Cann Group raises $60m; expects Aussie cannabis exports to start soon
The world could soon be buying Bonza Bud, Dinky-di Dope or Ripper Reefer — and cannabis producer Cann Group is amassing a $60 million warchest to ramp up local production.
“With the Federal Government now reviewing the possibility of allowing exports from Australia to overseas markets where cannabis is approved, there is the prospect of a major additional opportunity that our accelerated expansion will help facilitate,” Cann Group chief Peter Crock told investors yesterday.
Export of domestically grown cannabis is currently banned under federal law “to ensure that sufficient product is available to address the needs of Australian patients”, according to the department of health’s Office of Drug Control.
But Cann Group is so certain Australia will soon reverse the ban that it’s raising $60 million to ramp up local production facilities.
Cann (ASX:CAN) will use the cash to build a “much larger” production and manufacturing facility, “following a further assessment of the market opportunity, and the prospect of Australian cannabis producers being approved to export product into overseas markets”.
Mr Crock said while he expects to see a steady increase in demand for medicinal cannabis within Australian market, he is preparing for the prospect of exports.
Canada, which will next year become the second country after Uruguay to legalise marijuana for recreational use, is just one potential market for Aussie pot producers.
“While the Canadian industry is investing heavily in capacity expansion, it is unlikely that it will be sufficient to meet this demand for several years,” analyst Matthijs Smith said in a recent Canncord Gennuity research report.
It’s not just Canada though that Cann is looking to. It says Europe is an increasingly important possible market with medicinal cannabis allowed to be used in 18 countries, some of which fund it through national insurance systems. Germany fully legalised it as a prescription medication in March, and Cann investor Aurora has an import licence to bring product into that country.
Mr Crock is one of a group of people in the cannabis industry who think the government could make it clear which way they want to go with exports before the end of the year.
“For us to be able to set up at scale and have a globally competitive operation, we must have an export component to allow us to work at that scale,” Mr Crock recently told Stockhead.
“That’s where the ability to export is going to be important for the industry as we grow.
In August an Office of Drug Control survey found “overwhelming support for allowing the export of medicinal cannabis products” among industry players.
Cann Group plans to build a state-of-the-art facility incorporating 16,000 sq m of glasshouse cultivation space and research and development laboratories at an estimated cost of $40-45 million.
It’s expected to be commissioned in the first half of calendar year 2019.
The capital raising is fully underwritten and split between institutions who will get $50 million, and shareholders who will get $10 million. The placement is priced at $2.50.
Medicinal cannabis has become one of the hottest sectors on the ASX since it was legalised last year — in November alone pot stocks doubled in value.
Cann has been in a trading halt since Wednesday, last trading at $3.