North Korea Blinks - Metals & Miners Weekly Roundup

*** BREAKING NEWS *** Latest General Moly (GMO) Press Release:
GENERAL MOLY CLOSES FIRST $40 MILLION EQUITY TRANCHE WITH HANLONG
(2:16 PM PT)

Morning Miners!

It is 6:13 AM. Grab a cup of Monday Joe and let's see what's outside our window besides the weather...

North Korea Blinks

Tensions built over the weekend on the Korean Peninsula as South Korea went ahead with their planned artillery drill on Yeonpyeong Island. Diplomatic negotiations occurred at all levels including emergency meetings at the U.N. and an unofficial visit to Pyongyang by New Mexico Gov. Bill Richardson. Instead of carrying out the threats of new attacks, North Korea criticized South Korea but then said they didn't feel the need to retaliate.

The latest conflict drew the interest of this Report because of the potential impact it could have on South Korean steelmaker POSCO specifically and the Asian commodity story generally. POSCO is an investor in General Moly (GMO) and 20% owner of the Mt. Hope. The Colonel is bullish on the steelmakers for 2011 but an escalation in the Korean conflict could put a damper on this story. Stay tuned.

Metals & Miners Rally except for Thompson Creek

The broader markets are now open and it looks like the metals & miners are in rally mode except for moly producer Thompson Creek (TC). Thompson creek received a notice of judicial review of their recent acquisition of Terrane Metals Corp. The notice was posted by the Nak'azdli First Nation, here is a link to this breaking news:

Thompson Creek Metals

Let's see how Miss Moly fared last week...

Weekly Molybdenum Roundup



Spot prices of molybdenum oxide are now both above $16/lb in the West and Europe. Moly futures indicate a mild contango between spot prices and the London Metal Exchange (LME) and 15-month seller contract however a backwardation now exits between spot and the 3-month seller. The latter condition suggests near term demand may be increasing; the latter, stable future prices are expected. Contango occurs when the price of a commodity for future delivery is higher than the spot price, or a far future delivery price is higher than a nearer future delivery; backwardation is the opposite of contango. The 3-month seller at $15.88/lb is still above the Colonel's mid-range moly price target for 2010 of $15.71/lb.

Western Moly Oxide $16.00/lb (the price tracked by Base Metals on the General Moly Website)

Moly Oxide, Europe (Mo Drummed Molydbic Oxide EU) $16.30/lb (the price reported in the Metals Bulletin)

LME Futures Contracts

LME cash seller is at $34700/metric ton $15.74/lb

3-Month (Buyer) $33,000/metric ton $14.97/lb
3-Month (Seller) $35,000/metric ton $15.88/lb

15-Month (Buyer) $34,300/metric ton $15.56/lb
15-Month (Seller) $36,300/metric ton $16.47/lb

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



Eureka Miner's Index (EMI)

The Eureka Miner's Index (EMI) gives us the market temperature for the sectors that have the greatest impact on mining in Eureka County. Below is a chart of the EMI at Friday's close. The magenta line is the EMI with a low interest cap of 3% on 10-year Treasurys (LIRC) and adjustments for gold and silver prices (i.e., Au:Ag ratio). A 1-month moving average is given by the blue line. A larger and more readable chart appears near the bottom of this blog page.


The Eureka Miner's Index(EMI) is above-par at 705.78 up from Friday's 697.96. The 1-month moving average is 554.96. The 2010 record high for the EMI is 739.13 set 12/7/2010; the low was set 6/7/2010 at 50.7. An EMI greater than 100 signals better times for the metals & miners relevant to Eureka County, the EMI re-established an upward trend on Friday, 12/3.

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

Oil & Copper Correlations with Gold

Oil & copper correlations with gold give us insight into what may happen next for the metals & miners.

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

Oil/Au correlation +0.7717 (1-month) +0.8828 (3-month)
Cu/Au correlation +0.5897 (1-month) +0.8000 (3-month)
Cu/Oil correlation +0.9017 (1-month) +0.9113 (3-month)

Here are the numbers from the last Monday's roundup (12/13/2010):

Oil/Au correlation +0.8659 (1-month) +0.9220 (3-month)
Cu/Au correlation +0.7364 (1-month) +0.8884 (3-month)
Cu/Oil correlation +0.9227 (1-month) +0.9387 (3-month)

All these correlations remain high and positive which is a bullish condition for the metals & miners. The correlation of copper & gold is starting to weaken with copper showing a very over-valued state with respect to gold (greater than 5 standard deviations above the December model "fair vale" line). The 1-month and 3-month correlations of copper & oil remain above 0.9 suggesting copper will track rising oil prices.

Gold/Oil & Oil/Copper Ratios

The recent stability of the gold/oil and oil/copper ratios is interesting to monitor. This morning's gold/oil ratio is 15.6 suggesting $90/bbl oil should support $1400/oz gold; $100/bbl oil, $1560 gold. The oil/copper ratio is presently 21.1 suggesting $90/bbl oil should support $4.27/lb copper; $100/bbl oil, $4.74/lb copper.

Here are charts of both ratios showing a period of stability commencing in early September to the present:




For the past 3-months we have these statistics:

Au/Oil ratio

mean 16.26 bbl/oz
variation 2.56% (1-standard deviation/mean)

Oil/Copper ratio

mean 21.70 lbs/bbl
variation 1.86% (1-standard deviation/mean)

Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Outlook Dashboard

4-WD is OFF - Markets are stable; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) in the low-$100s above its 200-day average of $79.39 (our new warning level, 12/06 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

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

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

The YELLOW light is turned on for Inflation Watch as the Federal Reserve resumes buying Treasurys (aka QE2)

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

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

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

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is up $0.26 in early trading at $88.86 (February contract, most active); Gold is up $6.0 to $1385.2 (February contract, most active); Silver is up $0.087 to $29.220 (March contract, most active); Copper is up $0.0440 to $4.2030 (March contract, most active)

Western Molybdenum Oxide is $16.00; European Molybdenum Oxide is $16.30; LME moly 3-month seller's contract is $15.88, LME cash seller is $15.74

Stock Market Morning Update

The DOW is down 12.26 points to 11,504.17; the S&P 500 is up 2.43 to 1246.34. Miners are up except for Thompson Creek:

Barrick (ABX) $52.23 up 1.16%
Newmont (NEM) $59.90 up 0.84%
US Gold (UXG) $7.46 up 2.61%
General Moly (Eureka Moly, LLC) (GMO) $5.36 up 1.13%
Thompson Creek (TC) $13.47 down 0.82%
Freeport-McMoRan (FCX) $115.26 up 1.36% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $38.60 up 0.05% - global steel producer
POSCO (PKX) $102.77 down 0.08% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.87% to $1,845,050.92 (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

Uh-oh, Ho-ho or Ho-hum? Miss Moly Caroling

Morning Miners!

It is 6:04 AM. There's still some of Scott Raine's delicious Jingle Bell Java in the cupboard so I brewed a fresh pot. Pretty quiet in the ole break room, pour yourself a cup and let's see what's going on in the world...

Uh-oh, Ho-ho or Ho-hum?

Uh-oh, North Korea is threatening to attack South Korea if Seoul goes ahead with plans to test-fire artillery from Yeonpyeong Island. The broader markets are now open, I wonder what this news is doing to our favorite South Korean steelmaker and 20% owner of Mt. Hope? POSCO (PKX) opens the morning at $102.90. The ole Colonel bought some at $102.89 on Wednesday (Buy POSCO?) - I guess I'm up 1 cent, that doesn't seem too scary.

Hmm, here's a bad story in the Wall Street Journal:

LONDON—Moody's Investors Service Inc. downgraded Ireland's debt to Baa1 from Aa2 Friday, warning the government's financial strength could deteriorate further if economic growth were to miss its projections. (WSJ, 12/17/2010)

Let's see if copper is getting whacked on this news. COMEX copper is up $0.031 to $4.147/lb, that's a relief. Here's what the indefatigable metal reporter Maria Kolesnikova has to say from her Bloomberg perch in Moscow:

Copper Gains on EU Debt Accord, Rise in German Business-Confidence Gauge (Maria Kolesnikova, Bloomberg, Dec 17, 2010 5:34 AM PT)

Gee, things are rosier in Europe after all (maybe). Oh, what about $90/bbl oil stirring about with the Christmas mouse? Here's another tidbit from the Wall Street Journal:

NEW YORK—Oil prices crept lower in thin trading, as market participants sold positions ahead of the year-end holiday season. (WSJ, 12/17/2010)

Nuts, there's nothing to get all tied up in knots about! Even Miss Moly is caroling, European Moly Oxide popped 15 cents yesterday to $16.30/lb. Let's close the shop early buckaroos - where's that Friday Christmas party?

Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Miner's Index(EMI)

The Eureka Miner's Index(EMI) is above-par at 614.62 getting a nice bounce up from yesterday's 555.15. The 1-month moving average is 552.39. The 2010 record high for the EMI is 739.13 set 12/7/2010; the low was set 6/7/2010 at 50.7. An EMI greater than 100 signals better times for the metals & miners relevant to Eureka County, the EMI re-established an upward trend on Friday, 12/3.

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

Eureka Outlook Dashboard

4-WD is OFF - Markets are stable; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) in the low-$100s above its 200-day average of $79.39 (our new warning level, 12/06 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

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

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

The YELLOW light is turned on for Inflation Watch as the Federal Reserve resumes buying Treasurys (aka QE2)

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

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

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

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is up $0.08 in early trading at $88.48 (February contract, most active); Gold is up $1.7 to $1372.7 (February contract, most active); Silver is up $0.173 to $28.995 (March contract, most active); Copper is up $0.0310 to $4.1470 (March contract, most active)

Western Molybdenum Oxide is $16.00; European Molybdenum Oxide is $16.30; LME moly 3-month seller's contract is $15.88, LME cash seller is $15.74

Stock Market Morning Update

The DOW is down 33.68 points to 11,465.57; the S&P 500 is down 2.02 to 1240.85. Miners are mixed and headed for the Christmas party:

Barrick (ABX) $51.071 down 1.08%
Newmont (NEM) $59.40 down 0.83%
US Gold (UXG) $7.19 up 0.56%
General Moly (Eureka Moly, LLC) (GMO) $5.44 down 0.91%
Thompson Creek (TC) $13.43 down 0.89%
Freeport-McMoRan (FCX) $112.81 up 1.23% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $38.26 up 1.27% - global steel producer
POSCO (PKX) $102.78 down 0.13% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.19% to $1,822,923.47 (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

Pearl Harbor High for EMI? - Metals & Miners Weaken

Þūnresdæg
Morning Miners!

It is 6:07 AM. Grab a cup and let's help our favorite Norseman Thor load up some thunderbolts in the truck. I got Old Miner Woden into senior housing yesterday with a promise to keep Thor out. When those two day-makers get together all hell usually breaks loose. I'm packing Thor over to Newark Valley today so he can practice chucking a few bolts for our weekend storm...far far away from all that nice solitude up the street.

Copper Weakens on Inventory Builds & China Tightening

This Report pays a lot of attention to copper even though our nearest copper mine is in Ely. Copper has been a very reliable canary in the global recovery mineshaft so any change in flight path is important to watch. For months we have witnessed copper inventories drop at the London Metal Exchange (LME). There has been much discussion recently that this is evidence for the tightening global supply of the red metal. The downward trend may be reversing with a small increase in inventory over the past several days:



Bloomberg carries an article this morning on the recent weakness in copper price:

Copper Declines on Increase in Stockpiles, Concerns Over China Tightening (Maria Kolesnikova, Bloomberg News - Dec 16, 2010 5:24 AM PT)

Ms. Kolesnikova points to the build in stockpiles and speculation that China may raise interest rates again to control inflation as important headwinds to further increases in copper price.

The U.S. dollar has been making a nice comeback against the euro and yen currencies with troubles brewing over Spain as the next domino in the European sovereign debt debacle and a less bleak domestic forecast for 2011. A stronger dollar has resulted in generally weaker commodity prices as this week draws to a close. With this backdrop, it's reasonable to wonder if we've reached the highs for 2010 for the metals & miners...let's ask the EMI.

Pearl Harbor high for the Eureka Miner's Index(EMI)?

The Eureka Miner's Index (EMI) gives us the market temperature for the sectors that have the greatest impact on mining in Eureka County. On Pearl Harbor Day, we saw new records for gold, silver & copper and the EMI pegged a new high of 739.1. This is impressively up from our 2010 low of 50.7 set June 7th. Copper went on to set another new high this Tuesday at $4.229/lb but has been in retreat along with gold and silver yesterday and this morning. Our favorite miners have also fallen off their recent highs, many of them new 52-week highs set by copper giant Freeport-McMoRan (FCX) and gold benchmark miner Barrick Gold (ABX).

This morning the EMI is in its third day of decline and has nearly reached its 1-month moving average (555.2 versus 545.8). If the EMI falls below this key level, we may see a reversal down for the metals & miners for the remainder of the year. It is expected that tomorrow may be the last high-volume day for the broader markets for 2010. I'm betting on a little bounce buckaroos. In any case, we've ended up pretty good for the year!

Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Miner's Index(EMI)

The Eureka Miner's Index(EMI) is above-par at 555.15, down from yesterday's 623.34. The 1-month moving average is 545.83. The 2010 record high for the EMI is 739.13 set 12/7/2010; the low was set 6/7/2010 at 50.7. An EMI greater than 100 signals better times for the metals & miners relevant to Eureka County, the EMI re-established an upward trend on Friday, 12/3.

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

Eureka Outlook Dashboard

4-WD is OFF - Markets are stable; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) in the low-$100s above its 200-day average of $79.39 (our new warning level, 12/06 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

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

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

The YELLOW light is turned on for Inflation Watch as the Federal Reserve resumes buying Treasurys (aka QE2)

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

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

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

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is down $0.04 in early trading at $88.58 (January contract, most active); Gold is down $11.3 to $1374.9 (February contract, most active); Silver is down $0.258 to $28.995 (March contract, most active); Copper is down $0.0150 to $4.1175 (March contract, most active)

Western Molybdenum Oxide is $16.00; European Molybdenum Oxide is $16.15; LME moly 3-month seller's contract is $15.88, LME cash seller is $15.74

Stock Market Morning Update

The DOW is down 21.79 points to 11435.68; the S&P 500 is down 0.10 to 1235.13. Miners are down:

Barrick (ABX) $51.81 down 1.37%
Newmont (NEM) $59.69 down 1.00%
US Gold (UXG) $7.04 down 1.95%
General Moly (Eureka Moly, LLC) (GMO) $5.35 down 0.93%
Thompson Creek (TC) $13.31 down 0.52%
Freeport-McMoRan (FCX) $110.84 down 0.19% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $37.14 up 0.38% - global steel producer
POSCO (PKX) $101.37 down 0.88% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.70% to $1,809,322.15 (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

Buy POSCO (PKX)? Miss Moly Gets Some Giddy-Up

Wōdnesdæg
Morning Miners!

It is 5:54 AM. Have a cup of holiday hump day java. Poor Old Miner Woden is looking a little unloved today. Ruby dropped him off at midnight so he could fire up Wednesday. That went OK but he's not looking forward to setting camp back up in the Colonel's hi-bay. I can't wait to tell him that he has been accepted into senior housing for the winter! Speaking of the unloved, what's up with POSCO?

Buy POSCO?

As the broader markets set new highs for the holidays, it is sad that the steelmakers missed the Christmas party. This Report follows steel giant ArcelorMittal (MT) and South Korean steelmaker POSCO (PKX) on a daily basis. They both have an investment interest in General Moly (GMO) and POSCO is a 20% owner of the Mt. Hope molybdenum project. Molybdenum is a key alloy in the hi-grade steels produced by both. Early in 2010, the steels had fire in their furnaces setting highs for the year in January. Here is a comparison of those highs and yesterday's closing price:

ArcelorMittal (MT) 52-wk high high $49.41 (1/8/2010)
Yesterday's close $37.07, down 25.0%

POSCO (PKX) 52-wk high high $140.34 (1/11/2010)
Yesterday's close $104.54, down 25.5%

Ouch! The European sovereign debt crisis soon cooled their January metal and the steels followed the miners down the shaft in May-June. Neither ArcelorMittal nor POSCO has fully recovered even though global growth seems to be back on track for 2011 with healthy prospects for the emerging world and at least slow positive recovery for the big western economies.

Yesterday, on CNBC Business News, "Commodity King" Dennis Gartman was bullish on steel for 2011 calling it the most "basic commodity" of global growth. He often reminds us that it is good to invest in things that hurt when you drop them on your foot.

The markets are now open and there are new jitters about Spain with Moody’s Investors Service expressing concern that it could follow Greece and Ireland in seeking a bailout. Predictably the metals & miners are taking a hit. POSCO is down another 1.5% but somewhat surprisingly ArcelorMittal is up 0.5%.

We can fret about Europe but in all honesty AreceloMittal has a very large global footprint and POSCO sells primarily to Asia. We can worry about building tensions on the Korean peninsula or remember that when others fear it may be a good time to invest. Warren Buffet has a major stake in POSCO and I haven't heard that he's headed for the lifeboats yet. Heck, I ain't scared either - the ole Colonel just threw a few ingots of POSCO into the buckboard at $102.89, the 200-day average price is $107.31.

For the folks that like charts, here is ArcelorMittal and POSCO share price for the past year. The green line is the 200-day average price:




This is the 1-year price comparison for both steelmakers:


Miss Moly Gets Some Giddy-Up

Often derided for its price volatility, molybdenum has been one of the steadiest metals for 2010 staying in a range of roughly $30,000 to $40,000 per metric ton for most of the year ($13.61/lb to $18.14/lb). By comparison, copper prices have had about 50% more variability than moly oxide over the same period (see note 1).

Spot prices in the West and Europe just nudged up a bit breaking a mild contango with the London Metal Exchange (LME) 3-month seller contract. The 15-month contract remains higher than the spot prices and 3-month seller.

All this mumbo-jumbo suggests near term demand is increasing and long term price stability is expected - not a bad state of affairs for Miss Moly. Here is a comparison with yesterday's and last weeks spot and futures prices:

Moly Oxide Spot Prices

Western $16.00/lb (was $15.75/lb) up 1.6%
European $16.15/lb (was $16.05/lb) up 0.6%

LME Futures

3-month seller $15.88/lb (unchanged)
15-month seller $16.46/lb (was $16.75/lb) down 1.7%

The Colonel's 2010 mid-range price target for the LME 3-month contract is $15.71/lb.

Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Miner's Index(EMI)

The Eureka Miner's Index(EMI) is above-par at 623.34, down from yesterday's 681.57. The 1-month moving average is 539.61. The 2010 record high for the EMI is 739.13 set 12/7/2010; the low was set 6/7/2010 at 50.7. An EMI greater than 100 signals better times for the metals & miners relevant to Eureka County, the EMI re-established an upward trend on Friday, 12/3.

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

Eureka Outlook Dashboard

4-WD is OFF - Markets remain in Christmas rally mode; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) in the low-$100s above its 200-day average of $79.39 (our new warning level, 12/06 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

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

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

The YELLOW light is turned on for Inflation Watch as the Federal Reserve resumes buying Treasurys (aka QE2)

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

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

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

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is down $0.99 in early trading at $87.29 (January contract, most active); Gold is down $15.3 to $1389.0 (February contract, most active); Silver is down $0.658 to $29.130 (March contract, most active); Copper is down $0.0585 to $4.1505 (March contract, most active)

Western Molybdenum Oxide is $16.00; European Molybdenum Oxide is $16.15; LME moly 3-month seller's contract is $15.88, LME cash seller is $15.65

Stock Market Morning Update

The DOW is up 16.05 points to 11492.59; the S&P 500 is down 0.28 to 1241.30. Miners are down:

Barrick (ABX) $53.07 down 0.15%
Newmont (NEM) $61.33 down 0.66%
US Gold (UXG) $7.28 down 0.27%
General Moly (Eureka Moly, LLC) (GMO) $5.35 down 0.74%
Thompson Creek (TC) $13.51 down 0.59%
Freeport-McMoRan (FCX) $113.63 down 1.04% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $37.25 up 0.49% - global steel producer
POSCO (PKX) $102.98 up 1.49% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.39% to $1,836,692.08 (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: There is a quick back-of-the-envelope way to compare copper and moly price variability for 2010. The mid-range moly oxide price is one-half the trading range of $30,000 to $40,000/tonne or $35,000/tonne. Copper has been in range of roughly $2.75/lb to $4.25/lb over the same period with a mid-range of $3.50/lb. Comparing their mid-range to range limit difference we have:

copper/moly oxide = ($0.75/$3.50)/($5,000/$35,000) = 1.5 or 50%

Headline photograph by Mariana Titus

General Moly (GMO) Water Right Application Update

*** BREAKING NEWS *** COMEX Copper set a new record of $4.2290/lb this morning at 05:30:00 ET


Morning Miners!

It is 6:01 AM. Have a mug of Sweet Ruby T's favorite joe, "the best part of waking up is Folgers in your cup!" Last week she rolled in with a lo-boy trailer full of new records for gold, silver and copper. Today it appears Santa Claus is taking a little profit in all three. London spot and COMEX gold both brushed $1408/oz in the early hours and then fell back to earth below the $1400 level. Silver and copper have lost some shine too [note copper actually reached a new high earlier in the morning, see above]. Might be a good day to clean the shop and do a little catch-up...



General Moly Water Right Application Update

The General Moly water right application hearing wrapped up last week. As you may recall the State Engineer set December 6 as the date for protests to the Company's water right applications to be heard. General Moly spent Monday and Tuesday giving their testimony, there was a break Wednesday and the opposing parties gave theirs Thursday and Friday. Following the hearing, the State Engineer will issue a ruling with respect to these applications. Yesterday, Mt. Hope General Manager Tim Arnold gave this wrap up to the Report:

"We feel that the hearing went very well and we remain confident that we will once again receive our water right applications. From a timing standpoint, we don't anticipate hearing anything for a few months as the State Engineer's office will likely take some time to write up its decision."

A trusted non-company source provided this opinion:

"...they [General Moly] have presented a water monitoring model that the county is much happier with. The County fully expects the mine’s water rights to stay intact and at this point, are trying to gain insurance that the County will have the ability to engage GM in mitigation if impacts emerge in Diamond Valley. I know that the Commissioner’s biggest issue was the mine’s water model and it sounds like they are much more comfortable with what has been proposed."

This Report respects all parties involved and the application process. We will continue to monitor the hearing outcome as new developments occur.

Where do the Markets Go From Here?


The other day Gary Kaminsky of CNBC Business News "The Strategy Session" commented that this Friday (12/17) will wrap up the year for most of the big players in the marketplace. His point was that it is much more difficult to buy and sell large orders as the market volumes thin out near the Christmas and New Years holidays.

Last March, the ole Colonel predicted that the S&P 500 would break 1,251 before Christmas (Still Fearless in 2010? The Colonel's Market Prediction, 3/19/2010). Yesterday, the S&P 500 made it to a new high for the year of 1,246.73 and closed at 1,240.46. If Gary Kaminsky is right, we may only have this week to make my bet good. the broader markets are now open and the S&P is trading at 1,242.00...just 9 points to go. Will the Christmas rally put coal or candy in my stocking?

The S&P 500 moving above the 1,250 level has some significance. Before the so-called "Great Recession", the S&P 500 closing high was set 10/9/2007 at a lofty 1,565.15. Technically we entered a bear market when the index fell 20% from this peak or 1,252. That occurred in September 2008 as the collapse of Lehman Brothers accelerated the financial crisis. The market bottom followed on March 6, 2009 for an intraday low of 666.79. We've come a long way from the bottom of that canyon buckaroos.

The key question is whether we are now at the gate of the bull pasture or headed back to bear country as this year unwinds and 2011 begins. If we can sustain the S&P 500 above 1,252 for any decent period of time, I'd say we have a shot at all that green grass on the other side of the fence. If not? Stay tuned.

Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Miner's Index(EMI)

The Eureka Miner's Index(EMI) is above-par at 681.57, down from yesterday's 723.32. The 1-month moving average is 529.44. The 2010 record high for the EMI is 739.13 set 12/7/2010; the low was set 6/7/2010 at 50.7. An EMI greater than 100 signals better times for the metals & miners relevant to Eureka County, the EMI re-established an upward trend on Friday, 12/3.

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

Eureka Outlook Dashboard

4-WD is OFF - Markets remain in Christmas rally mode; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) in the low-$100s above its 200-day average of $79.39 (our new warning level, 12/06 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

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

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

The YELLOW light is turned on for Inflation Watch as the Federal Reserve resumes buying Treasurys (aka QE2)

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

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

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

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is down $0.51 in early trading at $88.10 (January contract, most active); Gold is down $2.2 to $1395.8 (February contract, most active); Silver is down $0.254 to $29.370 (March contract, most active); Copper is down $0.0130 to $4.1940 (March contract, most active)

Western Molybdenum Oxide is $15.75; European Molybdenum Oxide is $16.05; LME moly 3-month seller's contract is $15.88, LME cash seller is $15.74

Stock Market Morning Update

The DOW is up 22.74 points to 11451.30; the S&P 500 is up 1.54 to 1242.00. Miners are down:

Barrick (ABX) $53.58 down 0.56%
Newmont (NEM) $61.44 down 0.70%
US Gold (UXG) $7.34 down 1.08%
General Moly (Eureka Moly, LLC) (GMO) $5.43 down 0.37%
Thompson Creek (TC) $13.85 down 1.00%
Freeport-McMoRan (FCX) $115.01 down 0.45% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $36.88 down 1.18% - global steel producer
POSCO (PKX) $104.50 down 0.55% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.53% to $1,846,725.45 (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

Copper New High, Silver Pops - Metals & Miners Weekly Roundup

Morning Miners!

It is 6:09 AM. Have a hot cup of Monday ether and let's see if we can start your diesel. Copper and silver are running hard already, let's get to work...

Copper posts a new high, Silver pops

Spot copper (below) got a boost to new highs on strong economic data from China and a decision not to raise interest rates yet to blunt their rising inflation:

Copper hits record high on China data (Reuters, 12/13/2010)



After being in the doldrums lately, COMEX Silver got a nice pop to a morning high of $29.740/oz but short of its recent record of $30.75/oz.

For the record keepers, COMEX copper has posted a new high besting $4.154/lb set 12/9 with $4.2065/lb in the early hours. Here's where we stand for the big three:

COMEX Gold $1432.5/oz 08:25:00 ET 12/7/2010, February contract most active
COMEX Silver $30.75/oz 08:25:00 ET 12/7/2010, March contract most active
COMEX Copper $4.2065/lb 08:30:00 ET 12/13/2010, March contract most active

This is the Colonel's bet on copper price to close out the year:

COMEX copper will break $4.25/lb before New Year's Eve

You can review this and my other bets in The Colonel's Beer Derby at the bottom of the column to the right of this blog.

Weekly Molybdenum Roundup



Moly futures weakened some last week but there is still a mild contango between western moly oxide spot prices and the London Metal Exchange (LME) 3-month and 15-month seller contracts. Contango occurs when the price of a commodity for future delivery is higher than the spot price, or a far future delivery price is higher than a nearer future delivery. The 3-month seller at $15.88/lb is still above the Colonel's mid-range moly price target for 2010 of $15.71/lb.

Western Moly Oxide $15.75/lb (the price tracked by Base Metals on the General Moly Website)

Moly Oxide, Europe (Mo Drummed Molydbic Oxide EU) $16.05/lb (the price reported in the Metals Bulletin)

LME Futures Contracts

LME cash seller is at $34500/metric ton $15.65/lb

3-Month (Buyer) $33,000/metric ton $14.97/lb
3-Month (Seller) $35,000/metric ton $15.88/lb

15-Month (Buyer) $35,000/metric ton $15.88/lb
15-Month (Seller) $37,000/metric ton $16.75/lb

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



Eureka Miner's Index (EMI)

The Eureka Miner's Index (EMI) gives us the market temperature for the sectors that have the greatest impact on mining in Eureka County. Below is a chart of the EMI at Friday's close. The magenta line is the EMI with a low interest cap of 3% on 10-year Treasurys (LIRC) and adjustments for gold and silver prices (i.e., Au:Ag ratio). A 1-month moving average is given by the blue line. A larger and more readable chart appears near the bottom of this blog page.


The Eureka Miner's Index(EMI) is above-par at 723.32, a good move up from Friday's 650.78. The 1-month moving average is 529.92. The 2010 record high for the EMI is 739.13 set 12/7/2010; the low was set 6/7/2010 at 50.7. An EMI greater than 100 signals better times for the metals & miners relevant to Eureka County, the EMI re-established an upward trend on Friday, 12/3.

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

Oil & Copper Correlations with Gold

Oil & copper correlations with gold give us insight into what may happen next for the metals & miners.

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

Oil/Au correlation +0.8659 (1-month) +0.9220 (3-month)
Cu/Au correlation +0.7364 (1-month) +0.8884 (3-month)
Cu/Oil correlation +0.9227 (1-month) +0.9387 (3-month)

Here are the numbers from the last Monday's roundup (12/06/2010):

Oil/Au correlation +0.8843 (1-month) +0.9137 (3-month)
Cu/Au correlation +0.8249 (1-month) +0.9394 (3-month)
Cu/Oil correlation +0.9021 (1-month) +0.9307 (3-month)

All these correlations remain very high and positive which is a bullish condition for the metals & miners. The 1-month and 3-month correlations of copper & oil are quite amazing resting solidly above 0.9 for some time. Expect higher copper and oil prices.

Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Outlook Dashboard

4-WD is OFF - Markets are in Christmas rally mode; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) in the low-$100s above its 200-day average of $79.39 (our new warning level, 12/06 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

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

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

The YELLOW light is turned on for Inflation Watch as the Federal Reserve resumes buying Treasurys (aka QE2)

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

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

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

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is up $1.34 in early trading at $89.13 (January contract, most active); Gold is up $11.6 to $1396.5 (February contract, most active); Silver is up $0.935 to $29.540 (March contract, most active); Copper is up $0.0855 to $4.1975 (March contract, most active)

Western Molybdenum Oxide is $15.75; European Molybdenum Oxide is $16.05; LME moly 3-month seller's contract is $15.88, LME cash seller is $15.65

Stock Market Morning Update

The DOW is up 22.10 points to 11432.42; the S&P 500 is up 3.73 to 1244.13. Miners are happy campers:

Barrick (ABX) $53.92 up 1.16%
Newmont (NEM) $62.13 up 1.16%
US Gold (UXG) $7.64 up 1.73%
General Moly (Eureka Moly, LLC) (GMO) $5.54 up 0.73%
Thompson Creek (TC) $14.08 up 2.32%
Freeport-McMoRan (FCX) $115.39 up 2.23% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $37.28 up 3.18% - global steel producer
POSCO (PKX) $104.23 up 1.89% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 1.65% to $1,868,463.81 (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's Gold & Silver Predictions for 2011

Morning Miners!

It is 6:14 AM. Scott Raine brought us over some of his special blend Jingle Bell Java for the holidays. My ears are already ringing - have a cup and let's see what the precious metal Ouija board has to say for 2011.

The Colonel's Gold & Silver Predictions for 2011

As I've said many times in this Report, predicting commodity prices is a fool's errand but the ole Colonel is a happy fool. There are few things I enjoy more than betting on gold & silver prices for a new year. We've spent a good part of this week scratching our heads on the recent trends of oil, gold, silver and copper. On Wednesday I said in the monthly Oil & Metals Outlook, "In my view, $1500+ gold is a slam dunk for 2011" and "I bet we will see $100+ oil some time in 2011."

Let's close the week drilling just a little deeper on these claims. Yesterday I mentioned that Barrick Gold CEO Aaron Regent said earlier this year that the price of gold was not too high when compared to oil. As I recall, he used a historical gold/oil ratio of around 17 to illustrate his point. We checked the last three months of NYMEX/COMEX price data and came up with a number very close to his, if anything gold appeared slightly undervalued with respect to oil.

There is a growing consensus in the oil & gas community that we will see $100+/bbl next year. On CNBC Business News yesterday, I heard one expert say he thought it may happen as soon as the first quarter; another said before mid-year. The logic behind this prediction is increasing demand from the emerging economies even if the U.S. and Europe are stuck in low gear coupled with the increasing likelihood of a geo-political scare from any number of hot spots (e.g. Iran, Korea). If you believe this story, the Barrick number gives you $1700/oz gold. This makes some sense because oil and gold prices tend to rise together during scary times.

This isn't always true, we saw oil prices decline and gold prices increase during the European sovereign debt crisis earlier this year. Even though this crisis has re-emerged as a concern for 2011, the global growth story appears to be back on track so I'll bet oil and gold run together for the most part. Yesterday we looked at the past three months and calculated the oil/gold ratio to be 16.44 with less than 3% variation. Assuming this continues into 2011 we can develop a mean gold price and range given $100/bbl oil (see note 1):

The mean gold price is $1644/oz (100x16.44) in a range of $1560/oz to $1728/oz

Alternatively, my December oil/gold model for the same period of data gives us $1570/oz gold for $100/bbl oil. This number lies just above the low range and Aaron Regent's ratio gives us a price a tad below the high range. Comme Ci, Comme Ça.

If we use my $1570/oz, the Colonel's silver/gold model predicts the following for silver price given $100/bbl oil:

The fair price of COMEX silver is $35.978/oz in a range of $35.978/oz to $38.004/oz

That's enough number crunching for me to place bets that the following price events will occur prior to the Fourth of July 2011:

NYMEX light crude will break $100/bbl

COMEX gold will break $1570/oz

COMEX silver will break $36/oz

Now, that wasn't so hard was it? Stay tuned buckaroos.

You can review this and my other bets in The Colonel's Beer Derby at the bottom of the column to the right of this blog.

Daily Market Roundup

Enough prognostication, let's walk the walk:

Eureka Miner's Index (EMI)

The Eureka Miner's Index(EMI) is above-par at 650.78, up slightly from yesterday's 639.79. The 1-month moving average is 527.72. The 2010 record high for the EMI is 739.13 set 12/7/2010; the low was set 6/7/2010 at 50.7. An EMI greater than 100 signals better times for the metals & miners relevant to Eureka County, the EMI reversed its downward trend last Friday.

Eureka Outlook Dashboard

4-WD is OFF - Stable conditions in the marketplace; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) is in the low-$100s above its 200-day average of $79.39 (our new warning level, 12/06 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment.

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

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

The YELLOW light is turned on for Inflation Watch as the Federal Reserve resumes buying Treasurys (aka QE2)

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

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

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

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

Commodity Market Morning Update

NYMEX/COMEX: Oil is up $0.02 in early trading at $88.39 (January contract, most active); Gold is down $12.0 to $1380.8 (February contract, most active); Silver is down $0.352 to $28.465 (March contract, most active); Copper is up $0.0325 to $4.1195 (March contract, most active)

Western Molybdenum Oxide is $15.75; European Molybdenum Oxide is $16.05; LME moly 3-month seller's contract is $15.87, LME cash seller is $15.64

Stock Market Morning Update

The DOW is up 15.51 points to 11385.57; the S&P 500 is up 2.55 to 1235.55. Miners are mixed:

Barrick (ABX) $53.35 down 0.06%
Newmont (NEM) $59.99 down 0.45%
US Gold (UXG) $7.47 down 1.19%
General Moly (Eureka Moly, LLC) (GMO) $5.56 up 1.00%
Thompson Creek (TC) $13.36 up 0.23%
Freeport-McMoRan (FCX) $111.62 up 0.87% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $35.88 up 0.63% - global steel producer
POSCO (PKX) $102.27 down 0.89% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.38% to $1,830,478.49 (what's this?).

Cheers,

Colonel Possum

Note 1: The standard deviation of the oil/gold ratio over this period is 0.42 bbl/oz or roughly 2.6% of the mean at 16.44 bbl/oz. The gold price range was computed using two-standard deviations from the mean oil/gold ratio.

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