Jacob Redmond
Well-Known Member
A downturn in the resources industry has prompted a growing number of struggling Australian miners to switch their focus to the booming medicinal marijuana market in an effort to stimulate investor interest.
At least three resources companies are aiming to raise money on the Australian Securities Exchange in the coming weeks, swapping mechanical diggers for hemp grow houses.
The moves follow the flotation of Phytotech Medical, a Perth-based company which raised A$4m in January to become Australia's first listed marijuana stock.
"The resources sector generally, but in particular at the micro-cap end, is finding it difficult to find support from the capital markets," said Peter Tasker, director of International Goldfields.
"Therefore boards need to assess assets, projects and investments capable of garnering support of the capital markets, which is exactly what we did," he said.
International Goldfields, a gold explorer, has outlined plans to buy an 85 per cent stake in Winter Garden, an Uruguay-based company that develops cannabis products to sell overseas. It is seeking to raise up to $4m from investors.
Capital Mining and Erin Resources are two other mining companies aiming to capitalise on a "pot boom", which has seen sales of cannabis for medicinal and recreational purposes in US states where use has been legalised grew 75 per cent year-on-year to hit $2.7bn in 2014.
Other countries, including Australia, are considering the legalisation of medicinal marijuana use, a trend that is fuelling investor interest in the US and elsewhere.
"Australia is a more vigorous investment market for medicinal cannabis companies than other counties such as the US, which have already experienced multiple listings in the sector," said Michael Sautman, Capital Mining chief executive.
Capital Mining, which was founded as a minerals exploration company, aims to raise US$15m to acquire medicinal marijuana companies based in Canada, the US and Australia. It wants to become a commercial grower of marijuana in Tasmania and extract cannabidiol, a non-psychoactive compound, for treatments that provide relief from convulsions, inflammation, anxiety and nausea.
"Australia is a new market and there is a big push to introduce regulatory reform," said Mr Sautman, who has worked in the marijuana industry in Canada, the Netherlands and the US.
The Australian state of Victoria is planning to put a bill to parliament to legalise medicinal marijuana use by the end of 2015, while other states and the federal government may follow as public interest in marijuana-based treatments increase.
But most companies are attracted to Australia by investors' appetite for high risk ventures and the ASX's attractive listing requirements, rather than a desire to sell products in the country.
"Early stage exploration is high-risk and investors in Australia are educated on that and willing to look at high-risk, high-return businesses," said John Toll, a corporate financier at Perth-based Azure Capital.
He said this coincided with an increase in reverse takeovers, whereby companies buy out struggling exploration companies to obtain a listing on the ASX to facilitate fundraising.
There have been 20 backdoor listings this year so far, compared with 29 in 2014 and 19 in 2013.
News Moderator: Jacob Redmond 420 MAGAZINE ®
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Author: Jamie Smyth
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Photo Credit: Brennan Linsley/AP
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At least three resources companies are aiming to raise money on the Australian Securities Exchange in the coming weeks, swapping mechanical diggers for hemp grow houses.
The moves follow the flotation of Phytotech Medical, a Perth-based company which raised A$4m in January to become Australia's first listed marijuana stock.
"The resources sector generally, but in particular at the micro-cap end, is finding it difficult to find support from the capital markets," said Peter Tasker, director of International Goldfields.
"Therefore boards need to assess assets, projects and investments capable of garnering support of the capital markets, which is exactly what we did," he said.
International Goldfields, a gold explorer, has outlined plans to buy an 85 per cent stake in Winter Garden, an Uruguay-based company that develops cannabis products to sell overseas. It is seeking to raise up to $4m from investors.
Capital Mining and Erin Resources are two other mining companies aiming to capitalise on a "pot boom", which has seen sales of cannabis for medicinal and recreational purposes in US states where use has been legalised grew 75 per cent year-on-year to hit $2.7bn in 2014.
Other countries, including Australia, are considering the legalisation of medicinal marijuana use, a trend that is fuelling investor interest in the US and elsewhere.
"Australia is a more vigorous investment market for medicinal cannabis companies than other counties such as the US, which have already experienced multiple listings in the sector," said Michael Sautman, Capital Mining chief executive.
Capital Mining, which was founded as a minerals exploration company, aims to raise US$15m to acquire medicinal marijuana companies based in Canada, the US and Australia. It wants to become a commercial grower of marijuana in Tasmania and extract cannabidiol, a non-psychoactive compound, for treatments that provide relief from convulsions, inflammation, anxiety and nausea.
"Australia is a new market and there is a big push to introduce regulatory reform," said Mr Sautman, who has worked in the marijuana industry in Canada, the Netherlands and the US.
The Australian state of Victoria is planning to put a bill to parliament to legalise medicinal marijuana use by the end of 2015, while other states and the federal government may follow as public interest in marijuana-based treatments increase.
But most companies are attracted to Australia by investors' appetite for high risk ventures and the ASX's attractive listing requirements, rather than a desire to sell products in the country.
"Early stage exploration is high-risk and investors in Australia are educated on that and willing to look at high-risk, high-return businesses," said John Toll, a corporate financier at Perth-based Azure Capital.
He said this coincided with an increase in reverse takeovers, whereby companies buy out struggling exploration companies to obtain a listing on the ASX to facilitate fundraising.
There have been 20 backdoor listings this year so far, compared with 29 in 2014 and 19 in 2013.
News Moderator: Jacob Redmond 420 MAGAZINE ®
Full Article: Subscribe to read
Author: Jamie Smyth
Contact: Contact Us | About us | FT.com
Photo Credit: Brennan Linsley/AP
Website: World business, finance, and political news from the Financial Times - FT.com
