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Harvest One Cannabis Inc. (TSXV:HVT) said it believes large-scale outdoor production will significantly reduce production costs compared to indoor cultivation

SmallCapPower | February 7, 2018: Harvest One Cannabis Inc. (TSXV:HVT), through its wholly-owned subsidiary United Greeneries (UG), Tuesday provided an update on its facilities and expansion targets. Harvest One is targeting 20,000 kg of dried cannabis flower capacity by 2018 year end, and 70,000 kg of dried flower capacity by 2019 year end. The expansion will be fully funded through the Company’s $80 million on its books. Post the announcement, shares of Harvest One surged nearly 12% Tuesday to close at $1.23 on the TSXV, and rose 7% in early Wednesday trading.

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United Greeneries (UG) currently operates a 16,000 sq ft facility at Duncan, B.C., with annual production capacity of 1000 kgs. UG has commenced a 15,000 sq ft expansion plan at this facility, which will accommodate a propagation system that will produce large quantities of rooted cuttings and pre-grown starter plants for all of the Company’s facilities. Licensing for the expanded site is expected in Q2 2018.

Year-end production targets of 20,000 kgs will come through expansions at The Chemanius facility, B.C. and the Lucky Lake facility, Saskatchewan. Located just a 10-minute drive from the Duncan facility, the Chemanius facility is ideally suited for repurposing into a cannabis cultivation facility aided by existing building envelopes and electrical power infrastructure. Expected to begin cultivation activities in late 2018, the indoor facility can produce 8,000 kg of dried cannabis flowers per annum.

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Following the recent announcement by the Saskatchewan provincial government on cannabis legalization, United Greeneries is advancing its 62,000 sq ft Lucky Lake facility located at Saskatoon, Saskatchewan, through the final stages of approval with the initial ACMPR license expected in Q3 2018. UG is planning construction of two levels of internal growing rooms within the facility, expanding the actual growing space to 80,000 sq ft with annual production capacity of 12,000kg of dried cannabis flowers. Subject to regulatory approval, the facility will reach its maximum capacity year-end 2018.

The Company’s year-end 2019 cumulative targets of 70,000 will be achieved through the British Columbia outdoor growing operation. For this purpose, UG has closed the previously-announced purchase of 398 acres of agricultural land in British Columbia. Subject to regulatory approval, the outdoor growing operation can produce up to 50,000 kg of dried cannabis flowers by year-end 2019, taking the Company’s total cumulative cannabis production to 70,000 kgs per annum. Harvest One believes large-scale outdoor production will significantly reduce production costs compared to indoor cultivation.

Harvest One is a global cannabis company serving the medical cannabis markets internationally and preparing to serve the new Canadian recreational cannabis market. Harvest One operates through its two wholly-owned subsidiaries – United Greeneries Holdings Ltd. and Satipharm AG. While United Greeneries is based in Vancouver, B.C., and holds a Canadian ACMPR cultivation and sales license for its 16,000 sq ft facility at Duncan, B.C., Satipharm is based in Germany and holds global marketing and distribution rights to a Gelpell® Microgel technology for all cannabis-related products. In terms of valuation, Harvest One trades at a market cap of ~$160 million compared to marketcaps in excess of $1.0 billion for the top cannabis players, which looks compelling given its aggressive expansion plans both within Canada and internationally.

Disclosure: Neither the author nor his/her family own shares in the company mentioned above.

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