Cannabis: The Next Mining Killer?
(Kitco News) - Miners have to just wait out the cannabis frenzy until thebubble pops for investor capital to flow back into the metals space, thisaccording to mining executives and fund managers.
Marijuana stocks are approaching pre-2001 Nasdaq levels ofovervaluation, and it's not a matter of "if," as much as it is amatter of "when" the cannabis space collapses on the same scale asthe last tech bubble, said the experts during a panel debate at the Mines andMoney Conference in Toronto.
Following such a bust from cannabis, a transfer of funds tothe mining sector is likely because the retail investors interested in juniorminers are the same high-risk speculators attracted to the cannabis stocks,said Warren Irwin, president and CEO of Rosseau Asset Management.
"There will be a point where all these retail guys willrun away, scared of the cannabis market and you'll have a pile of money. Andwhere are they going to go? They need their fix," he said. "Cryptosare dead, cannabis will be dead, where are you going to get your fix? And Ithink they're going to get their fix in the junior mining sector."
Irwin noted that even as the cannabis craze eventuallydissipates, a "massive" new discovery in assets and deposits isneeded to bring the flow of funds back into the mining sector.
He added that junior miners are the most viable alternativefor cannabis investors owing to the miners' attractive valuations.
The VanEck Vectors Gold Miners ETF (GDX) has declined 14%year-to-date and is currently at the lowest level since December 2016.
In contrast, the Horizons Marijuana Life Sciences ETF(HMMJ.TO) climbed 6% on the year and is up 126% since the fund's inception inApril 2017.
On the cryptocurrencies front, the panelists agreed thatwhile the bitcoin craze has fazed out for now after the coin's fall from itsDecember 2017 highs, blockchain technology still has value due to its potentialto be integrated into mining technologies.
"Blockchain and mining go hand in hand. It will just beinteresting to see how exactly it plays out, but we are firm believers thatthere is value in that data," said Michael White, president and CEO of IBKCapital.
While millennials have historically been the largestdemographic behind the growth of cryptocurrencies, convincing that group toinvest in metals will require a lot of changes in terms of simplifying mininginformation and the way investment opportunities are presented, according toWhite.
"The onboarding has to be simple. We have to figure outa way that millennials can very simply onboard and buy these miningstocks," White said.
By David LinFor Kitco News
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dlin@kitco.comwww.kitco.com Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication. |