Some Canadian mining companies are attempting to cash in on the explosive growth of the marijuana industry. 

Though at first it appears to be no more than a consequence of the bandwagon effect—an unavoidable part of any hot equity’s lifecycle—it quickly becomes clear that some companies view marijuana as a lifeline to profitability.

However, creating a profitable marijuana business is no easier than any other…

Cannabis Attracts Stagnant Mining Companies

It’s no secret why some companies would want to transition into cannabis.

According to Bloomberg,

“Cannabis stocks made up six of the top 10 performers on the Canadian benchmark in the first quarter.” 

That kind of statistic can make any struggling company re-evaluate its business plan.

But while the potential for billion dollar valuations has certainly inspired many an entrepreneur to enter the marijuana space, some are simply trying to save their business.

Take California Gold Mining Inc., for example. 

Via Bloomberg,

“Given the prolonged down-trend in the junior mining sector, and scarcity of public capital for exploration-stage mineral resource companies, the Company has been contemplating monetization of the property with a view towards generating positive cash-flow,” [said] Vishal Gupta, California Gold’s chief executive . . .”

The answer?

“A greenhouse for hemp seeds will be constructed on a portion of the property that is not currently used for its gold exploration business.”

California Gold Mining isn’t the first Canadian mining company, nor will it likely be the last, to pursue growth elsewhere.

Via the Mining Association of Canada,

“Over the past decade, Canada’s leadership in mining has been deteriorating year over year, with no sign of any significant turnaround . . .

. . . [I]nvestment in new mining projects has fallen, highlighting the fact that our country’s economic prospects are uncertain.”

To be fair, few sectors have been spared from cannabis’ allure. Even some of the world’s most well-established agricultural companies—such as Village Farms International—have indicated a willingness to restructure core parts of their business to better serve the cannabis market.

Cannabis Growth Will Continue To Dictate Investment Flow

When controlled for risk, capital typically flows in the most “efficient” direction—that is, where the return is highest.

And cannabis companies have certainly delivered returns.

For this reason and more, the cannabis industry is beginning to lure underperformers from a number of different sectors, chiefly mining. However, without some kind of competitive advantage—be it cost per gram or differentiated branding—companies are setting themselves up for disappointment.

In other words, success in cannabis is no different than mining. To attract investment, it has to be a “good project”.