ECS Botanics (ASX:ECS) has just become the stock exchanges largest, lowest cost and Australia’s most geographically diversified cannabis producers following shareholder approval of Victoria-based Murray Meds.
First announced in January, ECS shareholders gave approval, with over 99 per cent voting in favour.
Murray Meds has a fully licenced medical cannabis cultivation and manufacturing facility located on a seven-acre site on the Murray River in northwestern Victoria that fits in well with ECS’s low-cost cannabis model.
While other cannabis companies are building high cost indoor growing facilities, Murray Meds and ECS have both opted to grow cannabis in tunnels and outdoors, in ideal Australian climates for THC and CBD respectively.
ECS Tasmanian facility is due to come online this year and their extraction equipment has been shipped and due to arrive on site soon. The extraction equipment allows ECS to add value to the medicinal cannabis it grows to achieve higher prices.
Murray Meds is also producing high quality dry flower, which the broader narrative and industry did not think was possible using their style of low cost grow.
ECS focus on low cost commercial cultivation is cementing its position in the Australian market. The extraction deal prior to the Murray Meds acquisition, plus the manufacturing capacity though Murray meds allow the company to become very large vertically integrated medicinal cannabis company. The company has been busy announcing contracts lately for a range of products and has announced its in the recruitment phase for an EU sales leader.
Remember ECS also has a hemp business that has experienced quarter on quarter growth, they are approaching their third harvest. They sell into Woolworths and supply other hemp food companies with raw materials such as hemp seed oil.
Murray Meds has successfully harvested and is in the process of growing and harvesting more crops under its permit to cultivate 3,500 kilograms, with a production cost as low as 60c per gram.
Murray just last month signed a three-year agreement to supply London-based pharmaceutical distribution company The Armour Group with medicinal cannabis oil, which will contribute an estimated $500,000 in revenue in its first year, as well as a binding agreement to provide cannabis to the subsidiary of a large Australian-based medical cannabis company.
ECS managing director Alex Keach says he’s “delighted with the transaction and the opportunity and value it presents for ECS and its key stakeholder”.
“This deal allows ECS to deliver earlier and substantially more revenue,” he said.
The seven acre cannabis facility is part of a 170-acre farm and has licenses to pump 520 megalitres of water, meaning it has plenty of room to grow, and northwest Victoria’s hot dry climate provides a perfect climate for growing cannabis that’s high in THC.
The Tasmanian facility area is a 9 acre site on 110 acres, including a 60 mega litre water entitlement.
The geographic spread also reduces risk for the company, Keach says.
Murray Meds executive director and founder Nan-Maree Schoerie, a former chemist and executive with GE, ThermoFisher and Ventia, will be joining the ECS board as an executive director, and Keach says her diverse skill set and work ethic will benefit the group greatly.
ECS pays $1 million and 100 million ECS shares at 5c for Murray Meds, with another $1.5 million due in a year.ECS shares were trading Wednesday for 6.7c.
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.
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