk before we see Tim - see you tomorrow!


Enough talk, let's walk the walk:

Our newly minted Eureka Miner's Index (EMI - what's this?) moved uo to 65.25 this morning, a good step from Monday's low of 50.7. Remember an EMI greater than 100 is good times for metals & miners - we're still moving in the right direction.

4-WD is ON - rough roads in the marketplace; The VIX or "fear index" moves to the low-30s, still above our 25 level threshold; metals & miners remain remain on shaky timber with benchmark FCX in the low $60s well below its 200-day average of $76 (our new warning level), 10-year Treasurys are safely below 4% preserving a low-interest rate environment

The YELLOW light is turned on for Commodity Reflation with copper trading below $3/lb

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

The ORANGE light remains on for Investor Confidence the possibility of a 20% correction in the broader markets

The GREEN light remains turned on our Fuel Gauge with oil below $80

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions &
General Moly Mt. Hope Water Rights

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

NYMEX/COMEX: Oil is up $0.87 in early trading to $75.25 (July contract, most active); Gold is down $5.6 to $1224.3 (August contract, most active); Silver is down $0.139 to $18.050 (July contract); Copper is up $0.0075 to $2.8575 (July contract)

Western Molybdenum Oxide is at $16.00; LME moly 3-month seller's contract is at $13.83, LME cash seller moves is at $13.70, Euro moly oxide drops sits at $14.00.

The DOW is up 183.19 points to 10,082.44; the S&P 500 is up 19.61 to 1075.30. The miners are happy:

Barrick (ABX) $42.87 up 0.35%
Newmont (NEM) $56.05 up 0.63%
US Gold (UXG) $3.88 up 0.26%
General Moly (Eureka Moly, LLC) (GMO) $3.45 up 5.18%
Thompson Creek (TC) $8.80 up 2.56%
Freeport-McMoRan (FCX) $63.45 up 4.44% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $28.68 up 5.25% - global steel producer
POSCO (PKX) $91.97 up 2.97% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 2.20% to $1,304,810.25 (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 and other photographs by Mariana Titus

The Long & Short View - Euro Moly Drops

Morning Miners!

It is 5:55 AM. I hope you have some binoculars in the truck as well as those favorite dime store reading glasses hanging around your neck. Let me pour you a cup as we take the long and short view on these crazy markets. Mariana and I traveled to Elko the other day to stock up and she, as usual, took a zillion photos on the way. Somewhere north of Garden Pass, Mariana saw something of interest in the power lines (headline photo) - the long view. We stopped and caught a crow taking the short view of a much larger bird's nest (below).


This Report hopefully provides you with both the long and short view so you can better understand how events far-far away can have a significant impact on the mines in our backyard. Here's an example: last October the U.S. dollar was plumbing new depths against other currencies - the US Dollar Index (.DXY or "Dixie") was in the mid-70s after nearly breaking 90 during the stock market lows of March 2009 and there was much talk about the global community abandoning the dollar to price such commodities as oil.

The euro comprises nearly 58% of the Dixie and was the new rock star on the world stage. We had to endure much bombast from across the pond on how the euro was rapidly becoming the favored reserve currency and the overall superiority of the European economic system compared to ours. At that time Tony Blair, former U.K. Prime Minister, was thought by some to have a good shot at the European Union (EU) leadership. The Colonel wrote:

"Even though on paper the EU is a larger economy now than the United States, do we really believe that 27 disparate countries in Europe (possibly) led by Tony Blair will outstrip American innovation and productivity?" (Whistling Dixie... What is a Weak Dollar?, Eureka Miner's Market Report, 10/14/2009)

Mr. Blair didn't get the head honcho seat but I doubt it would have influenced the fate of the euro much, good or bad. This one-year chart of the U.S. Dollar Index (blue line) and COMEX gold (orange line) tells the story of what happened next.


The U.S. dollar hit bottom and gold peaked in early December 2009 just as the Dubai debt crisis unfolded. That was followed by all the sovereign debt worries in Europe starting with profligate Greece. Gold initially fell but then gold and the U.S. dollar trended up together as things worsened in Europe. The Dixie is now back in the mid-80s and gold is hitting new highs; in 12-months the greenback moved up 10% and gold, 27%. This morning the euro is strengthening some against the dollar struggling above the key $1.20 level ($1.2040) but there is belief by some that it still may fall to parity with greenback. C'est la vie.

Other than gold miners, the European sovereign debt crisis has been devastating to metals & miners given concerns that this could be the monkey wrench that breaks the global growth story. Perhaps not. Have faith buckaroos - yesterday was a pretty decent rally for rock busters and this morning looks pretty good too.

Euro moly oxide did drop to $14/lb increasing the spread with its western cousin from one to two-bucks (Western moly oxide steady at $16/lb). The LME futures prices seem to be holding up at $15.06/lb for cash sellers and $15.20/lb for the 3-month futures contract. Closing this spread in a positive direction would be a very good sign that things are on the mend. Stay tuned, keep the long and short view pardner.

Our newly minted Eureka Miner's Index (EMI - what's this?) is up sharply to 63.6 from Monday's low of 50.7. Remember an EMI greater than 100 is good times for metals & miners - at least we're moving in the right direction again.

Enough talk, let's walk the walk:

4-WD is ON - rough roads in the marketplace; The VIX or "fear index" moves to the low-30s, still above our 25 level threshold; metals & miners remain remain on shaky timber with benchmark FCX in the low $60s well below its 200-day average of $76 (our new warning level), 10-year Treasurys are safely below 4% preserving a low-interest rate environment

The YELLOW light is turned on for Commodity Reflation with copper trading below $3/lb

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

The ORANGE light remains on for Investor Confidence the possibility of a 20% correction in the broader markets

The GREEN light remains turned on our Fuel Gauge with oil below $80

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions &
General Moly Mt. Hope Water Rights

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

NYMEX/COMEX: Oil is up $1.84 in early trading to $73.83 (July contract, most active); Gold is down $11.1 to $1234.5 (August contract, most active); Silver is down $0.192 to $18.285 (July contract); Copper is up $0.0810 to $2.8605 (July contract)

Western Molybdenum Oxide is at $16.00; LME moly 3-month seller's contract remains at $15.20, LME cash seller moves up to $15.06, Euro moly oxide drops to $14.00.

The DOW is up 28.27 points to 9,968.25; the S&P 500 is up 3.48 to 1065.48. The miners are happy except the gold folks:

Barrick (ABX) $43.09 down 0.58%
Newmont (NEM) $55.99 down 0.81%
US Gold (UXG) $3.95 down 1.99%
General Moly (Eureka Moly, LLC) (GMO) $3.40 up 1.19%
Thompson Creek (TC) $8.84 up 0.91%
Freeport-McMoRan (FCX) $62.98 up 2.44% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $27.79 up 2.39% - global steel producer
POSCO (PKX) $90.65 down 1.67% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.37% to $1,301,053.52 (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 and other photographs by Mariana Titus

Gold Soars, Copper Falls, Moly Next? - Ask the EMI

SPECIAL NOTE (1): On 7/1/2010 the Eureka Miner's Index (EMI) described below was modified by a gold/silver ratio (Au:Ag) to further gauge fear in the marketplace. Click here for details
SPECIAL NOTE (2): On 8/9/2010 the Eureka Miner's Index (EMI) described below was modified with a low interest rate cap (LIRC) on the 10-year Treasury Note to address deflation influences on the index. Click here for Details

Morning Miners!

It is 5:30 AM. The Diamond Valley has rosy checks and a sliver moon smile rising in the east. Let's pour a cup and get to work. Yesterday was a rough-tough for the markets with the DOW falling below its so-called "flash crash" of 9869.62 to close at a 7-month low of 9816.49. This report follows the S&P 500 for a sense of where the broader markets are going because it includes 500 companies instead of just 30 for the DOW. Nonetheless, the S&P closing at 1050.47 is a healthy 13.8% below the lofty days of April (S&P intraday high of 1219.8, 4/26/10). Yesterday gold soared (COMEX Au $1240.8/oz) , copper fell into deep bear country (COMEX Cu $2.7660/lb) and molybdenum continued to show resilience although Euro moly oxide is trading a dollar below her western cousin ($15/lb versus $16/lb). Where to next?

Last August this Report created the Eureka Outlook Dashboard to give the reader a quick look at where the metals & miners important to our county are headed. Lately we have been turning on more and more warning lights to yellow and orange. I thought it might be helpful to come up with a single number to judge just how bad (or good) things really are.

You may point out that we already have a single number - the value of the Eureka Miner's Grubstake Portfolio. Yesterday it fell into the red for the year closing at $1,262,660.69 down 0.9% from last year's $1,274,064.67. If the composite performance of these twelve stocks that directly or indirectly affect Eureka County is a barometer, we're headed for a low pressure storm, pardner. The portfolio does, however, reflect cumulative performance - I'm looking for a thermometer that tells me something about the current temperature of the markets that influence our local mining economy.

Here's the Colonel's latest idea. How about an index (single number) built from key things we monitor on a daily basis: marketplace fear, interest rates, metal prices, oil price and the performance of benchmark miners? Let's call it the Eureka Miner's Index (EMI) which will roll up all these factors into one market temperature for Eureka County. If it has a value greater than 100 we'll say we're on solid footing; less than 100, look out below!

Here are the pieces of the EMI:

COMEX copper price
NYMEX oil price
Market volatility (VIX or "fear index")
Interest rate (benchmark 10-year Treasury Note)
Bellwether miner Freeport-McMoran (FCX)
Benchmark gold miner Barrick (ABX)
Benchmark moly producer Thompson Creek (TC)

"Hold your horses Colonel! This makes as much sense as a left-handed hammer; where's the price of gold and moly? Where's General Moly (GMO)? Where's US Gold (UXG)? Ely mines copper not Eureka! At least you included Barrick...what's up?"

OK, good questions - let me explain my choices. Let's start with miners. If we are looking for market direction, senior miners with a proven track record under market duress (FCX & ABX large cap seniors & TC small cap senior) are a better indicator than junior miners in pre-production, development or start-up phases (GMO & UXG). For example Freeport and Thompson Creek showed signs of weakness in early April while markets and metal prices climbed to the clouds. Copper prices hit a top on 4/12 (COMEX Cu $3.691/lb intraday) and the S&P 500 topped out on 4/26. FCX and TC trended down while GMO and UXG headed higher. Who saw the May commodity massacre coming...GMO & UXG or big'uns FCX & TC? Get my point.

"What about the price of gold?" Gold as we have seen in the past six months wears many hats: fellow traveler with commodities during rallies, safe haven during crisis, alternative to fiat currencies to hedge inflation fears. To build a mining index, I'd rather track Barrick whose share price rolls up gold price together with all the realities of mining (fuel and labor cost, government regulation etc.). The same argument applies for molybdenum - Thompson Creek reflects moly price as Barrick reflects gold but in the context of mining not spot and futures markets.

"OK but why then are we concerned about the cost of copper in Eureka?" Copper has been our brave canary in the global mineshaft since the beginning of this Report and has foreshadowed market declines with great clairvoyance. Remember copper hit its low in December 2008 long before the S&P 500 bottom in March 2009. As copper goes; so go the metals, so go the miners, so go the markets in my world. Oil is similar to copper because it is so key to the global growth story. This proves to be a two-edged sword because the price of oil is an input cost to miners but tumbling oil prices may presage a global slowdown.

If you buy my story, this is how we put it all together:

EMI = NORM x [(COMEX Cu)(FCX)(ABX)(TC)]/[(NYMEX Oil)(VIX)(10-yr T-Note)]

"Holy Cow, that's a whopper Colonel!"

Let me explain. "NORM" is not your neighbor but a normalization factor that brings the EMI to 100 points when we sit at the threshold of good or bad times (see note 1). All the other pieces are commodity or miner share prices together with fear and interest rates...what a doozie! If market fear, oil prices or interest rates go up; the EMI goes down. If the price of copper or the share price of FCX, ABX & TC go up; the EMI goes up. Hey that's not too hard to understand!

Here's what the EMI tells us lately:

4/12/10 EMI = 239.5 (COMEX copper high)
4/26/10 EMI = 198.0 (S&P 500 intraday high)
6/4/10 EMI = 57.9 (last Friday close)
6/7/10 EMI = 50.67 (yesterday's nose dive)

Remember: greater than 100 - yee-ha!...Less than 100 - yikes!

This Report will calculate a weekly EMI with our Monday morning molybdenum roundup. Stay tuned buckaroos.

Looks like we finally got that relief rally for miners today.

Enough talk, let's walk the walk:

4-WD is ON - rough roads in the marketplace; The VIX or "fear index" moves to the high-30s, way above our 25 level threshold; metals & miners remain on shaky timber with benchmark FCX falling to low $60s well below its 200-day average of $76 (our new warning level), 10-year Treasurys are safely below 4% preserving a low-interest rate environment

The YELLOW light is turned on for Commodity Reflation with copper trading below $3/lb

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

The ORANGE light remains on for Investor Confidence the possibility of a 20% correction in the broader markets

The GREEN light remains turned on our Fuel Gauge with oil below $80

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions &
General Moly Mt. Hope Water Rights

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

NYMEX/COMEX: Oil is up $0.24 in early trading to $71.68 (July contract, most active); Gold is up $4.0 to $1244.8 (August contract, most active); Silver is up $0.153 to $18.315 (July contract); Copper is down $0.0100 to $2.7560 (July contract)

Western Molybdenum Oxide is at $16.00; LME moly 3-month seller's contract down to $15.20, LME cash seller down to $14.97

The DOW is down 40.28 points to 9,776.21; the S&P 500 is down 6.62 to 1043.85. The miners are happy except for TC:

Barrick (ABX) $44.49 up 3.18%
Newmont (NEM) $57.06 up 3.34%
US Gold (UXG) $4.08 up 4.35%
General Moly (Eureka Moly, LLC) (GMO) $3.24 up 2.21%
Thompson Creek (TC) $8.15 down 2.40%
Freeport-McMoRan (FCX) $60.07 up 2.40% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $26.60 down 0.15% - global steel producer
POSCO (PKX) $90.53 up 1.07% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 1.74% to $1,284,619.82 (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: Here are the pieces to the normalization factor NORM:

Key levels/prices

VIX = 25
10-year Treasury Note = 4%
COMEX copper = $3/lb
NYMEX Oil = $80/bbl

and 200-day averages for benchmark miners:

FCX = $76
ABX = $39.6
TC = $12.4

then...

NORM = 100/([(COMEX Cu)(FCX)(ABX)(TC)]/[(NYMEX Oil)(VIX)(10-yr T-Note)])

Headline and series photographs by Mariana Titus

Copper Tumbles to 8-Month Lows

Morning Miners!

It is 5:29 AM. Keep the coffee pot going for me, I've got an early morning meeting. Here's a quick look at the markets before the ole Colonel heads out.

If there is just one thing I want to check lately it is spot copper prices. They held valiantly at the key $3/lb level as late as last Thursday then fell solidly into bear country Friday (4-month lows). This morning plumbs a new depth (8-month lows) although there is some movement off the bottom at $2.7861:



This is not a good sign for metals & miners although we may see a small relief rally for the sector later today. Here's a Reuters article that pretty well sums up the situation as the euro plummets further to $1.1955 on more euro-woes:

Copper hits eight month-low as eurozone fears mount
(Reuters, 6/7/2010)

Our molybdenum summary for last week shows some further weakness in European moly oxide notching down to $15.00/lb - nuts!

Western Moly Oxide (FeMo65) remains at $16.00/lb (the price reported by Infomine and tracked by Base Metals on the General Moly Website)

Moly Oxide, Europe (Mo Drummed Molydbic Oxide EU) falls to $15.00/lb (the price reported in the Metals Bulletin)

LME Futures Contracts

LME cash seller moves to $16.78

3-Month (Buyer) $35,500/metric ton $16.10/lb
3-Month (Seller) $37,500/metric ton $17.01/lb

15-Month (Buyer) $35,500/metric ton $16.10/lb
15-Month (Seller)$37,500/metric ton $17.01/lb

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



Enough talk, let's walk the walk:

4-WD is ON - rough roads in the marketplace; The VIX or "fear index" moves to the mid-30s, still above our 25 level threshold; metals & miners remain on shaky timber with benchmark FCX falling to low $60s well below its 200-day average of $75 (our new warning level), 10-year Treasurys are safely below 4% preserving a low-interest rate environment

The YELLOW light is turned on for Commodity Reflation with copper trading below $3/lb

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

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

The GREEN light remains turned on our Fuel Gauge with oil below $80

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions &
General Moly Mt. Hope Water Rights

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

NYMEX/COMEX: Oil is down $0.07 in early trading to $71.44 (July contract, most active); Gold is down $3.2 to $1214.5 (August contract, most active); Silver is up $0.0.81 to $17.380 (July contract); Copper is down $0.0420 to $2.7775 (July contract)

Western Molybdenum Oxide is at $16.00; LME moly 3-month seller's contract remains at $17.01, LME cash seller moves to $16.78

The DOW is up 22.52 points to 9,954.49; the S&P 500 is up 2,80 to 1067.68. The miners are down:

Barrick (ABX) $41.20 down 0.53%
Newmont (NEM) $53.34 down 0.70%
US Gold (UXG) $3.73 down 0.75%
General Moly (Eureka Moly, LLC) (GMO) $3.38 unchanged
Thompson Creek (TC) $8.87 unchanged
Freeport-McMoRan (FCX) $61.59 down 1.94% (a bellwether mining stock spanning copper, gols & molybdenum)

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

ArcelorMittal (MT) $27.03 down 1.71% - global steel producer
POSCO (PKX) $90.77 down 0.48% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.50% to $1,267,454.69 (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 and series photographs by Mariana Titus