The Investing News Network (INN) had the opportunity to talk with the president of Cannabis Wheaton (TSXV: CBW; OTC:KWFLF) Hugo Alves, a lawyer with nearly 18 years of practice, who spent a lot of time involved in the cannabis industry before joining Cannabis Wheaton this year. Alves speaks about the company’s business model in relation to one of their latest deals with ABcann Global.
Regular readers of the Seed Investor know that we are bullish on ABcann (TSX.V: ABCN; OTC: ABCCF), so we were interested in hearing what he had to say in regards to ABcann.
Excerpted below is Mr. Alves' remarks on ABcann:
INN: Looking back at the deal with ABcann, what was the deciding factor for Cannabis Wheaton to select this company?
HA: I know ABcann very well, I’ve been to the facility I’ve met the executive team, [and] the grow team. I’ve seen the product, I’ve seen what they are doing there, and I think anyone that has gone to that facility and has had the benefit of going to many other facilities, quickly realizes that they are doing something a bit different there. It’s an intensive build out but it is very science [and] pharma based.
The amount–in terms of the system that they use, in terms of the data that they have collected, and [in terms of] the grow team that they have assembled for us–it ticked a very important box, which we think that they’re risk on scaling is lower than many others. They have a tremendous amount of data that they have overlayed.
We looked at it and said ‘from an expandability point of view when someone is going from 30,000 square feet to 60,000 doubling, that presents its challenges right? When someone is going from 30,000 to 200,000 alright how are people going to manage the rapid growth.’ We looked at ABcann and said they got a better chance than most of doing this right without any major hiccups, they grow excellent quality products and have a strong team in place.
We made the right deal, we’re getting the same result after we deployed all our capital, we’re getting effectively somewhere between $55-$60 million range, depending on where we come out on the construction budget in the timeline. We’re getting anticipated yield of –even being conservative– somewhere in the 7.5 and 8 million grams of cannabis annually.
Even if the sale puts pressure on the product I think, whether you’re … bearish outlook on where the margins are going to be, with $2 a gram in terms of the margin should be relatively achievable. We get our stream, it’s a 99-year stream, [and] there’s a rule against perpetuities in the law so you can’t say it’s forever. It’s not hard to do the math on 8 million grams a year, multiply by a $2 margin, multiplied by 99 years. From an investment and return perspective, it’s a very attractive deal for us.
“I’m still always surprised by how controlled [ABcann’s] grow environment is”
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