Hothouse produce grower to devote site to marijuana

Canada’s only publicly traded greenhouse produce-growing company plans to put up one of its British Columbia greenhouses for a new venture in cannabis production.

Vancouver-based Village Farms announced Tuesday it has partnered with Victoria-based medical cannabis producer/processor Emerald Health Therapeutics in a 50/50 joint venture to grow cannabis for medical use and, pending changes to federal marijuana legislation, the “non-therapeutic adult use market.”

Emerald has pledged $20 million in cash to the venture, while Village Farms will “initially” contribute a 25-acre greenhouse at Delta, B.C., to be converted to cannabis production, and leased to the joint venture with an option to buy.

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The joint venture also has options to lease or buy Village Farms’ other two Delta greenhouses: a 25-acre facility and a 60-acre facility, both “adjacent” to the leased greenhouse.

Village Farms, in a release, described the j.v. as a “transformational opportunity… to grow a substantially more profitable agricultural product.”

That said, the company, which grows tomatoes, cucumbers, peppers and eggplant hydroponically at seven greenhouse sites in B.C. and Texas, emphasized Tuesday it “remains committed to its existing greenhouse produce business and customers.”

Once full licensing and the greenhouse’s conversion for cannabis production are completed, the Delta site, at its current size, is expected to yield up to 75,000 kilograms of “product” per year, the company said Tuesday.

Taking up the other two Delta greenhouses, they said, could allow them to expand operations up to 4.8 million square feet and dial their yield up over 300,000 kg of product per year.

At that scale, they said, the facility “would supply a considerable portion of the expected future cannabis demand in Canada or for export abroad.”

Village Farms CEO Michael DeGiglio said the company’s “conservative” market pricing forecasts and yield projections could generate revenue of “10 to 15 times that of our current Canadian vegetable production, with EBITDA (earnings before interest, taxes, depreciation and amortization) margins potentially expanding to more than 50 per cent compared with our current Canadian vegetable margins.”

The joint venture’s goal, the companies said, is to be the “lowest-cost, highest-quality cannabis producer in Canada,” with a targeted production cost of less than $1 per gram.

From Emerald’s standpoint, the deal “strategically positions” it for “rapid production capacity expansion in partnership with world-class greenhouse operators, preparing it for the future non-therapeutic market and existing undersupplied medical cannabis market.”

Emerald, a TSX Venture Exchange-listed firm, brings “significant cannabis industry experience” to the table, they said, including “high-quality genetics and refined standard operating procedures” plus a “flawless” record of operations under Health Canada’s current medical marijuana regulations.

Emerald’s executive chairman Avtar Dhillon hailed Village Farms as “an expert in the complex matter of safety for agricultural consumables, which is a critical competency in the production of cannabis.”

The joint venture plans to “immediately” start the process to get a Health Canada license to grow medical cannabis and, at the same time, start converting their leased greenhouse for cannabis cultivation.

Emerald said it will also still develop the first phase of its own indoor growing operation, a 50,000-square foot facility on a 32-acre site in B.C.’s Lower Mainland, and expects to complete that phase’s construction by the first quarter of 2018. — AGCanada.com Network

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