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CLIENT NEWS - Cannasouth announces significant cannabis cultivation joint venture

Cannasouth announces significant cannabis cultivation joint venture

Cannasouth today announced a long-term strategic joint venture (JV) with Aaron Craig and his family (Craig Family Interests) to construct and develop a world-class cannabis cultivation facility in the Waikato.

The JV will construct and operate a medicinal cannabis and hemp cultivation and production facility, which will service and supply Cannasouth’s production requirements. Construction is expected to start before Christmas and be fully operational by the mid-2020.

The JV is structured as a joint venture company, Cannasouth Cultivation Limited (JV Co), which will be owned equally by Cannasouth and the Craig Family Interests.

JV Co will commence stage one of its operations by constructing a state-of-the-art hybrid greenhouse cultivation facility utilising part of the 111-acre site. It will grow medicinal cannabis and complementary product, primarily for Cannasouth, but potentially for other medicinal cannabis companies in New Zealand and internationally.

JV Co will also investigate expanding into broadacre operations (outdoor growing) across the balance of the land, and/or in conjunction with developing a network of New Zealand-based contract growers.

Cannasouth CEO Mark Lucas says the capital costs associated with the construction of a state-of-the-art cannabis cultivation facility are significant.

“This joint venture arrangement has enabled Cannasouth to maximise the allocation of capital raised during our recent IPO and achieve an important objective of the company’s vertical integration strategy.

“Our goal is to have complete control over every stage of the production and distribution of our medicinal cannabis products to ensure we achieve the highest possible standard of quality at every step.

“It makes sense for us to share the considerable capital costs of developing a cultivation facility with a third party,” he says. “Entering into a strategic relationship with a trusted and experienced partner like Craig Family Interests will add considerable value in terms of the skill set they will bring to the table.”

Mr Lucas says the JV also provides Cannasouth with a commercial footprint and model from which the JV can expand into other locations throughout New Zealand as the medicinal cannabis market matures.

“We are confident it will create a strong foundation from which further strategic initiatives, involving growing and cultivating other complementary products, can be leveraged.”

The rural site in the Waikato heartland allows Cannasouth to make the most of New Zealand’s reputation for high quality horticultural produce.

Further expansion at the site will enable Cannasouth to explore multiple cultivation strategies depending on the end product and export requirements.

“A phased expansion strategy will ensure capital is only deployed when market demand exists for the end product,” says Mr Lucas. “This flexibility will enable Cannasouth to adapt to pricing pressures as the market matures to ensure end products remain competitively priced, ultimately reducing the cost to patients.” 

Aaron Craig is a successful business owner, developer and entrepreneur who has developed a number of substantial private companies.

“My family and I are delighted to be part of the Cannasouth story and the development of New Zealand as a major player in the exciting global medicinal cannabis industry,” says Mr Craig.

The Craig Family Interests have agreed to purchase 100 per cent of the land at their own cost and to lease portions of the land as required to Cannasouth Cultivation. The maximum term of the lease is 20 years.

Cannasouth Cultivation will have the option to expand its footprint across the balance of the land as and when it may require more land for its commercial cultivation operations.

The Craig Family Interests have also agreed to grant Cannasouth an option to purchase a one-half share interest in the land for the duration of the JV.

The land and proposed facility will give JV Co. the opportunity to produce and Cannasouth to source, high-quality medicinal cannabis flower similar to that produced by expensive indoor cultivation methods.

Utilising the power of sun through the hybrid greenhouse option significantly reduces the overall energy costs of production and is consistent with Cannasouth’s desire to utilise environmentally sustainable cultivation methods.

Cannasouth CEO Mark Lucas says, “the establishment of Cannasouth Cultivation is an exciting development in the evolution of Cannasouth. It represents another strategic milestone as we position ourselves as a leader in the emerging medicinal cannabis industry in New Zealand.

“We are delighted to have partnered with someone of the calibre of Aaron Craig and his family interests in this exciting project. We are looking forward to implementing our business plan for the construction of the new facility and leveraging off that facility strategically in the future.”