Weekly Cannabis Commentary
Weekly Cannabis Commentary Author: Sid Rajeev, Iftekhar Mahmud Cannabis Industry Performance Over the past week, the Horizons Marijuana Life Sciences ETF (TSX: HMMJ / “HMMJ”), the Standard & Poor’s/MX International Cannabis Index (“MCAN”), and the Standard &...
Weekly Mining Commentary
As the rollout of vaccines is expected to take three to six months, we do not expect the economy to recover to pre-COVID levels until mid-2021. We believe that gold prices will remain volatile in the coming months, and gain strength in the second half of 2021, when inflation kicks-in from the stimulus packages and economic growth. We are raising our base metal price forecasts for 2021 based on positive developments surrounding vaccines. That said, we believe that the recent run-up in base metal prices is an overreaction.
Kontrol’s COVID Detection Unit Tested at a McDonald’s Location
Kontrol announced today that it filed patent applications for its BioCloud technology in the U.S. and Canada. On another positive note, we found that a McDonald’s (NYSE: MCD) location in London, Ontario, gave BioCloud a test run last week.
Kidoz Inc.(TSXV: KIDZ / OTC: KDOZF) Q3 Revenue up 161% QoQ and Beats Expectations
Q3 revenue was $1.9M, up 161% QoQ, and 51% YoY. We were pleasantly surprised by the spike in revenue as the outlook for ad spending this year had been weak due to the pandemic.
Inner Spirit Holdings Ltd. (CSE: ISH) Q3 Revenue up 49% QoQ, Second Consecutive Quarter of Positive EBITDA
Inner Spirit Holdings Ltd.’s Q3-2020 revenue was $8.09M, a YoY increase of 152%, and a QoQ increase of 49%. Net loss improved QoQ from $1.23M (EPS: -$0.01) to $1.01M (EPS: -$0.00). While revenue beat our expectations, gross margins were relatively inline; actual 2020 (9M): 47% vs our estimate of 48%.
Steppe Gold Limited (TSX: STGO / OTC: STPGF) Minimally Impacted by COVID-19
Unlike most gold producers, Steppe Gold’s operations have not been materially impacted by the pandemic as most employees reside on-site. Also, as 100% of the produced gold is sold within Mongolia, the company is not reliant on export channels.
Weekly Cannabis Commentary
The number of stores across the country has increased by 63% since February to date. Ontario has experienced the highest growth (597%). The growth in Ontario is driven by the Alcohol and Gaming Commission of Ontario’s (AGCO) mandate to increase store count in the province, which has a significantly higher population per store vs the national average (see table on the next page). We note that the population to Beer-Wine-Liquor stores ratio across Canada is 10,821 in 2019. As the current population per cannabis store is 30k, we believe there is significant room for expansion of cannabis retail space in the country.
Weekly Mining Commentary
AstraZeneca (LSE: AZN) announced today that tests on its vaccine for COVID-19 returned an average efficacy rate of 70%. AZN is now the third drug company to report positive results. Although Pfizer (NYSE: PFE) and Moderna (NASDAQ: MRNA) have achieved 94%-95% efficacy rates, a major benefit of AZN’s vaccine is that it does not have to be stored at ultra cold temperatures. AZN’s vaccine is also expected to be cheaper. Pfizer has submitted its vaccine to the U.S. FDA for approval. These developments are extremely positive for an economic recovery, and drove base metal prices higher in the past week. Not surprisingly, gold and silver reported losses, as demand for safe haven assets typically rises when there is global economic uncertainty and vice versa.
Ian Telfer and Frank Guistra to Jointly Advance a Junior Gold Producer
This week, we mention Ian Telfer and Frank Giustra’s latest deal, a near-term gold producer in Mexico, a tech company with the potential to improve efficiency of motors in electric vehicles, and other updates on companies under coverage.
Kaya Holdings Inc. (OTCQB: KAYS) – Vertically Integrated U.S. Cannabis Company to Tap into Growth Opportunities in Europe – Introductory Note
In this note, we are introducing Kaya Holdings Inc. (“company”, “KAYS”; market capitalization:US$6M), a U.S. based company operational since 2014. According to management, KAYS is the first publicly traded company in the U.S. to own and operate a medical marijuana dispensary. Their business model is focused on cultivating, processing, and retailing medical and recreational cannabis.
European Residential REIT (TSX: ERE.UN) A Unique Opportunity to Own European Rental Properties – Initiating Coverage
European Residential Real Estate Investment Trust (“ERES”, “company”) provides exposure to rental markets in Europe, with a focus on the Netherlands, one of the most attractive regions in Europe. The country is one of the top performing economies in the European Union, with above average per capita income, below average unemployment rate, and one of the strongest export economies.
Caldas Gold Corp. (TSXV: CGC / OTCQX: ALLXF) Closes Streaming Deal with Wheaton Precious/Q3 Production up 108% QoQ
Caldas Gold Corp.’s (“company”, “CGC”) Q3 revenue was up 108% QoQ. EBITDA improved QoQ from -$0.8M to $1.7M. Although revenue beat expectations due to higher production, EBITDA was lower due to higher than expected costs. We are raising our 2020 production forecast from 22 Koz to 23.5 Koz, but lowering EBITDA forecast due to higher cash costs.
FinCanna Capital Corp. (CSE: CALI / OTCQB: FNNZF) Starts Receiving Royalty Revenue
In Q1-FY2021 (quarter ended July 31, 2020), FinCanna Capital Corp.(“CALI”, “FinCanna”) generated $55k in revenue, of which, $44k was from royalties, and the remaining was from accrued interest (non-cash) from a loan offered to its portfolio company named CTI. Although we were pleased with the commencement of royalty revenue, they were well below our expectations. CALI reported a net loss of $0.44 million (EPS: -$0.00) in Q1. As Q1 was the first quarter of royalty revenue, we believe it is not appropriate to compare Q1’s performance with prior quarters.
Weekly Cannabis Commentary
In the past week, the cannabis market corrected slightly following a week of significant sector-wide price gain due to optimism around a Democratic victory in the U.S. elections. Over the past week, the Horizons Marijuana Life Sciences ETF (TSX: HMMJ / “HMMJ”), the Standard & Poor’s/MX International Cannabis Index (“MCAN”), and the Standard & Poor’s/TSX Cannabis Index (“XCAN”) generated a return of 3%, -3%, and -2%, respectively.
Weekly Mining Commentary
Following last Monday’s announcement from Pfizer (NYSE: PFE), Moderna, Inc. (NASDAQ: MRNA) announced today that they have also received positive test results (94% efficacy) for their vaccine for COVID-19. Stock markets rallied on the news; the S&P 500 index was up 1.1% today vs 2.6% last Monday. As shown below, six of the seven indices we track are up WoW (orange bars). Four out of seven indices are trading higher than pre-COVID19 levels (blue bars).
Near-Term Gold Producer Obtains Funding
Mammoth Resources Corp. (TSXV: MTH) Regrouping After Centerra Terminates Option
In September 2020, Centerra Gold Inc. (TSX: CG) notified Mammoth Resources Corp. (“company”, “Mammoth”, “MTH”) that it will not be continuing with its option agreement on MTH’s Tenoriba gold-silver project in southwestern Chihuahua State, Mexico. This move was totally unexpected as CG had recently filed a permit application to drill 139 holes, and had two drill companies bidding for a drill contract. CG stated that their decision to cease exploration was not a reflection of Tenoriba’s potential.
Gran Colombia Gold Corp. (TSX: GCM / OTCQX: TPRFF) Triples Dividend / Q3 Production Beat Expectations
Gran Colombia Gold Corp. Research Report : Gran Colombia Gold’s (“company”, “GCM”) Q3 revenue was up 36% YoY, while EBITDA and net income were up 50% and 168%, respectively. Although revenue beat expectations due to higher production, EBITDA was lower due to higher than expected costs. Q3 cash cost of $796/oz still remains on the lower-end of gold producers.
GMV Minerals Inc. (TSXV: GMV / OTCQB: GMVMF) Updated PEA Demonstrates Scalability and Flexibility
GMV Minerals Inc. research report: On November 3, 2020, GMV Minerals (“company”, GMV”) announced results of an updated Preliminary Economic Assessment (“PEA”) on its Mexican Hat gold project in southeast Arizona. Management decided to update a previously completed 2018 PEA to account for higher gold prices and evaluate the economics of a lower throughput/lower initial CAPEX scenario.
Namaste Technologies Inc. (TSXV: N / FRA: M5BQ / OTC: NXTTF) Q3 Revenue Inline with Projections
Namaste Technologies Inc. (“Namaste”, the “company”) reported fiscal Q3-2020 financials (quarter ended August 31, 2020), with $5.7M in net revenue, up 49% YoY due to stronger product sales, and in line with our expectations. Flagship, CannMart, was the fastest growing segment, and contributed to 33% of this year’s revenue vs 3% in 2019-9M.
Global Energy Metals (TSXV: GEMC / OTCQB: GBLEF) – Diversifies Exposure to Battery Metals with Nickel-Cobalt-Copper Assets in Nevada – FINAL REPORT
Highlights In October 2020, Global Energy Metals (“company”, GEMC”) closed on a letter-of-intent originally entered in 2018, to acquire a 85% interest in two projects (the historic Lovelock cobalt-nickel mine and the Treasure Box copper-cobalt project) in Nevada,...
Weekly Cannabis Commentary
Over the past week, the Horizons Marijuana Life Sciences ETF (TSX: HMMJ / “HMMJ”), the Standard & Poor’s/MX International Cannabis Index (“MCAN”), and the Standard & Poor’s/TSX Cannabis Index (“XCAN”) generated returns of 25%, 27%, and 31%, respectively. Cannabis stocks rallied in the past week due to the Democratic party’s victory in the U.S. elections, and voters in Arizona, Montana, New Jersey, South Dakota, and Mississippi voting to relax marijuana laws in their respective states. In addition, the governors of New York and Connecticut also spoke to the media about their intensions to legalize recreational marijuana in 2021. Cannabis is now fully legalized in 16 states in the U.S.
Weekly Mining Commentary
Global equity markets rallied today as Pfizer (NYSE: PFE) announced highly encouraging test results (90% efficacy) of its vaccine for COVID-19. The S&P 500 index was up 2.6% today. As shown below, every single index we track is up WoW (orange bars). Four out of seven indices are trading higher than pre-COVID19 levels (blue bars).
COVID Tech Hammered but Outlook Remains Positive
Although most sectors generated positive returns today from Pfizer’s announcement, a few sectors/assets were negatively impacted, namely the US$, gold/silver, and stay-at-home stocks such as Zoom (NASDAQ;ZM), Amazon (NASDAQ: AMZN), and Netflix (NASDAQ: NFLX). Note...
Senior Gold Producers(NYSE: NEM, GOLD, AU) – Strong Q3 from Higher Production and Gold Prices
Highlights All three of the world’s largest gold producers, Barrick, Newmont and AngloGold, reported QoQ increases in production. With a 22% QoQ increase, Newmont reported the strongest growth. Barrick and Newmont have...
Senior Gold Producers(NYSE: NEM, GOLD, AU) – Strong Q3 from Higher Production and Gold Prices
Highlights All three of the world’s largest gold producers, Barrick, Newmont and AngloGold, reported QoQ increases in production. With a 22% QoQ increase, Newmont reported the strongest growth. Barrick and Newmont have...
Senior Gold Producers(NYSE: NEM, GOLD, AU) – Strong Q3 from Higher Production and Gold Prices
Highlights All three of the world’s largest gold producers, Barrick, Newmont and AngloGold, reported QoQ increases in production. With a 22% QoQ increase, Newmont reported the strongest growth. Barrick and Newmont have...
Braveheart Resources Inc. (TSXV: BHT / OTCQB: RIINF) – Advancing a High-Grade Copper Project to Production for Just $6.5M – Initiating Coverage
Braveheart Resources Inc. (“company”, “BHT”) is focused on bringing its 100% owned Bull River copper-gold-silver mine in B.C. back into production. The company is also in the process of acquiring another historic producer (copper-nickel), named the Thierry mine, in Ontario.
Gold Springs Resource Corp. (TSX: GRC) Robust PEA on an Open-Pit Gold Project on the Nevada-Utah Border – Initiating Coverage
Gold Springs Resource Corp. (“company”, “GRC”) is focused on delineating a multi-million ounce gold resource on its 100% owned Gold Springs project on the Nevada-Utah border in the Western U.S
Panoro Minerals Ltd. (TSXV: PML) Wheaton Precious Funded Copper-Gold Junior in Peru with Hudbay as the Largest Shareholder – Initiating Coverage
Panoro Minerals Ltd. (“company”, “PML”) is a copper focused junior with nine projects in Southern Peru. Hudbay Minerals (TSX: HBM) owns 12% and is the largest shareholder. PML’s portfolio includes two advanced stage assets – Cotabambas (copper-gold) and Antilla (copper) – with a combined After-Tax Net Present Value (“AT-NPV”) at 7.5% of US$989M, per Preliminary Economic Assessments (“PEA”) completed on the projects. Panoro’s Enterprise Value (“EV”) of $28M is just 2% of the combined AT-NPV.
Atrium Mortgage Investment Corporation – Q3 Beat Expectations; Interest Collections In Line With Historical Rates
Atrium’s Interest payment collections have been in line with historical rates through the pandemic. After a quiet Q2, the company ramped up lending in Q3; net mortgages outstanding increased 2.8% QoQ; management expects Q4 to be much stronger and lend approximately $100M in the quarter vs $48M in Q3 and $16M in Q2.
Weekly Cannabis Commentary
Over the past week, the Horizons Marijuana Life Sciences ETF (TSX: HMMJ / “HMMJ”), the Standard & Poor’s/MX International Cannabis Index (“MCAN”), and the Standard & Poor’s/TSX Cannabis Index (“XCAN”) generated a return of 3%, 2%, and 7%, respectively. Most of the stocks gained strength today due to the growing optimism surrounding U.S. elections. A number of states in U.S., such as New Jersey, Arizona, Montana, South Dakota, and Mississippi, will have voters deciding this week whether to make recreational marijuana legal in their respective states.
Weekly Mining Commentary
We believe that base metal prices would have declined more if inventory levels had not declined. As shown in the charts below, copper inventory levels declined both on the SHFE (Shanghai) and on the LME (London), primarily due to a rebound in activities in China and the U.S. As shown below, manufacturing activities in the U.S. in October were higher than pre-COVID levels.
Yamana Gold to Acquire an FRC Top Pick
With the U.S. presidential election concluding this week, we highlight certain sectors that will benefit from a Trump victory and sectors that will benefit from a Biden victory.
Apple Inc. (NASDAQ: AAPL) – FY2020 EPS Missed Our Estimate by 0.04%
We had predicted the decline in iPhone sales as Apple had announced earlier that their new iPhone 12 series will only be launched after the fiscal year-end. We expect a strong Q1-FY2021 based on sales from iPhone 12.
Wearables, home, and accessories, and services reported strong revenue growth. Although we are concerned about increasing competition for iPhone, we are slightly raising our revenue and EPS forecasts for FY2021 based on stronger growth in wearables, home and accessories, and services. Our forecasts are on the conservative-end of consensus forecasts.
Microsoft Corp. (MSFT) – Q1 Revenue Inline, but EPS Beat Our Expectations
Highlights: Q1-FY2021 (quarter ended September 30, 2020) revenue was up 12% YoY, inline with our expectation, but beat market consensus by 4%. As expected, revenue was driven by a surge in demand for cloud services amid a work from home environment due to the pandemic. We expect a high percentage of businesses to move to a permanent work-from-home environment, even after the pandemic. This is positive for MSFT, and other cloud providers, as the recent surge in demand for cloud products will likely stay.
Weekly Cannabis Commentary
Over the past week, the Horizons Marijuana Life Sciences ETF (TSX: HMMJ / “HMMJ”), the Standard & Poor’s/MX International Cannabis Index (“MCAN”), and the Standard & Poor’s/TSX Cannabis Index (“XCAN”) generated a return of -5%, -4%, and -5%, respectively. There was no significant news in the industry in the past week.
Weekly Mining Commentary
Last week’s major headline was the surge in new cases of COVID-19 in Europe and North America. The second wave is significantly worse, with most countries reporting record numbers of daily new cases. As a result, global equity markets continued to retreat in the past week. All seven indices we track reported losses. Three out of these seven indices (the S&P 500, SSE Composite/China, and Nikkei 225/Japan) are still trading higher than pre- COVID19 levels. The S&P 500 was down 2.1% WoW. Although inventory levels of copper and zinc on the SHFE (Shanghai) declined, they were up on the LME (London).
Businesses Better Equipped for Second Wave
Although we are concerned about the surge in new cases, we believe that most countries are better equipped to handle the situation, as opposed to the first wave. Although a number of countries have imposed new restrictions, we do not expect total lockdowns. We continue to expect a U-shaped global economic recovery, and maintain our commodity price forecasts, as shown below.
Grown Rogue International Inc. (CSE: GRIN / OTC: GRUSF) Q3 Revenue up 17% YoY, Inline with Expectations
In Q3-2020, the company reported $904k in revenue (in line with our expectations), an increase of 17% YoY, and a decrease of 23% QoQ. EBITDA also showed a similar trend, improving YoY, but declining QoQ. The Bay City indoor production facility in Michigan (acquisition expected to be completed by Q2-2021) received its first Class-C adult-use (recreational) cannabis production license in August 2020. Recreational cannabis prices were 30% higher than medical in September.
