Tag Archives: coal mining

Mining’s New Joint Venture

Posted by Gabe Friedman

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This isn’t a great time for small Canadian mining businesses. For the past couple of years, people have worried that China’s economic problems will keep it from buying metals and minerals in big quantities, as it once did, which has lowered prices for some of those commodities. Plus, mine workers are aging and retiring, and there may not be enough younger people to replace them. The combined value of the hundred largest “junior” mining companies—the small ones focussed on exploring deposits, in contrast to “major” companies, which extract the deposits that juniors have analyzed—fell by forty-four per cent last year. As Winston Churchill said, “To improve is to change.” So a couple dozen mining companies are now trying out a sexier business: weed.

Canada started granting its first commercial permits to grow marijuana for medicinal purposes late last year. Since then, at least thirty junior mining enterprises have started diversifying into medical marijuana—“M.M.J.,” for short—or have announced plans to do so.

“As a publicly traded company, we always need a story that’s good enough to raise money on,” Jennifer Boyle, the C.E.O. of Satori Resources Inc., told me. Satori is—or has been, in any case—a gold-mining company. Now Boyle wants to get into pot. “If you can latch on to something you can probably raise money on, i.e., medical marijuana, then why not?” she said. “Because otherwise, your assets are in danger of being bought for next to nothing.”

The fact that exploratory mining and growing marijuana have little in common is, it seems, hardly important. The Papuan Precious Metals Corp.’s stock price rose from two cents to fourteen cents after it announced plans to consider agricultural projects and then hired a marijuana consultant. This month, Papuan agreed to acquire the assets of a pot dispensary in Colorado, where marijuana is now legal for anyone who is twenty-one or older. Other junior companies are experimenting with growing mediums and fertilizers, or looking to provide equipment to growers. “The reason you’re seeing the junior mining companies going to medical marijuana is because there is no money in mining,” Greg Downey, the C.F.O. of Papuan, said. “We look to where the money is going.”

The junior mining companies experimenting with marijuana are not high up in the hierarchy of mining. At the bottom level, there are prospectors, who walk hillsides and fields, kicking rocks in search of minerals and metals. One step up are the juniors: they follow up on prospectors’ finds by conducting more serious studies and sometimes even developing mining sites, with the goal of one day selling their assets to a major mining corporation. Most of the juniors that are turning to pot have market capitalizations of five million dollars or less; they represent only about one per cent of Canada’s estimated three thousand two hundred mining firms.

Major mining companies have had trouble raising capital because of falling commodities prices and a tendency toward cost overruns, which has made it even more difficult for juniors to raise money for their projects, since chances of a buyout are remote. It hasn’t helped that junior mining projects keep failing. There is also an impending labor crisis: in the next ten years, the mining industry will need to replace more than half of its workforce, as current employees retire or depart for more attractive industries. This is problematic both because companies will have to cover those former workers’ retirement benefits and because not many young people choose mining as their profession these days, according to a report by the Canadian government’s Mining Industry Human Resources Council.

The marijuana business isn’t necessarily a panacea. Marijuana remains illegal in Canada, although, since 2001, the federal regulatory agency Health Canada has let residents with a doctor’s authorization possess the plant for personal use. It also granted tens of thousands of permits to grow the drug for personal use or to grow it for someone else’s personal use. Last year, Health Canada became convinced that marijuana was being abused for recreational purposes, announced a repeal of the old growing permits, and started accepting applications for commercial-growing permits instead. (A court injunction put the repeal on hold for the moment, but Health Canada has issued thirteen of the commercial permits. It hasn’t put a cap on how many commercial permits it will grant, but it has said that it has received more than nine hundred applications.) Wagner, the consultant, said that only forty thousand Canadians or so have medical-marijuana prescriptions, a level of demand that a couple hundred growers could easily meet; even if the number of people with prescriptions grows to more than four hundred thousand by 2024, as Health Canada is forecasting, he predicts that this would create only enough customers for an additional several hundred growers. So far, none of the mining companies have been granted a commercial-growing license, although one former mining company is close to merging with a company that owns a license. Many are applying for a license or conducting medical-marijuana due diligence.

Executives at the junior mining companies gave various reasons for why they are well suited to enter the marijuana industry: Downey said that juniors are already publicly listed and therefore have immediate access to capital. Another said that his skill set is in assembling teams, whether it is geologists or pot growers. Boyle, the C.E.O. of Satori Resources Inc., pointed out that her company already has the ticker BUD, which gives it a natural leg up; even now, investors assume that the company is in the marijuana business.

Michael Dehn, the C.E.O. of Jourdan Resources Co., said that he wound up in the marijuana business by happenstance. His company owns several properties in Quebec that it wants to mine for phosphates, a component of fertilizer. It also leases office space in a strip mall in a Toronto suburb, next to a pot grower called ChroniCare Canada Corp. “One day, I was out in the parking lot talking to the guy next door, and I said to him, ‘What do you do?’ ” Dehn recalled. “He said, ‘We grow marijuana,’ and I said, ‘We make fertilizer. We should work together.’ ”

Jourdan and Satori Resources have joined together to excavate and pulverize a small amount of phosphate rock, and they’re partnering with ChroniCare to test whether it could be used to fertilize pot. If it works, the companies would together start selling fertilizer to pot growers.

“We were always going to do fertilizer, and our plan was to target corn or wheat, but we’re still five years away from that, so in the meantime we’ll receive a cash flow,” Dehn explained.

The Canadian market, however, is small. With only thirty-five million people in the country, Dehn and others said that they are thinking about export opportunities. “You kind of look at this as the prohibition period, like when Canada was smuggling alcohol to the U.S.,” he said. Dehn has never smoked pot, but he has heard good things about Canadian-grown marijuana. “For most of my life, this is where you heard the good weed was,” he said. “It’s like France—that’s where you go for champagne.”

Gabe Friedman writes about legal affairs, the environment, and business. He was a Knight-Bagehot Fellow at Columbia University and lives in New York.

Illustration by Dadu Shin.

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LET FREEDOM RING IN KENTUCKY! GATEWOOD GALBRAITH NOW HAS SIGNATURES TO BE PLACED ON NOVEMBER BALLOT! GOD BLESS GATEWOOD GALBRAITH!

Galbraith gets 5,000 signatures for governor run

By ROGER ALFORD — Associated Press

Posted: 11:03am on May 27, 2011; Modified: 1:05pm on May 27, 2011

FRANKFORT, Ky. — In a move that has helped to organize supporters, independent gubernatorial candidate Gatewood Galbraith said Friday he now has the 5,000 signatures needed to get his name put on the general election ballot in Kentucky.

Galbraith, a Lexington attorney, said he intends to collect another 5,000 signatures before turning them over to the secretary of state’s office to officially enter the race against Democratic Gov. Steve Beshear and Republican nominee David Williams, just in case the opposing campaigns challenge the eligibility of some of the people who signed.

Last December, Galbraith filed paperwork declaring his intent to enter the race for governor. Under Kentucky law, independent candidates also must collect at least 5,000 signatures from registered voters, which, Galbraith said, isn’t as easy as it may sound.

“There’s no doubt; it’s a burden,” he told The Associated Press on Friday. “But I understand there needs to be a threshold so the ballot doesn’t become overcrowded. That’s the rule in place, and we’re going to comply with it.”

Galbraith said collecting the signatures has strengthened his campaign by energizing supporters and establishing grassroots organizations in the majority of Kentucky counties.

“It’s a natural organizing tool,” he said.

Early on, Galbraith differentiated himself from the other gubernatorial candidates by taking a strong stand against mountaintop removal coal mining, charging that it has caused “unsurpassed environmental damage” in Appalachia and should not be permitted to continue.

Both Beshear and Williams have called for the U.S. Environmental Protection Agency to ease restrictions that have made it difficult for coal companies to get governmental permission to open new mountaintop mines or to expand existing ones.

Galbraith had received an early endorsement from the United Mine Workers of America, only to have it rescinded later. Union leaders opted to instead support Beshear, who they believed had a better chance of winning the Nov. 8 election.

Mountaintop removal has long been a heated issue in Kentucky politics. Demonstrators have been sitting outside Beshear’s office each Thursday to bring attention to the procedure, in which forests are cleared and rock is blasted apart to get to coal buried underneath. The leftover dirt, rock and rubble usually is dumped into nearby valleys. Coal operators say it is the most effective way to get to the coal, while environmentalists say it does irreversible damage.

Frankfort resident Angela Mitchell, a solitary protester who sat outside Beshear’s office for two hours on Thursday, said she’s a likely Galbraith supporter.

“I don’t’ feel like we’re getting anywhere with the other two candidates, so maybe it’s time for a change,” she said.

Galbraith also stands apart from Beshear and Williams as a proponent of legalizing hemp and medicinal marijuana, positions that have marginalized him for mainstream Kentucky voters in four previous runs for governor.

Since announcing his interest in running again, Galbraith has downplayed the marijuana issue, saying it’s only a minor part of his platform.

Galbraith said he believes he can win the general election against much better-funded candidates. Williams raised some $1.2 million for the primary election race that he won earlier this month. Beshear has raised about $5 million and is already on the air with the first television ad of the general election season.

“It doesn’t make any difference how much money Gov. Beshear spends,” Galbraith said. “If your vote’s not for sale, it doesn’t matter how much he spends.”

Read more: http://www.kentucky.com/2011/05/27/1754968/galbraith-gets-5000-signatures.html#ixzz1NaN9RC3f