Australian Firm Buys Big In Canadian Pot Grower

oct-2010-cannabis-1.gifAn Australian mining company has recently purchased a significant stake in a Canada-based medical cannabis business.

The purchasing firm, Capital Mining, announced that it paid some $25 million in stock options alongside $7 million in cash for 49% of the Canadian cultivator Broken Coast Cannabis.

Capital Mining will also buy in its entirety another Canadian company, Cannan Growers. This purchase is in $250,000 cash and $1 million in stock options.

Broken Coast Cannabis is one of the 14 cultivators in Canada that have distribution licenses, while Cannan Growers is currently applying to be a licensed medical marijuana producer. Both companies are headquartered in British Columbia.

According to the Capital Mining announcement, it is the first company publicly traded on the Australian Stock Exchange to obtain a direct stake in a Canadian medical cannabis venture.

The company’s investment in Broken Coast will allow the grower to double its current space to 26,000 square feet and triple its producing capacity to roughly 2 million grams a year. It will also reduce production costs by 50% and enhance cannabinoid content in their plants by 30% to 40%, projects Capital Mining.

Broken Coasts plans even further, intending to expand space to 44,000 square feet and boost production to 3.38 million grams a year, both starting 2016. It even has long-term plans to construct a 150,000-square feet of new facility and increase output capacity to a yearly 11.5 million grams.

Meanwhile, the cannabis developer and adviser Cannan Growers is awaiting the approval of its license application from Health Canada. This license would be for a Vancouver facility which the company has the option to buy for CAD 1.2 million.

Capital Mining’s decision to buy into the Canadian marijuana industry is based on Health Canada’s estimates that the country’s medical cannabis users will increase more than tenfold – totaling some 450,000 users – by 2024. The agency also expects that medical marijuana revenues will spike to CAD 1.3 billion.

While Capital Mining is the first to venture into Canada, the first medical cannabis stock to be traded on the Australian Stock Exchange is Phytotech. It was listed just last December and is currently planning to cultivate MMJ in Israel.

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