Two companies from down under are making a splash in the Canadian medical cannabis market.
Australian mining Firm, Capital Mining, announced in early March that it has paid $7 million in cash plus $25 million in stock options for a minority stake of 49% in medical cannabis company Broken Coast Cannabis. Broken Cost is one of 14 cultivators that holds a distribution license in Canada. Capital Mining also announced that it plans to buy another Canadian company, Cannan Growers, in its entirety, for $250,000 plus $1 million in stock options. Both cannabis grow operations are located in British Columbia.
The mining company was the first publicly traded company on the Australian Stock Exchange (ASX) to own a direct stake in a Canadian medical marijuana cultivation and dispensation operation. The investments will allow both Canadian companies to dramatically expand operations. Broken Coast will double its grow operations to 26,000 square feet, triple its production capacity, reduce costs by 50% and boost cannabinoid content of its crop by as much as 40%. Cannan Growers, a cannabis developer and consultant, has a pending application for a Vancouver facility, with an option to buy it outright for $1.2 million.
This is an interesting if not strategic move on the part of Capital Mining, both in Canada and Australia. In Canada, the federal health ministry, Health Canada, has projected a tenfold increase in marijuana users by 2024. In Australia, marijuana legalization is also on the fast track to national acceptance. Last year, the country’s Prime Minister Tony Abbott, announced that there were no longer any scientific reasons for continuing to bar medical use. The future of recreational use is less certain, however, as in the United States, it is almost sure to follow.
The investment by a company in the Australian mining sector is also an interesting strategic move. The largest export destination for Australia’s minerals as well as its excess food is China, which currently maintains a death sentence for minor possession.
In March, a second Australian company, this time a publicly traded cannabis company, PhytoTech Medical Limited (PYL), threw its hat into the Canadian cannabis market. The company entered into a merger agreement with MMJ Biosciences, Inc. PhytoTech will acquire 100% of MMJ Biosciences for 68 million shares or $21.8 million at current market valuation. The company also works with Israeli-based research centers and has a licensing agreement with an R&D company associated with the Hebrew University in Jerusalem. MMJ Biosciences owns United Greeneries with 78,000 square feet of growing space that are in the process of government approval for medical marijuana facilities.