Health: Cann flags upgrade at Mildura production facility, shares bounce off recent lows

Medicinal pot stock Cann Group (ASX:CAN) is planning to go large at its Mildura-based cannabis manufacturing facility.

The company announced revised construction plans this morning which will see an extra production room added, along with denser planting operations.

As a result, Cann now expects production capacity to reach 70 tonnes of dry cannabis flower per year, up around 40 per cent from previous estimates of 50 tonnes.

The announcement accompanied Cann’s full year annual report and results presentation released this morning. The company posted a full-year net loss of $10.926m on revenues of $4.25m.

Shares in CAN were up more than 12 per cent in morning trade at $1.91, bouncing off recent lows after the share price fell from above $2 during the market ructions in August.

Nine-figure market

To help finance construction at the site, Cann has signed a term sheet for debt funding with a “major Australian bank”.

The company says its now carrying out extensive cost modelling to ensure the construction revisions can be managed with the project budget.

The debt funding facility will be signed off once “construction costs are tendered by the facility’s contractors”, Cann said.

“Specialised components from the Netherlands continue to arrive at the site and construction is progressing well,” CEO Peter Crock said.

“We are looking forward to pushing on with this major expansion and keeping the market informed of our progress over the next year.”

Cann says that with the increased production output, it will be able to generate future annual revenues of “approximately $220 million to $280 million, based on the current wholesale price of cannabis dry flower”.

The raw cannabis flower produced at the site will then be processed into medicinal cannabis products for patients in Australia and abroad.

Distribution for the products will be driven mainly via a five-year off-take agreement with Canada-based Aurora Cannabis Inc, Cann’s major shareholder and strategic partner.

The company forecasts that construction of the site will be completed by the end of next year.

In other ASX health news today

Another medicinal cannabis player, MGC Pharmaceuticals Ltd (ASX: MXC), has done a deal with the Slovenian Government. MGC will partner with the Slovenian Institute of Hop Research and Brewing to conduct a large-scale research project on medicinal cannabis.

“The project is to be divided into two focal points; cultivation optimisation, and standardising the production process of active pharmaceutical ingredients (API) derived from phytocannabinoids,” MGC said. Shares in the company were up 2.33 per cent at 4.4 cents.

And Roto-Gro International Limited (ASX:RGI) announced that its Canadian subsidiary has completed installation of the company’s hydroponic rotational garden system technology for Oakum Cannabis Corporation.

Installation took two weeks to complete as part of a $600k transaction. Roto-Gro will now finalise testing and product support for Oakum’s first crops. Shares in RGI were up 9.4 per cent to 17.5 cents.