Desperate Canadian juniors turn to medical pot industry to raise funds

A Cannabis Day legalization rally in Vancouver, BC.

Trying to stay afloat in a tough environment, a group of Canadian junior miners have decided to diversified their business by tapping into an emerging, but controversial market: medical marijuana.

According to a Reuters’ report, in the last two months there have been at least a dozen of these companies, hard hit by a downturn in the mining industry, which have announced they are considering growing cannabis.

Interest in this business has been growing since Health Canada announced it would allow licensed commercial growing of medical marijuana beginning April 1. In the US, meanwhile, this practice is legal in at least 20 states and the District of Columbia, with Colorado and Washington recently legalizing it for recreational purposes, and about a dozen other states likely to legalize marijuana in some form in the coming years.

Companies such as Next Gen, Sartori Resources and TSX Venture-listed Cavan Ventures, have floated the idea of an incursion in the industry, with the news regularly sending their stocks to a temporary high.

“What links the two industries is that they are both highly regulated. Having worked within a regulated mining framework definitely gives a new entrant a leg up in this new industry,” Cavan said this week in a news release.

While the junior mining sector have endured a couple of rough years as of late, a recent study suggests these companies are more resilient than many expected, with only 31 juniors that were trading at the Toronto Stock Venture Exchange being delisted in the 12 months ending June 30, 2013.

However the market value of the top 100 Canadian juniors dropped 44% to $6.49 billion in the same period, which means that miners are no longer the dominant force on the Venture exchange.