Junior miners jump into medical marijuana, food service amid slump

Century Global Commodities

24/08/2015 12:00

(Repeats story first published on Sunday) 
    By Euan Rocha, Nicole Mordant and Jim Regan (Australia) 
    TORONTO/VANCOUVER/SYDNEY, Aug 23 (Reuters) - Many of the 
world's junior miners are laying down their picks and shovels to 
start new ventures ranging from egg exporting to medical 
marijuana farming, as they as try to survive a crash in metals 
prices by shifting away from exploration.  
    Prices for copper, gold, iron ore, coal and almost every 
other metal have collapsed, stalling exploration work and 
hitting early stage miners particularly hard. These firms 
typically find the deposits that larger miners often then go on 
to acquire and develop into mines. But there's scant demand for 
new sources of metal now.  
    Pivoting into other businesses has happened during mining 
funks in the past, including a spate of defections into the tech 
sector during the dotcom boom in the late 1990s. But now the 
concern is that when prices eventually do rebound, there will be 
fewer junior miners, and a reduced pool of new mine prospects. 
    "No one has any interest in a grassroots exploration project 
right now," said Yari Nieken, chief executive of Chlormet 
Technologies  PUF.CD , which has bought an e-cigarette company 
and has a license to grow medical marijuana pending.  
    Canada made it legal to buy marijuana from licensed 
producers with a doctor's prescription in 2014. Regulator Health 
Canada estimates that the Canadian medical marijuana industry 
will reach C$1.3 billion (US$987 million) in a decade. 
    Canada's Century Iron Mines  FER.TO , whose mining projects 
are backed by two major Chinese companies, Minmetals and Wuhan 
Iron and Steel Corp (WISCO), owns development stage iron ore 
assets in eastern Canada. In July, Century started a new 
independent venture to distribute Australian eggs in Hong Kong, 
Macau, and potentially mainland China. 
    Century aims to piggyback on Australia's move from a 
reliance on mineral exports to shipping food and agricultural 
products to a growing Asian middle class. 
    "Due to the downturn in commodity prices, Australia's moving 
its focus from mining to dining," said Century CEO Sandy Chim. 
"We're just an exploration company, but we have a solid balance 
sheet, and we feel we can also do the same. 
    "We see a good opportunity to start a small, but meaningful 
food distribution business that can capitalize on our network in 
China." 
    The shift to egg distribution will help create a cash flow 
generating business until iron ore prices recover, Chim said. 
While Century isn't turning its back on mining, it's considering 
buying food production assets, such as fisheries, while it waits 
for the sector to rebound. 
    This business shift by miners is most visible in Canada, 
home to the majority of the world's publicly-listed miners, but 
is also seen in other mining centers like Australia and Brazil. 
 
     
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ 
     For graphic on global commodity prices,  
    click [http://link.reuters.com/par45w] 
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> 
     
    ABANDONING SHIP 
    Century may be able to ride out the cycle, but some of its 
smaller peers both in Canada and overseas have begun to abandon 
the mining sector altogether, as it becomes increasingly 
difficult to raise financing.  
    In January, Brazil's All Ore Mineração SA decided to end its 
commodities operations and enter the cosmetics and hair-care 
markets by buying Sweet Distribuidora, also known as SweetHair, 
in an all-share, no-cash deal. The new company, renamed Sweet 
Cosméticos  SWET3.SA , hopes to sell beauty products developed 
using biotechnology and nanotechnology. 
    In March, TSX Venture-listed Sabre Graphite bought 
DraftTeam, a website offering fantasy sports games. It has since 
changed its name to DraftTeam Daily Fantasy Sports Corp  DTS.V . 
Australia's Erin Resources  ERI.AX , which was previously 
exploring for gold in Senegal, has ventured into the medical 
marijuana business.  
    Supreme Pharmaceuticals Inc  SL.CD , formerly a copper and 
gold explorer with projects in western Canada, is also seeking a 
license to grow medical marijuana in Canada and has bought a 
greenhouse facility in Ontario. 
    "With the downturn that the mining industry has suffered, I 
think the smart and innovative entrepreneurs in the sector are 
looking for other asset types that can rebuild businesses and 
restore lost value for shareholders," said John Fowler, 
Supreme's Chief Executive. 
    Australian-listed International Goldfields  IGS.AX , which 
is investing in medical marijuana assets overseas, has seen more 
trading activity in its stock since it moved away from mining, 
according to director David Tasker. The shares trade for less 
than a cent each. 
    The company said its gold investment in Brazil and joint 
venture in the U.S. were offering limited value to its 
shareholders.  
    "Also, the level of support we could expect from the capital 
markets was very, very minimal, if not all together 
non-existent," Tasker said. "Once that reality dawned, it was 
incumbent on us to look for alternatives." 
    The hundreds of largely TSX Venture-listed exploration 
companies have been among the hardest hit in the current 
downturn, as investors have fled the sector due to prolonged 
decline in metal prices. Those tough conditions also mean that, 
cash-strapped larger rivals aren't willing to invest in new 
projects.  
    Some institutional and retail investors, while dismayed by 
the collapse in exploration company values, are sanguine about 
the shift away from mining. 
    "I didn't buy this stock thinking I was investing in the egg 
distribution, but I've no problem with them doing other things," 
said Ian Morrison, a retail investor who owns more than 500,000 
shares in Century, the iron ore miner turned egg distributor. 
    "I look forward to seeing what their next move will be 
because I do not think they are putting everything they have got 
into Aussie eggs."                    
 
 
 
 
 (Additional reporting by Jeb Blount in Rio de Janeiro and Susan 
Taylor in Toronto, editing by Amran Abocar and John Pickering) 
 ((euan.rocha@thomsonreuters.com; +1 416 941 8185; Reuters 
Messaging: euan.rocha.reuters.com@reuters.net)) 
 
Keywords: MINING EXPLORATION/EXODUS (PIX, VIDEO, GRAPHICS, R