The Pot Seat: Cann’s Peter Crock says they’re not slow, they’re methodical
Food & Agriculture
Food & Agriculture
As Australia’s other cannabis cultivators rush to set up large scale pot farms amidst warnings of an agricultural race to the bottom, Cann Group (ASX:CAN) has sedately walked.
Or at least, that’s what it’s looked like from the company’s restrained and comparatively infrequent shareholder updates from a board stacked with ASX experience in the most difficult of sectors — agriculture.
Underneath, it’s all action.
CEO Peter Crock says Cann is up to its 36th harvest, having started growing pot in May 2017, and have the plants and genetics ready to go for large scale production.
Even the bombshell news in March that it was moving its flagship facility from Melbourne Airport to Mildura was the result of having a number of balls in the air.
Cann said in January it was on track to start building at Melbourne Airport by the end of March.
But Crock told Stockhead, with an uncharacteristic giggle, “clearly at the time we were also working closely on the Mildura project”.
The back story is that Cann raised $60m from investors in November 2017 for a 16,000 square metre project housing glasshouse cultivation, R&D labs, and a GMP manufacturing facility at an estimated cost of $40m-4m.
It was a big deal at the time because it was the first Australian cannabis company institutions had got behind.
By April 2018 it’d signed with major shareholder Aurora Cannabis’ engineering firm Aurora Larsson Projects, and the phase 3 design had been upped to 23,500 square metres with an operational start date of mid-2019.
Come June, it had turned into a 37,000 square metre site with a price tag for $100m after it had signed a deal for land at Melbourne Airport.
Last month it was forced to admit the airport wasn’t going to work.
A leasehold on federally owned land made things complicated, pre-approved development plans by the lessor didn’t eventuate, and the cost had blown out to more than the $130m now slated for the new Mildura site.
But the whole time the company had backup plans.
“We always had a strategy of having hub and regional cultivation nodes, so we’d been looking and when we ran into some headwinds with the concept of Melbourne Airport we decided to decided to move first on one of the regional nodes, and that’s when Mildura fitted into that pattern,” Crock said.
It’d also scoped out sites in the La Trobe valley, elsewhere around Melbourne, north of the Great Dividing Range in Victoria, as well as in NSW and South Australia.
And that sleight of hand in January about the build start date?
“What we were talking about there was we had placed orders and had the material being fabricated in Europe,” Crock said.
“It [was] still on track to ship according to the timeline we had so in terms of starting site works and preparation, that was all coming through.”
The design for the airport as well as the pre-ordered buildings will all fit on the Mildura land, so it expects to still meet anticipated timelines for getting weed out the door.
Companies like Althea Group (ASX:AGH) and THC Group (ASX:THC) both have ambitious timelines for turning initial base crops into marketable medical cannabis products
Althea is yet to say whether it has started building its facility in Melbourne. THC is still building its base stock and waiting on a permit for its Southport, Queensland, manufacturing lab.
And, like Cann, both are aiming at 2020 start dates.
So the question arises: why is Cann, with its head start of 36 harvests and two small operational sites, still to build its main growing site and also looking at 2020 — the third quarter in their case — for the start date of the big growing site?
“We’ve been focused on producing and delivering against our requirements and the fact that that’s been solely focused on supply into the Victorian government,” Crock said, without referring to any specific rival.
“It’s not a slower route.
“There’s a lot of white noise in the space in terms of people talking up what they’re going to do when in fact let’s see what they produce and what they deliver against, because I’m not sure that all the talk and rhetoric is being met with reality.”
The time spent on genetics research means Cann has several strains ready for mass cultivation now.
As a result it expects to be able to very quickly ramp up to both meet Australian market needs, via manufacturing partner IDT Australia (ASX:IDT), and to supply Canadian giant Aurora Cannabis under a five year offtake agreement.