I wish I’d kept count. If I had, I’m sure the number would have been high, but I’ve asked every mining executive I’ve met the same question over the last six months and every single one has answered the same way.
Me: It appears to me that the old grey-haired mining investor has checked out. Too many losses, too much BS, too much sun in Boca, too many sharks in Vancouver. In their place, however, has come a new kind of investor. A younger investor. They invest in what they use; tech, marijuana, your Tesla’s and Google’s. But they don’t look at mining. They don’t get holes in the ground. They don’t see the point. Do you think the mining sector needs to reach out to those people, maybe come up with a plan to bring them across? Something like, hey, do you know what metals make up that iPhone you sleep next to?
Mining executive: Hmm… Yeah… Actually, yeah!
The smart mining execs have already begun this transition. See the graphite industry, swiftly tacking itself to the back of Tesla so that every new Tesla innovation announcement sees graphite projects jumping in share price. Witness the Lomiko Metals (TSX:V.LMR, Stock Forum) strategy of cranking out spinoffs with the word‘graphene’ in the title.
The old guard would never utter a word like graphene in a press release. They like ‘gold’ and ‘grade’ and ’porphyry’. Graphene is an abstract concept that the guy who hates having to plug his phone into a wall to recharge for two hours completely gets. He’s going to will graphene into existence and be a zealot for any stock that may make it happen.
But gold? Copper? Coal? Maybe you buy one and sell another, sticking around only while the going’s good.
The marijuana business gets this new truth and they get it well. Look around the market just in the last week and you’ll see a lot of marijuana/tech crossover, and it’s increasing at a pace.
Wildflower (CSE:C.SUN, Stock Forum) released news that they had licensed what they call the most advanced vape system around to sell in Washington State. Invictus MD Strategies (CSE:C.IMH, Stock Forum) has its own high tech vapery going on, and announced their subsidiary Edison Vape had locked in a patent application for same. Nutritional High (CSE:C.NHL, Stock Forum) is working on a high tech edibles production facility in Colorado that it hopes will make the mom and pop stuff a thing of the past, or at least dominate the sector with high quality/high margin product, and they have CannaPills coming.
Naturally Splendid (TSX:V.NSP, Stock Forum) is all about its tech IP to turn hemp omega into water soluble powder, which makes it useful in just about any food/drink/cosmetic/pets situation. And Grenadier Resources (CSE:C.GAD, Stock Forum) is using NSP to supply them with part of what they think will make the hemp drink business an everyday accepted staple. And as I’ve written in the last week, they’ve developed some products that are right on trend, and leave nothing to be desired on quality.
Weedmaps and Leafly are massive tech plays earning massive bucks on the edges of the marijuana business. Cannigistics (TSX:V.CYX, Stock Forum) is creating software to help marijuana companies deal with compliance, productivity and security. Lifestlye Delivery Systems (CSE:C.LDS, Stock Forum) hit the market last week with CannaStrips as their ‘take over the world’ tech/weed crossover.
InMed Pharmaceuticals (CSE:C.IN, Stock Forum) takes FDA approved pharma data and runs it through an exclusive tech platform that figures out what elements of those approved therapies can be found in medical marijuana, as a fast track to MMJ-based therapies. That’s not even weed-tech, that’s weed-tech-health… a triple threat if ever there was one.
I’ve been long calling this the ‘value-add’ part of the marijuana story, but it’s not really. It’s the weed-tech sector figuring out just how high they can go, and that combo has no shortage of people who want to invest.
The tech space, just a year ago, was dying on the Canadian public markets. A couple of biotech plays took flight mid-2014 in what looked like a sector-wide spurt, but it was all short lived and came back to earth as investors learned (too late) what it takes to get FDA approval of a new product.
But that was then. Just in the last week, I’ve been bombarded with new tech plays hitting the TSX and CSE, and they’re the real deal up and down. We’re not talking dotcom-era vaporware, we’re talking companies with real revenues and real potential with the phrase ‘blue sky’ not needed to tell the story.
Take one: Health Space. This thing is going public in the next few weeks and, frankly, I love it. It’s not overly sexy at first listen; we’re talking a company that helps health inspectors do their job. But when you get into the details, it starts to get really interesting.
Basically, health inspectors generally use a pen and paper to do their job, sending faxes and scrawling notes and lacking any sort of consistency in their data. It’s a long, manpower heavy, mistake-laden process that ends with data being in a stack of dead trees rather than an easy to use website.
Health Space provides health departments with a customised app/CMS that allows a health inspector to go in with a mini-tablet, check off all their boxes, select from pre-approved fields, take photos and circle troublespots, see previous inspection records, and even track their day with GPS. And that forgetful ambulance driver? He can get an alert to his phone when his equipment is more than 300m from his vehicle..
All of this means big savings in man hours, productivity, accuracy and, well, a reduction in lawsuit threats. And the data is live right away and Health Space can lay it all out for public perusal.
On Health Space’s side, it’s not proposing this as a thing – it’s already a thing. They’ve got deals with around 400 organizations (of a potential 4000), the product is in use, and they’re making revenue right now. Seven figure revenue at that.
They’re also making money on data sales, which they can do because the data is public and, traditionally, impossible to cross-reference. Imagine if Google decided to include health inspection data with every restaurant listing it holds. How would you do a deal with 4000 health organizations at the national, state, city and municipality level to make that data uniform and timely? The only way you could is with Health Space.
And as for barriers to entry for competitors, consider that not only has Health Space already got a large segment of the industry signed up (to recurring revenue government contracts at that, so no trouble getting invoices paid), and not only is their tech portable across a variety of inspection needs and industries, but they’ve already done the work to build out modules for everything from beach inspections to tattoo parlours, garbage hauling and migrant labor camps, shellfish inspections to radiation levels to dairy inspections to child care inspections, and about 25 more besides.
So why am I mentioning them on a marijuana update? Because Health inspectors are generally the ones inspecting marijuana grows, dispensaries and production facilities and, right now, they’re using pen and paper. Can you see the fit I can see?
Take two: Moseda Technologies (TSX:V.MSD, Stock Forum) is a group previously known as SmartFleet/MobSafety before it went public in late April, which has created a tracking system used in fleet management and, more recently, the health industry.
Picture this: You call for an ambulance. The paramedics arrive, bust out a bunch of expensive equipment, save your life, and then quickly cart you off to hospital before realizing they left behind a defibrillator. There’s two grand down the toilet. Now you get to hospital and need a heart monitor, but the orderly has to go find one. I think maybe there was one in room 245… maybe it was 246? It’s here somewhere… Then you get your vital signs checked and the nurse has to write them all down on your clipboard and eventually do her data entry, but hey, it’s busy so… and when you’re healthy again and switched to home care, why hasn’t the nurse shown up for your weekly check?
Moseda SmartCare solutions take this time sensitive, money intensive mix of processes and turns them into one tech-based, connected system. Your workforce is monitored, your vital signs are electronically collected, archived and accessed, right there at the bedside, or on the road while you’re being extracted from a car wreck. The equipment is tagged and monitored so you know where it is and what it’s reading. Everything is GPS tracked. Prescriptions are at hand when needed, not buried in a wall of files. And the whole thing is HIPAA/PIPEDA security compliant, so your private info isn’t being passed around for laughs.
Essentially, you’re replacing clipboards with tablets so doctors, nurses, pharmacists, physios and dieticians are connected, their data is instantly stored and accessed, and nobody has to sit at the nurses station for four hours hand entering your vital signs.
This is a potentially massive market by itself. But Moseda can move this into supply chain management. It can monitor the aisles at your supermarket so it knows when something needs to be restocked, or discounted so it moves faster. It can be (and is being) used on trucks so dispatch knows when someone takes an 8 hour rest stop break or a 4 hour lapdance, or a wrong turn, or is heading into heavy traffic. It can be used on pallets of lumber so a truck with a receiver can drive through the yard and do an automated three-minute inventory. It can be used on a sales forces cellphones or a government department’s laptops or a construction company’s power tools.
Moseda boasts one of the most savvy, engaged, hands on coder CEOs I’ve ever encountered. He’s got all the answers. He’s non-promotional and up at 3am. He’s focused and delivering and pilot contracts are being negotiated right now.
And – you’re waiting for it I know – they system can be used on the plants, products, staff, equipment, security systems and deliveries of a weed company. Are you picking up what I’m putting down?
Take three: YDreams.
I’ma shut up now and let you watch some videos. We’ll talk when you’re done.
I know, shut up, right?
So this company is out of Brazil, with arms in Spain and Portugal. It has developed over 200 projects for over 50 Fortune 500 companies. Their client list includes Disney, Coca-Cola, Nokia, Nestle, Nike, Fifa, Adidas, L’Oreal, Unilever, Vodafone, Nissan, Fiat, Audi, Ambev, Petrobras, Barclays, Santander, JCDecaux, and a host of others. Their partners include Microsoft, Siemens, Intel, LG, Cisco, and more. As far as tech companies go, this is a mature, high reputation outfit that has innovated new motion capture, augmented reality and interactive technology, brought it to market effectively, signed the biggest companies in the world to it, and generated revenue consistently.
So where’s the medical marijuana connection?
There is none. None at all. But it’s coming to Canada. By which I mean it’s going public on the Venture exchange.
Oxford Resources (TSX:V.OXI, Stock Forum) has signed a non-binding LOI to acquire YDreams Brazil SA. As part of the RTO, Oxford will consolidate shares on a 4-to-1 basis. A $1.5 million private placement has been announced and closes soon (and is, I’m told, rapidly hitting the over-subscribed point), and two seats on the board will go to YDreams execs. The North American push is part of the company’s desire to penetrate the US and Canadian tech space, as well as access growth capital.
ADDENDUM (27/05/15): This deal is dead, as of a few days ago. Mitch Adam, President and Director of Oxford, has been arrested in the US. From Stockwatch:
The U.S. Securities and Exchange Commission and Department of Justice have charged Vancouver's Mitchell Adam and an associate, Kenneth David Stevenson, for their roles in a 2013 market manipulation scheme. Prosecutors claim that the men planned an elaborate pump-and-dump of a purported oil company, HBP Energy Corp. The alleged plan, which included wash trades and cold-calling, fell apart after an associate began co-operating with authorities. Authorities arrested Mr. Adam on the charges last week at the Houston George Bush Intercontinental Airport in Texas. He appeared before a judge there who ordered the U.S. Marshals Service to transport him to New Jersey, where the case was filed. Agents took Mr. Stevenson into custody on Dec. 9, 2013, but kept the file sealed until after Mr. Adam's arrest.
There's more, and it's not a good look. Adams resigned as director a few days ago. I'm told YDreams will still go public, but in another shell.
You’ve never heard of YDreams because you don’t live in South America or Europe. But you know where the next summer Olympics is happening, right? And how many of those companies listed above will want a presence in Brazil, do you think…?
So let’s loop back around to mining for a moment. All of the above companies have a story arc. They’re doing something that differentiates them from everyone else in some way, and early investors often become evangelists for them because they can get behind that story.
When I consult with a company outside of Stockhouse, this is a very important aspect that I focus on; what is your differentiator? What’s the story? What’s the thing that will inspire someone who has never considered your industry before to jump in and not just own your stock for a morning, but own it for a year?
The number of mining companies that can answer that question is very VERY small. I talked about a diamond play a month or so back in which the company in question is using tech to snap up land claims en masse, then zeroing in on those claims where data shows they have the best chance to actually find something.
That company, Strike Diamonds (TSX:V.SRK, Stock Forum), laid out a circle around North Arrow’s (TSX:V.NAR, Stock Forum) project, and once V.NAR released data showing where it was finding kimberlites, Strike knew exactly what areas in their claim to ignore and which ones to zero in on.
We’re not talking rocket science here. We’re talking basic tech allowing a scrappy startup to piggyback on a bigger player to increase the odds of finding something from the old ‘we flew a plane over it’ to ‘we know where to stick the drills and we’re raising only what we need to drill that point and if we hit we have all the land you could ever ask for to grow into.’
It’s no surprise that Strike is run by a young guy who looked at the old way of doing things and decided it was stupid and corrupt and ripe for disruption. What’s a real surprise is that it happens so rarely.
Now, nobody is going to make the claim that all weed companies are run well. Or even that most of them are. But one thing they've got right almost across the board is in drawing in the new investor and turning that rookie investor base into evangelists.
As evidence, witness Creative Edge Nutrition (OTO:FITX, Stock Forum), which has been refused a license, is under investigation, has been the subject of an endless run of expose pieces from the respected Grant Robertson at the Globe and Mail, has lost 95% of its share price, been fired by its PR company, and angered the Health Minister, all while the CEO was selling millions of shares and telling investors to hold fast.. and even that steaming coiler of a company has investors that insist (loudly and stupidly) that they're 'this close' to a big comeback.
They're not, but you've got to appreciate the precision with which that company built an army of zealots willing to use their rent money to fuel the CEO's personal real estate deals.
Of all the marijuana and tech companies I’ve named in this piece, I can’t even think of one run by your standard old guard grey hair. They’re young, agile, they’ll pivot and do deals and they’re not out playing golf, they’re trying to build empires.
That’s what the new investor wants to see; a CEO in a tent on the side of a mountain making sure the drills go in right, or a CEO up at 3am coding fixes on the website, or a CEO on a plane to Oregon and New Mexico and Illinois because maybe there’s a deal to be done.
The mining industry will not come back until the mining industry learns how to disrupt itself.
UPDATE: Aurora Cannabis (TSX:V.ACB, Stock Forum) doesn't get much mention in these pages often, but has got Ticker Trax columnist Danny Deadlock now covering them, which is as close to a legitimacy vote as you can get. If Deadlock is in, I'll give it another look.. Secret link to Deadlock's multi-page report can be found here. Shh.
--Chris Parry
https://www.twitter.com/chrisparry
FULL DISCLOSURE: Wildflower, Invictus, Nutritional High, Naturally Splendid, InMed, Cannigistics, and Moseda are Stockhouse Publishing marketing clients, though they have not paid for inclusion in this article.
The author owns shares in Nutritional High, Naturally Splendid, Invictus, InMed, Lifestyle Delivery Systems, and Strike Diamonds having acquired the shares on the public market.The author is a consultant for both Invictus and Strike.
Please do your own due diligence before purchasing any of the above companies.