A Golden Opportunity in California Hemp

A junior mining company based in California is entering the industrial hemp industry. Investors may think they have heard this story before. A number of new cannabis companies are essentially born-again mining companies. California Gold Mining Inc (CSE: CGM, OTCQX: CFGMF, Forum) is not a “born again” cannabis company.

It’s a gold exploration and development company that is adding a new/separate hemp division to its mining operations. Put another way, CGM is a new entrant into California’s lucrative, high-CBD hemp industry, with a huge, 100%-owned land package – and a market cap of only $27 million.


(3,351 acre Fremont Gold property, Mariposa County, California)

Gold + hemp: this is a “two for one” opportunity for investors. The Company’s President and CEO, Vishal Gupta outlined the thinking that led to this important new initiative.

“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 Fremont property with a view towards generating positive cash-flow. To that end, the Company conducted comprehensive research and due diligence on the industrial hemp sector over the past 10 months. We believe California Gold is entering the cannabinoid-rich industrial hemp space that is in its infancy. Our 100% ownership of the land, the availability of water and power, the highway connectivity, the close vicinity of skilled and unskilled labour, and our location within the most populated state in the US, makes Fremont an ideal launchpad for CGM’s high-CBD industrial hemp operations.”

Hemp is big news these days, for several reasons. As the global movement to normalize cannabis laws continues to gather steam, the world is rediscovering hemp. In addition to thousands of traditional applications for this extremely versatile plant, there is a new and especially lucrative hemp application that has materialized in the 21st century: extraction of CBD-rich cannabinoids for medical use.

The active ingredients in the cannabis plant are known as “cannabinoids”. As research into the health and medicinal properties of cannabis has deepened, increasing awareness is being focused on one cannabinoid: cannabidiol (CBD).

Unlike tetrahydrocannabinol (THC), CBD has no psychoactive properties of any kind. This is also the principal distinction between the two sub-species of cannabis: marijuana and hemp. Marijuana is an abundant source of both THC and CBD. Hemp, on the other hand, contains negligible amounts of THC, but is an even richer source of CBD.

As California Gold Mining began its due diligence on the opportunity in this sector, they determined that the current market price for feminized, high CBD-content hemp seeds (alone) in California is US$15,000 - $30,000 per pound, depending on CBD concentrations. For mining investors contemplating this new opportunity, at current metals prices hemp seeds are roughly worth their weight in gold.

The value of these specialized seeds is entirely in their subsequent cultivation into high-CBD hemp crops. The flower biomass of the plant has substantial commercial value – since this is the raw material used for extraction of CBD-rich cannabinoids.

In a hot market that is getting hotter by the day, thanks to the recent passage of the 2018 U.S. Farm Bill thereby legalizing industrial hemp on a federal level throughout the US, management is already in advanced-stage discussions with respect to off-take agreements for this hemp seed. More on that later.

Conditions in the gold mining sector have been brutal. The long trough in this industry since 2011 is now very reminiscent to conditions in the sector in the 1990’s – just before gold went on a 10+ year bull-run. Advancing gold mining operations in this bear market (even with highly prospective projects) has been extremely difficult without incurring punishing levels of equity dilution.

For the management of California Gold Mining, high CBD-content hemp seed propagation is not a mere survival strategy. It is a non-dilutive means of dramatically enhancing its gold mining operations. Consultations with hemp industry experts, have led management to estimate approximately US$3.0 million in capital will be required to launch this industrial hemp operation. Management recently announced that it has negotiated a non-dilutive credit facility for the entire US$3.0 million through a Canadian real estate and mortgage fund that happens to be a long-term shareholder of CGM.



CGM has previously been the subject of a full-length feature article at Stockhouse and investors wanting to learn more about the Fremont Project can refer to that earlier article, or simply visit the CGM website.

Returning to hemp seeds, in speaking with Stockhouse Editorial, CEO Gupta indicated that “high level approval” has already been obtained from Mariposa County officials for this new high CBD-content hemp seed propagation operation. Only some routine, secondary land-use permitting is required to be positioned to launch operations – not unlike the permitting for CGM’s gold exploration activities.

Obviously, California Gold’s management team are miners, not hemp experts. However, in an industry that has now been at least partially legal in California for two decades, hemp expertise exists at all levels of the production and distribution chain.

The Company is committed to contracting out its hemp operations – to industry leaders in hemp seed propagation, cultivation, sales, marketing and distribution. Its initial greenhouse for the propagation of specialized hemp seeds will have a grow area of 27,000 square feet, and a footprint of just over 1 acre. That’s a substantial amount of space for hemp seed propagation, but it’s only a tiny fraction of CGM’s 3,351-acre Fremont property.

Management is fast-tracking development of the greenhouse, with debt funding just secured. Investors can do their own, rough number-crunching here. With even this one, initial greenhouse (producing high-CBD-content hemp seeds), the revenue potential is similar to a small, operating gold mine.

As noted, talks are already underway for an off-take agreement for these hemp seeds, even before the first harvest. Investors should expect construction updates and off-take announcements in the coming weeks. With an abundance of land, the Company can add more greenhouses to this operation in additional 27,000 square foot increments, provided the initial greenhouse-based operation is successful.

Cannabis investors who are familiar with the operations of “cannabis companies” may wonder about how CGM is able to expedite its California business plan with (effectively) only local permitting / licensing being required. This leads to another reason why hemp is currently big news – especially in the United States.

In Canada, there is not a large distinction between marijuana and hemp in terms of either the regulatory structure or public attitudes. In the United States, the dynamics could not be more different.

Marijuana (at the federal level) still faces strong prejudice. After decades of anti-marijuana propaganda, there is still wide public resistance to marijuana use and legalization in some parts of the United States.

Hemp, on the other hand, is now recognized as being distinct from marijuana – commercially, socially, and legally. The 2018 U.S. Farm Bill fully normalized hemp as a commercial commodity in the U.S.



With cannabis already generally legal in California (for both medicinal and adult use), the thinking at the state-level regarding hemp is simply deregulation – allowing the cultivation of hemp just as with any other commercial crop.

The only remaining regulatory issue in California is an administrative one. The State has not yet put in place a fee structure for hemp cultivation. CGM’s management has obtained a legal opinion from Hoban Law Group regarding the near-term resolution of this remaining formality.

CDFA [California Department of Food and Agriculture] is currently engaged in completing the rulemaking process to set the registration fee; it is anticipated that the process will complete later this year or early 2019 and applications made available soon thereafter.

California Gold Mining is still a mining company. With the price of gold well below the price level to sustain the industry, with mine production falling and mine reserves plummeting, the gold sector is well overdue for its next significant rally. Management is committed to not only engaging in high CBD-content hemp seed propagation as a non-dilutive revenue stream for its shareholders, it also plans to use a portion of the cash flow from hemp operations to advance development of its Fremont gold project.

Investors looking at CGM today can spot two golden opportunities. There is the opportunity today in hemp. And there is the opportunity tomorrow in gold.



www.caligold.ca




FULL DISCLOSURE: California Gold Mining Inc. is a paid client of Stockhouse Publishing.