NetworkNewsWire
Coverage: For 17 years Canada has provided legal access to
medical cannabis to its citizens, and now the country is expected
to legalize recreational marijuana by July 2018. With sales of
Canadian medical cannabis projected to exceed $8 billion by 2024
(http://nnw.fm/bEi4r) and the recreational
market estimated to be worth over $18 billion annually (http://nnw.fm/x49Ay), investment capital has been
pouring into Canada’s licensed producers (LPs). Though the demand
for cannabis is projected to exceed 600,000 kilograms a year (about
1.3 million pounds), Canada’s LPs currently only cultivate about
20,000 pounds of dried marijuana annually. This immense impending
imbalance is a magnet for serious capital investment. It also
presents enormous domestic opportunities for one of Canada’s
premier producers, ABcann Global (TSX.V: ABCN) (OTCQB:
ABCCF) (ABCCF
Profile), which produces only organically grown,
pesticide-free, standardized product and produces among the highest
yields within the Canadian sector. Other publicly traded cannabis
companies vying for position include Cronos Group Inc.
(TSX-V: MJN) (OTC: PRMCF), Maricann Group Inc.
(CSE: MARI) (OTCQB: MRRCF), Emblem Corp., (TSX.V:
EMC) (OTC: EMMBF), with cannabis finance company,
Cannabis Wheaton Income Corp. (TSX.V: CBW) (OTCQB:
CBWTF), looking to profit by injecting capital into select
growers.
Canada’s initial objective in recreational legalization is to
eliminate criminal elements that made a fortune trafficking in
marijuana. By getting marijuana out of the black market and into a
regulated environment, Canada will generate significant tax
revenues and enable it become the first developed country in the
world to legalize recreational use. Managing the complexities of
integrating the programs will be a delicate balance, but despite
the challenges, suppliers are optimistic that legal recreational
sales will be a reality by summer. Once fully implemented, Canada
could be in the enviable position of being the only regulated
producer of marijuana products in the world. In the interim, money
keeps streaming into licensed suppliers; $685 million in investment
capital was infused into publically traded licensed producers last
year and this year looks to be even bigger. In November,
Constellation Brands, a major beer and wine distributor in the
United States, pumped $245 million into Canadian licensed medical
marijuana growers (http://nnw.fm/Dl3Ew).
To become a licensed producer is a marathon exercise in
bureaucracy that can take up to three years, with only 3% of
applications ultimately approved. Health Canada conducts thorough
reviews of applications, ensures compliance, conducts frequent
inspections, and enforces stringent standards. A pioneer in
Canadian medical cannabis, ABcann Global
(TSX.V: ABCN) (OTCQB: ABCCF), has been licensed in
good standing since 2014 with no history of product recalls, and
proprietary computer-controlled production systems that have
bolstered the company’s reputation for its consistent
pharmaceutical-grade cannabis. Recognizing early on that if the
plant was to be effectively utilized as medicine, production had to
be standardized from batch to batch, year-over-year, ABcann took an
unprecedented scientific approach to medical cannabis production
and established a $1.5 million research contract with the
University of Guelph, a world leader in controlled environmental
growth systems. The scientific collaboration led to ABcann’s
proprietary cultivation methods that produce the highest consistent
quality cannabis with yields that double the industry standards.
Precise computer control of every possible variable allows ABcann
to reliably homogenize the environmental experience so each plant
reacts and produces the exact same medical compounds each and every
grow cycle. The success of company’s proprietary technique is
reflected in its 94.7 percent customer retention rate, 30 percent
month-over-month customer growth and its current yield rate which
is nearly double the industry average (http://nnw.fm/w1vUW). ABcann’s scientific approach to
medicine has established the company as an industry leader for
quality and consistency and a reputation for pharmaceutical-grade
products, a crucial factor to capitalize on international market
opportunities. The company’s modular approach to systems technology
mitigates start up risks while ensuring consistency and product
quality anywhere in the world. ABcann is already tactically
targeting Western Europe.
ABcann’s success didn’t go unnoticed. The company went public in
May 2017, raising nearly $12 million in a private placement and
another $25 million in debentures. Shortly after, PI Financial
pegged a one-year share price target of $2.25 (USD). ABcann
recently announced the receipt of $11.9 million in proceeds from
the exercise of warrants, and with a significant investment from
Cannabis Wheaton Income Corp. (TSX.V: CBW) (OTCQB:
CBWTF), brings ABcann’s current cash position to about $45
million today. Priced significantly above market, ABcann announced
on in August (http://nnw.fm/aVAL7) the close of an initial $15
million investment by Cannabis Wheaton, which has raised over $85
million in the last six months, funds licensed or nearly licensed
cannabis producers with smart money, brings in experts to evaluate
budgets, and injects capital at important development phases.
Once facilities are producing, Cannabis Wheaton gets a royalty
on the sale of one-third of the output, which it negotiates to
purchase at direct cost. Chuck Rifici, Cannabis Wheaton’s CEO,
commented on the investment, "This now adds a sixth license to the
Cannabis Wheaton portfolio, and our first publicly traded producer
with a sales license. Over the past three years, I've watched
ABcann's involvement and evolution in the Canadian cannabis
industry. They are widely recognized for their proprietary
cultivation methods that produce high quality cannabis with
industry leading yields.”
This initial investment is only part of a larger $30 million
phased investment for construction of an additional 50,000 square
feet of pure cultivation space next to ABcann's current
14,000-square-foot cannabis cultivation facility in Ontario,
Canada. ABcann’s second production facility, its 65-acre Kimmett
property, has construction plans for a 100,000-square-foot
purpose-built facility taking production capacity to 20,000
kilograms per year and positioning ABcann for hyperbolic expansion
in the Canadian cannabis industry.
Others vying for market position include Maricann Group
(CSE: MARI) (OTCQB: MRRCF), which is expanding its
cultivation, extraction and production facilities, has raised in
excess of $60 million over the last year, some of which was at a
$250 million pre-money valuation. However, the company reported
that Q2 sales declined by 27% from previous year levels and down
42% compared to Q1. Underscoring the importance of environmental
controls, Maricann attributed the shortfall to a March windstorm
that allowed sand to enter its greenhouses and ultimately caused
destruction of all impacted plants. Since going public less than a
year ago, Emblem (TSX.V: EMC) (OTC: EMMBF) has
attracted nearly $27 million in fresh capital and has the same size
growing facility as ABcann’s current facility. Cronos Group
(TSX-V: MJN) (OTC: PRMCF), which operates two wholly-owned
licensed producers collectively situated on more than 125 acres of
agricultural, licensed land, has garnered over $80 million in debt
and equity financing in just the last three months.
Smart money continues to pour into Canadian LPs at an
unprecedented rate, and appears to be on the upswing. Obvious
initial indications would be for the forthcoming legalization of
recreational use. There’s certain to be a bonanza of opportunity
upon implementation, but smart money capitalizes on not only the
impending obvious but also on strategic longer-term considerations.
Select Canadian medical cannabis companies will be uniquely
positioned to capitalize on gigantic global growth opportunities.
Investors seeking substantial capital appreciation should strongly
consider following the smart money.
For more information on ABcann Global please
visit: ABcann Global
(TSX.V: ABCN) (OTCQB: ABCCF)
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