In case you haven’t been paying attention, big things are happening with the marijuana industry. Last year, more than a dozen unique milestones were made, with the biggest of all being Canada’s legalization of recreational weed. In passing the Cannabis Act, Canada became the first industrialized country in the world to give the green light to adult-use consumption.
We’ve also seen sales estimates for the industry soar. The team of Arcview Market Research and BDS Analytics has called for 38% global growth in 2019 to $16.9 billion, with investment bank Cowen Group forecasting up to $75 billion in sales by 2030.
As a result, marijuana growers have more or less been in an escalation war over production capacity since the beginning of last year. This is a “war” that Aurora Cannabis is currently winning, with yours truly projecting 700,000 kilos in peak annual output by 2021 or 2022, although Canopy Growth is within striking distance at more than 500,000 kilos per year. But this doesn’t mean that other major producers aren’t doing what they can to move up the list, so to speak.
Emerald Health exercises an option to almost double production
Last week, British Columbia-based Emerald Health Therapeutics (NASDAQOTH:EMHTF)announced that it would be exercising one of its lease options regarding its Pure Sunfarms joint venture with Village Farms International (NASDAQ:VFF). In doing so, it nearly doubled its peak production potential.
Back in 2017, Emerald Health and Village Farms created the 50-50 Pure Sunfarms joint venture with the idea of retrofitting Village Farms’ existing vegetable-growing greenhouses to cannabis production. The initial outlay involved 1.1 million square feet of vegetable-growing space that, when complete, would house 1.03 million square feet of cultivation area and yield at least 75,000 kilos per year. Thus far, approximately 825,000 square feet of cultivation space has been licensed by Health Canada at the Delta 3 facility, with the remainder expected to be licensed very soon.
However, the joint venture featured an option for Emerald Health to acquire up to 3.7 million square feet of additional growing space from Village Farms to be used for cannabis production. On Monday, April 1, Emerald Health exercised its option for a second 1.1-million-square-foot facility (to be known as Delta 2), and announced its intent to purchase 25% of the aggregate production from Delta 2 and Delta 3 in 2020, 2021, and 2022. Emerald Health is expected to commit roughly 25 million Canadian dollars to help construct Delta 2, with positive operating cash flow from the joint venture funding the remaining CA$35 million (the Delta 3 facility cost CA$60 million).