Today, Cann Group (ASX: CAN) announced an agreement to buy an AUD $10.75 million site in Mildura, Victoria with the intention of building a 34,000 square meter greenhouse, producing 50,000 kg of dried cannabis flower.
The site is expected to be operational by 2020, with an estimated construction cost of $130 million. Once operational, Cann Group has also executed a five year off-take agreement with Aurora Cannabis.
Cann Group’s Cultivation
Cann Group currently operates two cultivation sites in Melbourne – named Northern Facility and Southern Facility.
The Northern Facility is focussed on research and development of genetics and tissue culture, while the Southern Facility hold a research and a commercial cultivation licence.
In June last year, Cann Group announced their plan for a five hectare site near Melbourne Tullamarine airport. However, this plan has been dropped and replaced with the Mildura site, after a “detailed revision of those plans”.
Cann Group CEO Peter Crock said, “The Mildura site offers other important advantages, including a lower total build cost and lower ongoing operating costs, due to the dryer climate and higher sunlight hours resulting in reduced power use.”
The raw material cultivated in Mildura will be processed by Cann Group’s manufacturing partner – IDT (ASX: IDT).
Aurora Relationship
Aurora Cannabis (NYSE: ACB), based in Canada, holds a 22.9% equity interest in Cann Group, and is one of the world’s leading cannabis companies.
Cann’s five year supply agreement is for medicinal cannabis products, subject to regulatory approval, and once domestic needs are met.
Mr Crock said, “Securing off-take with Aurora is a key milestone for the Company that is expected to both underpin the anticipated value generated with our expansion program and mitigate the risk associated with that investment. We remain firmly committed to satisfying the domestic market as a priority and the agreement with Aurora should enable us to meet this commitment.”
