Tag Archives: corporate cannabis

The great race to become the World’s weed supplier

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Submitted by Marijuana News on Fri, 10/11/2019

Companies vying to be the biggest cannabis producer in America or Canada are wasting their time and suffering from a crippling lack of vision. The real play is to make a bid to become the worldwide leader in global cannabis exports — like firms in Jamaica and Lesotho as well as Canada are attempting to do — and the window of time to get in is closing fast, according to one entrepreneur with clear-cut plans to curb that market.

Though recreational cannabis is now available in two countries, medical marijuana is legal in about 50 and not every country produces adequate supply to fulfill domestic demand. Over the long-term, the thinking goes, cannabis will become like any other agricultural commodity and production will shift to the locale where costs are lowest. But so far, the limited export game has been dominated by a few players, most of whom are either occupying a very limited lane or banking on the future.

An example of the former, Bedrocan in the Netherlands, produces cannabis solely for the government authority, which then exports most of it to Germany. Bophelo Bioscience and Wellness, a startup recently acquired by a Canadian-firm and based in tiny Lesotho, the first country in Africa to legalize cannabis, is an example of the latter. Somewhere else is a company like Fotmer Life Sciences in Uruguay, which is hoping to supplant both.

The world’s most popular illicit drug, cannabis boasts at least 263 million users worldwide, according to a New Frontier Data estimate, who in turn consume $340 billion worth annually, most of which is still on the underground market. At the moment, with so few legal companies producing cannabis and even fewer exporting, it’s a seller’s market. That state of play — flux, uncertainty, opportunity — will last only about another five years, said Jordan Lewis, an American entrepreneur who is Fotmer’s CEO.

Fotmer was in the news much last week as the company prepared its first shipment of export cannabis: 22 pounds, headed for medical cannabis patients in Australia. After that, Fotmer hopes to start competing with Bedrocan and begin shipping cannabis flower and oil to Germany, with up to 220 pounds or so per month headed out of the country to global customers, as he told Reuters.

Most of that will go to Europe, which “right now represents the single largest market in the next five years,” Lewis told Supplychainbrain.com.

The window for producers to charge high prices, before a reliable global supply floods the market, is now through 2024, he added, with high THC oils and plants to preserve their value longer than CBD products.

The modest first shipment is a tiny fraction of the company’s capacity. Fotmer currently has government approval to produce up to 10 tons of flower and 5 tons of oil, said Lewis — who added that he’s asking the Uruguayan government to allow him to grow 15 times that, in order to curb that global market. (He’s also shopping for a “large strategic partner” to provide the estimated $60 million of start-up capital needed to grow all that cannabis.)

If Lewis is right and producers in other companies join in, Fotmer may be well positioned to remain competitive, an outlook shared by other analysts. As New Frontier Data noted in a global market analysis released earlier this year, South America is considered a future hub for cannabis production thanks to an agreeable climate and low labor costs.

If countries decide that domestic suppliers are preferable and throw up tariffs, Lewis’s play could disappear. Or perhaps the best praxis is to play off of the incredible hype around the cannabis industry and get acquired. The point is that in a world obsessed with the next big thing, cannabis is very quickly approaching critical mass, and entrepreneurs are slowly catching on.

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Authored By: Cannabis Now

Article category: Marijuana Business News

Mining’s New Joint Venture

Posted by Gabe Friedman

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This isn’t a great time for small Canadian mining businesses. For the past couple of years, people have worried that China’s economic problems will keep it from buying metals and minerals in big quantities, as it once did, which has lowered prices for some of those commodities. Plus, mine workers are aging and retiring, and there may not be enough younger people to replace them. The combined value of the hundred largest “junior” mining companies—the small ones focussed on exploring deposits, in contrast to “major” companies, which extract the deposits that juniors have analyzed—fell by forty-four per cent last year. As Winston Churchill said, “To improve is to change.” So a couple dozen mining companies are now trying out a sexier business: weed.

Canada started granting its first commercial permits to grow marijuana for medicinal purposes late last year. Since then, at least thirty junior mining enterprises have started diversifying into medical marijuana—“M.M.J.,” for short—or have announced plans to do so.

“As a publicly traded company, we always need a story that’s good enough to raise money on,” Jennifer Boyle, the C.E.O. of Satori Resources Inc., told me. Satori is—or has been, in any case—a gold-mining company. Now Boyle wants to get into pot. “If you can latch on to something you can probably raise money on, i.e., medical marijuana, then why not?” she said. “Because otherwise, your assets are in danger of being bought for next to nothing.”

The fact that exploratory mining and growing marijuana have little in common is, it seems, hardly important. The Papuan Precious Metals Corp.’s stock price rose from two cents to fourteen cents after it announced plans to consider agricultural projects and then hired a marijuana consultant. This month, Papuan agreed to acquire the assets of a pot dispensary in Colorado, where marijuana is now legal for anyone who is twenty-one or older. Other junior companies are experimenting with growing mediums and fertilizers, or looking to provide equipment to growers. “The reason you’re seeing the junior mining companies going to medical marijuana is because there is no money in mining,” Greg Downey, the C.F.O. of Papuan, said. “We look to where the money is going.”

The junior mining companies experimenting with marijuana are not high up in the hierarchy of mining. At the bottom level, there are prospectors, who walk hillsides and fields, kicking rocks in search of minerals and metals. One step up are the juniors: they follow up on prospectors’ finds by conducting more serious studies and sometimes even developing mining sites, with the goal of one day selling their assets to a major mining corporation. Most of the juniors that are turning to pot have market capitalizations of five million dollars or less; they represent only about one per cent of Canada’s estimated three thousand two hundred mining firms.

Major mining companies have had trouble raising capital because of falling commodities prices and a tendency toward cost overruns, which has made it even more difficult for juniors to raise money for their projects, since chances of a buyout are remote. It hasn’t helped that junior mining projects keep failing. There is also an impending labor crisis: in the next ten years, the mining industry will need to replace more than half of its workforce, as current employees retire or depart for more attractive industries. This is problematic both because companies will have to cover those former workers’ retirement benefits and because not many young people choose mining as their profession these days, according to a report by the Canadian government’s Mining Industry Human Resources Council.

The marijuana business isn’t necessarily a panacea. Marijuana remains illegal in Canada, although, since 2001, the federal regulatory agency Health Canada has let residents with a doctor’s authorization possess the plant for personal use. It also granted tens of thousands of permits to grow the drug for personal use or to grow it for someone else’s personal use. Last year, Health Canada became convinced that marijuana was being abused for recreational purposes, announced a repeal of the old growing permits, and started accepting applications for commercial-growing permits instead. (A court injunction put the repeal on hold for the moment, but Health Canada has issued thirteen of the commercial permits. It hasn’t put a cap on how many commercial permits it will grant, but it has said that it has received more than nine hundred applications.) Wagner, the consultant, said that only forty thousand Canadians or so have medical-marijuana prescriptions, a level of demand that a couple hundred growers could easily meet; even if the number of people with prescriptions grows to more than four hundred thousand by 2024, as Health Canada is forecasting, he predicts that this would create only enough customers for an additional several hundred growers. So far, none of the mining companies have been granted a commercial-growing license, although one former mining company is close to merging with a company that owns a license. Many are applying for a license or conducting medical-marijuana due diligence.

Executives at the junior mining companies gave various reasons for why they are well suited to enter the marijuana industry: Downey said that juniors are already publicly listed and therefore have immediate access to capital. Another said that his skill set is in assembling teams, whether it is geologists or pot growers. Boyle, the C.E.O. of Satori Resources Inc., pointed out that her company already has the ticker BUD, which gives it a natural leg up; even now, investors assume that the company is in the marijuana business.

Michael Dehn, the C.E.O. of Jourdan Resources Co., said that he wound up in the marijuana business by happenstance. His company owns several properties in Quebec that it wants to mine for phosphates, a component of fertilizer. It also leases office space in a strip mall in a Toronto suburb, next to a pot grower called ChroniCare Canada Corp. “One day, I was out in the parking lot talking to the guy next door, and I said to him, ‘What do you do?’ ” Dehn recalled. “He said, ‘We grow marijuana,’ and I said, ‘We make fertilizer. We should work together.’ ”

Jourdan and Satori Resources have joined together to excavate and pulverize a small amount of phosphate rock, and they’re partnering with ChroniCare to test whether it could be used to fertilize pot. If it works, the companies would together start selling fertilizer to pot growers.

“We were always going to do fertilizer, and our plan was to target corn or wheat, but we’re still five years away from that, so in the meantime we’ll receive a cash flow,” Dehn explained.

The Canadian market, however, is small. With only thirty-five million people in the country, Dehn and others said that they are thinking about export opportunities. “You kind of look at this as the prohibition period, like when Canada was smuggling alcohol to the U.S.,” he said. Dehn has never smoked pot, but he has heard good things about Canadian-grown marijuana. “For most of my life, this is where you heard the good weed was,” he said. “It’s like France—that’s where you go for champagne.”

Gabe Friedman writes about legal affairs, the environment, and business. He was a Knight-Bagehot Fellow at Columbia University and lives in New York.

Illustration by Dadu Shin.

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