MMJ Enters Strategic Land Package Agreement
Perth, Aug 3, 2016 AEST (ABN Newswire) - MMJ PhytoTech Limited (
ASX:MMJ) ("MMJ" or "the Company") is pleased to advise that its wholly-owned subsidiary United Greeneries ("UG") has executed a binding letter of intent ("LOI") with Cowichan Tribes ("Cowichan") in respect to the leasing of a 13-acre strategic land package ("Expansion Land") located immediately adjacent to the Company's existing Duncan Facility.
Highlights:
- MMJ enters strategic option agreement to lease 13 acre land package located directly adjacent to existing Duncan Facility
- Expansion land has capacity to support up to 10 acres of greenhouse production space yielding additional ~25,000 kg/year of cannabis
- Potential for 25x increase to current production capacity - which would position MMJ as one of the leading large-scale cannabis producers globally
- Increased production would provide MMJ with the necessary flexibility and scale to supply existing MMPR market and soon to be legalised estimated C$5 billion Canadian recreational market
The Company estimates that the Expansion Land could support up to 10 acres of greenhouse production space potentially yielding ~25,000 kg/year of cannabis, which is more than 25 times the current production capacity of the Duncan Facility. Together with the existing production capacity, the expanded Duncan Facility could produce up to 26,000 kg of cannabis per year, which would position it as one of the largest cannabis cultivation operations in Canada.
The expansion of the Duncan Facility would further strengthen the Company's supply chain and will play a key role in supplying the soon to be legalised Canadian recreational market, with conservative estimates forecasting annual sales of ~C$5 billion. As one of only 29 companies currently licensed to produce medical cannabis in Canada, MMJ expects to be well positioned as a first mover in this emerging recreational market.
Cowichan Tribes Agreement and Strategic Land Package
The LOI grants MMJ an option to lease 13 acres of the 40-acre strategic land package directly adjacent to the existing Duncan Facility until June 1, 2017. Additionally, the agreement provides that MMJ can increase the acreage beyond 13 acres if needed upon exercise of the option. The terms of the lease agreement will be subject to further negotiation but will be consistent with common commercial lease agreements with annual lease rates negotiated based on the appraised value of the property.
In consideration for the option to lease, the Company has agreed to pay Cowichan Tribes C$1,000 per month until the earlier of the expiry of the option agreement on June 1, 2017, or the entry into a lease agreement. Additionally, MMJ has committed to work with a Cowichan Tribes employment liaison on an ongoing basis to identify any employment opportunities at current or expanded UG operations for Cowichan band community members.
The Duncan Facility sits on a ~1.2 acre lot at the bottom corner of the Expansion Land as depicted in Figure 1 (see link below).
The Expansion Land has been vacant for several years but previously housed commercial greenhouse growing operations. The land is clear and flat and would require very little landscaping or prepping prior to construction. Although owned by Cowichan Tribes, a Canadian First Nations band, the Expansion Land is not part of Cowichan Reserve lands and is regular private commercial property.
Low Cost Expansion Strategy
By utilising a greenhouse growing system similar to those implemented by Licensed Producers Aphria Inc. (CVE:APH) and Tweed Farms Inc., MMJ estimates the capital and operating costs associated with the expansion of the Duncan Facility would be considerably lower than those of a traditional indoor cannabis cultivation facility.
Additionally, the potential to leverage existing high compliance excess processing capacity from the Duncan Facility could further reduce the capital and operating costs and build time of the facility.
MMJ's Managing Director, Andreas Gedeon, commented:
"The Company is pleased to have entered this strategic land expansion agreement for our Duncan Facility, which provides the land access which would be required for the requisite scale for MMJ to become one of the largest commercial producers of cannabis globally.
The Board is encouraged by the strong level of support we have received from both the Canadian Government and local stakeholders, and we believe that this will enable us to deliver significant value to both our shareholders and the local community.
The Company looks forward to providing the market with additional updates from our Duncan Facility in the near-term."
To view tables and figures, please visit:
http://abnnewswire.net/lnk/2XV0IJAX
About MMJ Group Holdings Ltd
MMJ Group Holdings Ltd (ASX:MMJ) is a global cannabis investment company. MMJ owns a portfolio of minority investments and aims to invest across the full range of emerging cannabis-related sectors including healthcare, technology, infrastructure, logistics, processing, cultivation, equipment and retail. For MMJ's latest investor presentation and news, please visit: https://www.mmjphytotech.com.au/investors/
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