California Gold Mining (CNSX:CGM) Investment Potential in Mining and Hemp

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Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.

California Gold Mining (CSE:CGM) CEO Vishal Gupta sits down with James in studio for the first time. California Gold is a company focused primarily in gold mining, but it’s also looking into hemp propagation on its 100% owned Fremont property in Mariposa County, California.  The property was purchased in 2013 because of its key location. It lies along the Mother Lode Gold Belt of California, where the historic Gold Rush took place. On the hemp side, the company expects between 2,000 and 3,000 pounds on an annualized basis, which they will grow on their roughly 3,000 acre property. 

Transcript

Narrator: California Gold Mining, Inc. is focused on continued development of a high-quality gold resource on its 100 percent owned Fremont property in Mariposa County, California.

The property consists of an entirely private and patent land package totalling 3,351 acres of historically producing gold mines, with a State highway, PG&E electric substation, and abundant water present on the property itself.

The property lies within California’s prolific Mother Lode Gold Belt, that has produced over 50 million ounces of gold. California Gold is also investigating establishing a greenhouse-based propagation of high-CBD industrial hemp seed on the Fremont property.

California Gold Mining trades on the CSE under the ticker symbol CGM.

James West: Vishal Gupta joins me now. He’s the President and CEO of California Gold Mining, trading on the CSE under the symbol CGM. Vishal, welcome to the show.

Vishal Gupta: Thank you very much for having me here.

James West: Vishal, it’s heartwarming to see a company doing both gold mining and hemp for a person like me. Let’s start with the gold exploration project you’ve got going – it’s called the Fremont property in Mariposa County, California.

Vishal Gupta: Right, yeah. We’ve had this project for about six years now, and the reason why we purchased this private piece of land in 2013 is because it lies along the Mother Lode Gold Belt of California, where the historic Gold Rush took place. And out of the 200-kilometre long belt, we have a 4-kilometre strike on the mineralized shear zone running on our property.

Out of that 4 kilometres, we’ve drilled only about 1 kilometre, and we’ve got an initial resource estimate, NI 43-101 compliant, of almost 900,000 ounces of gold, 1.6, 1.7 grams per tonne, all near surface in the top 200 metres. So we’ve got an expansion potential just on the shallow ounces of another four times, as much as four times, I should say, and we’ve got 25 historic mines on the property as well from the Gold Rush days that have all been dormant for the last 70, 75 years. They were all underground mines, and they go down to depths of 500, 600 metres below surface.

Our resource only goes down to a depth of 200 metres below surface, so we’ve got a pretty substantial expansion potential on the underground mining potential, you know, at depth, as well.

James West: Sure. And so is there an expectation that permitting of a new mine would not be problematic, given the history of mining there?

Vishal Gupta: We are in California, which is always problematic regardless of whether you’re in mining or not.

James West: Right.

Vishal Gupta: Especially when you’re in mining. But we’ve got a few things going for us: we’re on completely private land, and in the United States, regardless of where you are, as a private landowner, you’ve got substantial rights. So we are on completely private land; we own the property, you know, 100 percent surface rights, 100 percent mineral rights, plus we are in a county that is an autonomous county, which means that when it comes to environmental permitting, the county is the lead agency, not the State. It’s one of those rare counties in California where the county is the lead agency.

So if you have local community support for your project to go forward, then the probability of getting your project permitted is pretty high. And in our instance, we have a very large, supportive community, you know, for our project to go forward, and the reason why there’s so much support is because, you know, over 30 percent of the population of Mariposa County is on social welfare and drawing social welfare in some form or another. Another 30 percent of the population is hired by the County government so that people can actually have jobs.

So you know, from an economic standpoint, this is a depressed economy; they desperately need jobs, they desperately need tax revenue to come in, and a project like ours could provide both of those components. So there’s a lot of local support for us to move forward with this.

James West: Okay. And so at what stage is the development of the property at? Besides you’ve got the resource, but how soon till you go into production?

Vishal Gupta: We believe we’re at least three to five years away, at least. I mean, it could take longer, of course; nothing is set in stone. But the expectation is that we’ve got another 75 percent of the strike to drill out first, then do some project economics to show, you know, what a pretty large project of that scale would look like on this property in terms of economics, and then, you know, progress to a PEA, then you progress to a pre-feasibility study, you progress to a feasibility study.

If there was an opportunity for us to put this project into production at, you know, maybe a slightly resource of, you know, 1 million to 1.5 million ounces or so, then we would definitely, you know, fast-track this project towards a PEA, then towards a pre-feasibility study and towards a feasibility study. We’re not at that stage yet to make that decision. So we are currently, you know, when we do start our drill programs again on the property, we will be looking to expand the resource first.

James West: Okay, interesting. So I guess that gives you lots of time in the meantime to grow hemp seed! And most recent press release, you announced that you had pre-sold your entire production of hemp seed in the range of 5,000 pounds, and you expected to realize 15,000 to 30,000 pounds. Even at the lowest number, that’s still $75 million. What’s the status of that, and how did you get involved in hemp seed production?

Vishal Gupta: Well, I think first things first, it’s, you know, I’m a geologist, so my heart is in the mining, you know, aspect of what we’re doing on the Fremont property. But increasingly it became quite apparent that, you know, even though we were coming up with some very substantial operational results on the gold mining and exploration side, we were not getting the appreciation in our stock price. And instead of just, you know, doing one dilutive financing after another to just keep on funding the gold exploration business, we were in a completely dead market when it comes to the gold mining industry, and so instead of just doing dilutive financings and diluting our shareholders moving forward, we decided to see if we could monetize this private piece of land that we actually have in Central California, and see if we could generate some positive cash flow.

And so, you know, initially we were looking at, you know, building a greenhouse and doing some high-margin commodities, you know, in terms of agriculture, like ginseng or basil or some specialty peppers. But then, you know, we got approached by a couple of, you know, cannabis sector companies – private companies – based in California, that wanted to lease our land and then they wanted to do some cultivation on their own. And that’s where we got the idea from in terms of, you know, going into the cannabis sector.

But we strictly wanted to stay away from marijuana. Marijuana is illegal in the United States, and we did not want to do anything illegal, especially because we’re a publicly traded company. So we wanted to stick completely to industrial hemp, which has now been completely legalized by the passing of the US Farm Bill in December of 2018. And so we are in the process of launching our hemp seed propagation business. The expectation is that, you know, we’ll be setting up one greenhouse, 27,000 square feet; you know, that greenhouse should be up and running by the end of Q3.

You know, the seed propagation that would take place within the greenhouse would be on three-month cycles, so every year we can expect as many as four cycles. So our first cycle of seed propagation should be complete by the end of December, or I should say, by the end of Q4 of this year, and at that time, we should be revenue-positive.

James West: I see.

Vishal Gupta: And from one greenhouse, we’re expecting between 2,000 and 3,000 pounds on an annualized basis. We’ve got some cultivation partners who have an impeccable reputation in the industrial hemp space in particular; those partners are the same partners who have given us an offtake agreement for all of the seed production that we will be generating from our greenhouse in 2019 and 2020. That is as much as 5,000 pounds of seed.

The seed currently is selling, in the wholesale market in the United States, it is selling for between $40,000 and $50,000 USD per pound, and you know, our long-term projection for the wholesale market is between $15,000 and $30,000 USD per pound of seed. So 2,000 to 3,000 pounds on an annual basis, you’re looking at $15,000 to $30,000 USD per pound, long term projection, that should be some substantial cash flow coming in.

James West: Sure. And I guess if that all starts to work out, there’s no reason not to build more greenhouses.

Vishal Gupta: No, I don’t want to be too forward-looking here, but you know, you can reasonably expect us to have a very rapid expansion of our plans in the 2020 season.

James West: Right. So the price of gold and advancing gold mining projects in particular has been challenging to say the least for a lot of companies, but this ability to diversify the opportunity for investors into, you know, the hemp business, which is clearly a key focus of the global retail investor class right now, is really interesting. And do you think that there’s a likelihood that the money that comes out of the hemp seed business could actually fund exploration in your gold project?

Vishal Gupta: That was the entire impetus behind us getting into industrial hemp. We, as I said, you know, we don’t want to give up on our mining roots, and so, you know, 99.9 percent of our shareholders are shareholders because we’re a mining company, not because we’re a cannabis sector company. And so the expectation was that we wanted to generate some positive cash flow that would help us achieve our gold exploration objectives. That was the original impetus.

Clearly now it has turned into an opportunity that is an incredible investment opportunity in its own right, given how hot the industrial hemp/CBD sector is at current time. The expectation is, you know, when we convert our hemp project into a business, into a viable business, that will be around the time that we realize our first revenues. Around that time, we will have two options in front of us: either we do a change of business and we convert ourselves from being a gold exploration company into an industrial hemp/CBD company, or we split the two businesses up into two separate company.

So at that stage, right around that time, we will have two paths in front of us, and you know, we will consult all of our principal shareholders before making that decision. But you know, if we actually do choose the latter, which I am leaning towards myself, of splitting the two businesses up into two separate companies, then the expectation would be that we would do that as a plan of arrangement, shareholders plan of arrangement; which means that if you, James, own one share of California Gold today, then you would end up owning one share of the gold company and one share of the hemp company.

And in order to, you know, make sure that the gold company, after the split, does not go through a debt spiral of, you know, very dilutive financings, we would, you know, maybe structure some sort of a deal between the hemp company and the gold company where the hemp company will pay some sort of a royalty or some sort of a leasing arrangement between the two companies, where the gold company can have some cash coming in from the hemp business as well, and can fund its future exploration objectives.

James West: Interesting. Is the land where the hemp is going to be produced, is that on the gold mine site?

Vishal Gupta: Well, I mean, it’s a pretty large piece of land; we’ve got 3,300 acres.

James West: Okay.

Vishal Gupta: And you know, the gold is probably sitting primarily on about 1,200 acres or so – rough estimate, don’t hold me to it.

James West: Lots of extra room, then.

Vishal Gupta: And the, you know, the one greenhouse is going to take 27,000 square feet, which is a little over half an acre. So usage of land is not a problem. We’re definitely not going to be putting that greenhouse on top of a gold mineralization. [laughter]

James West: Okay, well, that’s great, Vishal. Let’s leave it there for now; we’ll come back to you when you’ve got more to tell us. Thanks very much for joining me today.

Vishal Gupta: My pleasure. Thank you very much.

 

Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.

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