The Pot Seat: THC Global’s Ken Charteris says everyone wants their pot factory
Health & Biotech
“This is one of the last times we’ll be able to show people around this place,” THC Global boss Ken Charteris said last week at his prized pharmaceutical making plant, trying to amp up anticipation around a future launch.
But truth be told, it might not be “one of the last times”.
Mr Charteris doesn’t know when the facility, which has sat idle on the THC books since it was purchased in April last year, will get its pot making licence.
He does reckon it’ll be this year.
And he also knows when they’ll have the marijuana to start filling it: the first quarter of 2020 is when they expect the first commercial crop, from the Bundaberg growing site.
The rest will come from offtake agreements from Australian growers who don’t have the luxury of a ready-made manufacturing plant.
THC Global (ASX:THC) is one of four companies in Australia that Stockhead has identified which have an all-important growing permit (here’s an explainer on licences and permits).
It covers their Bundaberg growing site, where they also have a small manufacturing plant.
They also have a NSW growing site in Ballina at an organic tea tree farm, an import deal to sell a Canadian branded medical product in Australia and New Zealand, a pot equipment sales business in Canada and plans there to start growing.
THC is one of the rare birds among Aussie pot stocks to be making money.
So far the cash is “predominantly” still coming from equipment sales in Canada, with a very small amount coming from cannabis sales in Australia.
Mr Charteris is not afraid to put a bet down on when THC will hit milestones.
In July last year he offered a series of dates when he believed they’d have licences, permits, when they’d start growing and when they’d start making stuff.
He was mostly right, about the growing licence and permits for a northern Queensland site at Bundaberg, first crops, and the offtake agreement for the NSW Jenbrook site.
But THC Global is still waiting on a growing licence for Jenbrook. Stockhead understands it could be coming in the next two months.
Mr Charteris says there’s no reason why it can’t be growing organic pot at Jenbrook by the end of the year.
And they’re waiting on manufacturing permits for both the Southport pharmaceuticals maker and the smaller version at Bundaberg, which means they won’t be producing first oils by the end of March as proposed, although the plan is to start ‘validation’ and small batch production from the latter this year.
THC Global doesn’t have buyers for the manufactured products yet. They’re talking about offtake agreements with foreign and local companies, but are yet to sign any deals.
“We’re in a really good position and realistically it’s just a matter of ticking the boxes,” Mr Charteris told Stockhead.
“We actually have real sites and we’ve obviously now brought on Bundaberg which is starting to bring our mother plants, our unique breeds online.
“We’re in a much better position in comparison to anybody new because we’ve got multiple sites [that already have permits].”
Getting a permit is not quick. Mr Charteris says it’s an 18-month to two-year process due to the level of scrutiny the Office of Drug Control has to do on every person and aspect of the business.
THC Global has made much of the fact that they have a GMP-certified — that’s good manufacturing practice — plant.
But the value of that plant is hard to understand amidst the sheer volume of cannabis noise around the world.
“There’s a worldwide shortage of pharmaceutical GMP [plants] and no one has capacity to do [that level of quality],” Mr Charteris says.
“One of the basic prerequisites [in countries that demand a pharmaceutical grade of cannabis product] is a very strict control of quality and production processes. The cannabis sector really hadn’t grappled with that because of the way it evolved… Pharmaceutical grade is a major stumbling block.”
The reason why is because the industry started out with recreational use in the US, and small business dispensaries in Canada, rather than from high quality medical grade level.
As countries have started legalising medical marijuana and requiring it to be made at a pharmaceutical GMP grade, such as Australia and Germany, companies that made it big by supplying cannabis of a lower standard are now scrambling to acquire the infrastructure to give them access to these markets.
The world’s number one and two pot stocks Canopy Growth and Aurora Cannabis have acquired this infrastructure via investments and takeovers.
AusCann (ASX:AC8) is looking to become a pharmaceutical manufacturer, but does not have the facilities yet. Other Australian companies are outsourcing that part of the process.
Mr Charteris says a plant like the Southport version would take over three years to build and cost about $35 million, while the lead time on the equipment inside is about two years.
THC Global is in the process of building up its sub-tropical cannabis strains to ready them for mass production.
In Canada, Mr Charteris says they’re still in due diligence over a potential growing operation there, but plan to have news out “in a few weeks”.
They’re hitting Canada because although it’s saturated with pot companies, the opposite it true for the actual product — the country has a serious shortage of weed in all forms.
They’ll start with medical cannabis in Canada sometime in 2020, Mr Charteris says, and branch out into nutraceuticals, hoping that any IP developed in the northern hemisphere will eventually be applicable in the southern reaches of the world.