The Drought Down Under

Morning Miners!

It is 5:52 AM and the ole Colonel just watched a pink sky over the Diamond Valley turn to gray. If we were sailors, we'd be taking warning and that's the theme of this blog for what may lay in store for the future of Eureka County's water supply. I am not an alarmist but it is often helpful to look ahead, anticipate the worst and be happy when things turn out better than expected. By now, you may have had a chance to look at the Nevada Drought Monitor link in the Local Weather & Climate section to your right below the sky picture. This information is supplied by the Western Regional Climate Center with updates every week. Presently most of the County is "abnormally dry" or drought level zero (D0). Our southern border with Nye County is "drought-moderate" or level D1 and a bit further south, Nye is experiencing "drought-severe" or D2. The scale goes up to D4 which is time to trade your horse for a camel and watch for happy buzzards.

The Colonel has been anxious to do this piece but a ton of market news got in the way earlier this week: soaring stock prices, $70 oil and gold rapidly approaching the mythical $1000 mark. I think that is typical of most water supply discussions, there is always something else to talk about until it is too late. Ironically, climate change induced water shortages may someday become a much larger impediment to global recovery than the price of oil.

As I said yesterday, local folks are quite familiar with the impact of water on their livelihoods and it seems that good planning is already underway. There is a second water tank under construction for the township and discussions on water were at the forefront during a recent Natural Resources Advisory Commission Meeting I attended. It might be helpful to look at a region of the world that is already experiencing extreme drought.


Many rural areas of Southern Australia are similar to Northern Nevada; they have ranchers, farmers and miners. Unfortunately, they are experiencing the worst drought in over a century. Let's set the stage for further comparison. Australia has states like we do in the U.S. and there are three big ones in its southeast corner: New South Wales (NSW), South Australia to the west and Queensland to the north. I like to think of the more populous NSW as California; and South Australia, as Nevada. Together they share with Queensland a vast water resource called the Murray-Darling Basin. The Murray and and its tributary, the Darling, are large rivers that flow north to south and reach the Southern Ocean in South Australia near the state capital of Adelaide.

Although California/Nevada have a different topography, one thing is as true in Australia as in the States: when there is a water shortage guess who gets the shaft (or perhaps more appropriately, the mineshaft)? The more populous Queensland and NSW comprise four-fifths of the Murray-Darling water resource. Farmers, especially cotton and rice growers in those upstream states account for 83% of the basin's consumed water. You can imagine why it could be approaching "lock n' load" time near the more rural areas at the drying mouth of the river. Government officials just warned Adelaide that there might not be enough water for over one million people to meet "critical human needs". Can you imagine getting that news flash from Carson City?

In fairness, our Humboldt River Basin doesn't directly compare with the Murray-Darling system. However, the High Sierras do their share of grabbing water for the Golden State and there is always that straw that keeps coming our way from a very thirsty Las Vegas. The Humboldt River Basin River Water Authority reports that in 20 years, the population it does serves has more than doubled with further stresses from industrial and mining use. Even with these differences in comparison, it is not unreasonable to assume that an extended drought in the West may very well result in conditions now found in South Australia.

So what are folks doing down under? Here's the good news; the farmers in Adelaide are not stringing up their upstream neighbors, instead they are working together. In the face of crisis it seems innovation and cooperation are saving the day until the drought-breaking rains come. The growers at Langhorne Creek near the mouth of the now salty Murray have formed a company to build a pipeline to secure water from a cleaner (less saline) point on the Murray further east. Australia has devised an interstate water-trading scheme to allow South Australia to buy water from distant farmers in NSW. They have in turn switched to less thirsty crops and keep the difference in store for Adelaide. The wine growers in Adelaide have also discovered new drought resistance vines that still produce quality wine. How's that for turning water to wine buckaroos! There may be lessons here for our county and Nevada my friend although I don't expect too many wine growers in Diamond Valley.

I'll close with another possible turn of events for Australia. There have been recent torrential rains which have brought havoc but also water to this dry land. Eric sent me this picture of submerged haul trucks in an Aussie open pit mine.



Enough dancing in the rain, let's walk the walk:

Oil is down $1.48 to $67.07 (July contract); Gold is down $5.5 to $978.9 (August contract); Silver is down $0.145 at $15.810 (July contract); Copper is down 0.040 to $2.22565(July contract); Molybdenum holds at $10.25.

The DOW is down 84.43 points to 8656.44; the S&P 500, down 13.57 points to 931.17. The miners are down today:

Barrick (ABX) $37.07 down 2.16%
Newmont (NEM) $47.62 down 1.65%
General Moly (Eureka Moly, LLC) (GMO) $2.54 down 5.22%
Freeport McMoran (FCX) $54.95 down 3.39% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are also down (a "tell" for General Moly):

Nucor (NUE) $45.22 down 4.56% - domestic steel manufacturing
ArcelorMittal (MT) $34.13 down 6.13% - global steel producer
POSCO (PKX) $83.40 down 3.01%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is down 3.13%.

Cheers,

Colonel Possum

Information for this article was derived from the article "In Need of a Miracle", The Economist, 5/9/2009.