Special Report: The project will also allow ECS to leverage the superiority of Tasmania’s natural growing environment.

Medicinal cannabis company ECS Botanics Holdings (ASX:ECS) has taken the first steps to building an innovative new pathway in cannabis cultivation.

In a landmark announcement this morning, the company announced plans are officially underway for a major outdoor growing facility at its fully-owned site in northern Tasmania.

Speaking with Stockhead, ECS Botanics CEO Alex Keach said the project is the result of “a lot of hard work coming together”.

Stage 1 of the project will be funded via existing cash and the company’s $600,000 share placement and $250,000 SPP, as well as existing business revenues.

The company is also in discussions with its key stakeholders and potential off-take partners as it moves to complete construction ahead of the planting window in December.

Compared to other large-scale production efforts in the market, “it’s very different, and I think people will be surprised about how much cannabis we can produce and how cheaply we can do it,” Keach said.


Tasmania advantage

By establishing an outdoor growing facility, ECS is looking to build a competitive advantage from the unique natural growing conditions in the Tasmanian environment.

The project was recently flagged as one of the highlights in the local cannabis space by investor and commentator Mark Bernberg, who told Stockhead Tasmania has the “perfect growing conditions for cannabis. Lots of sunlight, water and fresh air”.

Keach also noted Tasmania also has strong ties with the global pharmaceutical industry, given it already grows more than 50 per cent of global opium supply used in medical products such as codeine.

“We know plant-based pharmaceuticals do extremely well in Tasmania due to the low-risk climate, so we want to leverage that advantage,” Keach said.


‘Next-gen approach’

While the ECS Botanics farm won’t be the first attempt at large-scale cannabis cultivation in Australia, it will mark the first ASX listed company to do so in an outdoor setting.

Along with the natural environment advantages, it also significantly de-risks the project from a capital management perspective.

“Our total capex budget on this project is around $2.74m, and by completion, we’re expecting to have capacity for up to 32,000kg of cannabis flower,” Keach said,

ECS is building the project on a three-stage model, with a Stage 1 production range of around 2,000kg. That will increase to around 16,000kg for Stage 2, before hitting full capacity (32,000kg) at Stage 3.

“We’re taking a ‘next-gen’ approach to cannabis,” Keach said. Rather than growing indoors and trying to replicate a perfect growing environment, we’re just growing it where it grows naturally so well.”

The company has received planning approval from the local town council and has made a submission to the Office of Drug Control (ODC) to obtain a variation on its existing license.


‘Phase-2’ growth

From the company’s agricultural base in Tasmania, Keach said ECS is also well positioned for the next structural shift in cannabis as the sector continues to mature.

He compared it to the existing poppy industry, where big pharmaceutical companies have well-established extraction procedures to obtain the APIs (active pharmaceutical ingredients).

“I think what we’ve seen so far is a ‘Phase 1’ period of cannabis, which was the industry finding its feet and defined by some rapid growth and excess capital,” Keach explained.

“But now we’re moving into Phase 2 Cannabis, which is a more measured approach. On the production side, Cannabis will increasingly be viewed as an agricultural raw material.”

“From a production point of view, it’s becoming more of an agri-business play – commoditised to produce molecules at a very low cost per gram. And that’s where ECS is best positioned to take advantage in the future.”

This article was developed in collaboration with ECS Botanics, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.