GeoNovus enters the lucrative medical marijuana and industrial hemp business

GeoNovus Minerals Corp. (‘Geonovus’, TSXV: GNM) owns copper and gold properties in Canada and the United States, capable of supporting year round exploration (three of the properties are in Arizona) and increased opportunity for significant discoveries. Yesterday, Geonovus announced that it will enter the lucrative medical marijuana and industrial hemp business, signing a non-disclosure agreement with a private BC company which has already applied to become an MMRP (Marijuana for Medical Purposes Regulations) licensed producer of medical marijuana. Geonovus will, therefore, participate in a due diligence process, expected to close before June 15, 2014, to investigate a full business relationship with the private company. Geonovus believes that the fast emerging medical marijuana sector will help generate considerable value for its shareholders.

GeoNovus has advised its investors that there are still no assurances that it will actually conclude the deal with the private company; however, the market is becoming more interesting are potentially much larger. At the end of 2013, when many US States liberalized medical marijuana, also known as therapeutic cannabis, the markets reacted euphorically – how else? – stimulating a 300% return high on some related stocks in days. Colorado, Minnesota, Ohio and Pennsylvania are among the main states that have legalized therapeutic cannabis, which some Wall Street types may already be calling a “green gold”. Cannabis related businesses have been skyrocketing while at least twenty States plan to approve it – eleven of them are considering approving the recreational use of marijuana as well as the medical kind. Analysts have predicted a very wide margin of growth for the sector; some say as much as USD$ 10 billion a year by 2018; “good vibrations” indeed would say the Beach Boys.

Investors should take care in getting past an inevitable “purple haze” of opportunistic plays that will exploit the novelty and shortchanging them on the time they can enjoy their ‘strawberry fields’ – it was supposed to be forever after all. You would be rather confident, however, as pparticipants at a financial conference – GreenRush – looked nothing at all like the usual advocates of legalizing marijuana. They were not sporting the less than hygienic confidence inspiring ‘dreds’. No, these were serious investors in business suits who were solely interested in the economic potential of the marijuana culture. Government, private sector and bankers took part at the event, billed as the first congress on medical marijuana, industrial hemp and investments in alternative medicine. There were exhibitors with very serious names including Benton Capital Corp., Cannabis Investors and Pacific North West Capital as well as investment and pharmaceutical firms. Representatives from Deloitte and the Canadian Securities Exchange not only attended, they gave PowerPoint presentations. Surely, one Jethro Tull would have thought that even he might have toked one too many, had he witnessed the scene.

The point, not lost on Geonovus, is that serious finance has now become an integral part of the cannabis culture and many investors are looking at the possibility of entering into what could be a booming industry and a thriving investment, especially as the industry has become legalized and more States (and countries – see Uruguay, which legalized marijuana a few weeks ago). Canada could soon legalize medical marijuana and politicians love it because it offers a huge new tax base in which to sink their hands.

In Vancouver, cannabis retail has also evolved in line with the market. It is now possible to purchase marijuana from a vending machine. In Canada, it should be clarified, cannabis is still officially considered an illegal drug; medical use was allowed in 1999. Nevertheless, since the start of April, 30,000 ‘home’ based farmers have reported going out of business as their underground operations are being replaced by fewer but larger commercial operations that offer investment opportunities. Even Conservative MP’s in Ottawa are demanding the decriminalization of marijuana in Canada. The Fraser Institute has calculated the value of the cannabis market to be in the order of CAD$ 7 billion/year in the province of British Columbia alone. That’s where companies like Geonovus come in; they will help add a real business ‘cache’ to the products, adding conservative respectability while taking advantage of a very liberal ‘high’ growth sector.