Emerald Health Therapeutics Inc. (TSX.V:EMH) (OTCQX:EMHTF) (FRA:TBD), a producer of cannabis products, entered a partnership with Village Farms International. Executive Chairman Avtar Dhillon talks to James about the conversion of up to 5 million square feet of greenhouse that is currently focused on vegetable growing into growing cannabis.

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TRANSCRIPT:

James West: Avtar, thanks for joining me today.

Avtar Dhillon: thanks for having me, James.

James West: Avtar, let’s talk a bit about Emerald Health Botanicals. You guys have just recently announced a joint venture with Village Farms that contemplates the conversion of up to 5 million square feet of greenhouse that currently is focused on vegetable growing, into growing cannabis. How much of Emerald’s strategy is based on that conversion?

Avtar Dhillon: It’s a very important part of our strategy, because in the cannabis world right now, for us licensed producers, with the July 2018 date coming up, everybody is concerned about supply. So we looked for a partnership, and we found Village Farms, which was a great, high tech, large volume, low cost grower, and formed a partnership so that we can supply and be able to make our end product.

So we’re very, very excited about it. The first phase is about 1.1 million square feet, and then we have an option on another 3.7 million square feet. So that would be by far the biggest facility in the world.

James West: You bet. How much cannabis can 5 million square feet produce?

Avtar Dhillon: 300 tonnes, which could serve half the Canadian market for the foreseeable future.

James West: Okay. How much money has Emerald Health raised to date?

Avtar Dhillon: That’s a good question. I know we raised 42 million this year.

James West: So a lot. The bottom line is a lot.

Avtar Dhillon: Yeah, we’re well funded.

James West: Right. Hmm. All right, so at this point, do you currently serve medical patients under the ACMPR regime?

Avtar Dhillon: Yes, we do. We have been doing limited sales; it’s a good practice run for the scale-up that we need for middle of next year, so we have been selling mostly dried and oil-based products to the existing medical patients under the ACMPR.

James West: And are you finding at this point from the investment banking community, is there still strong interest in financing cannabis companies that are sort of later-stage relative to the original set that started in 2014, or are you finding it’s getting tougher to raise capital? And, do you have to differentiate yourself with things like scale?

Avtar Dhillon: Yeah. I think it’s all about differentiation right now. There’s 62 licensed producers, about a third of them are public already, so within the group of public companies, we all have different market caps. The top dozen or so are working hard to be able to clearly kind of differentiate themselves, and show that they have the capacity, they have the sustainability, they have the management to execute.

So there is a race to be able to continue to attract capital.

James West: Okay. So in terms of partnerships, you’ve got one with Village Farms. Have you got any other major partnerships in the space in terms of like retail branding or product development?

Avtar Dhillon: Stay tuned.

James West: Okay.

Avtar Dhillon: All the licensed producers are making their moves as we go, and we’re looking for smart partnerships. We see three or four main buckets of activity. There’s a growing side, and I think we’ve certainly nailed that very well, with up to 5 million square feet, and then we have another additional facility, which will give us up to an additional 1 million square feet, and that one, we’re focused on specific genetics.

And then there’s the world of extraction, so we’re doing a bunch of pilot work on large-scale extraction. Then you get the e-commerce component, you know, being able to fulfill orders effectively, and then the real joy for us is the end product.

James West: Sure, okay. So then, how long until your bigger facilities come on-stream?

Avtar Dhillon: The partnership that we have with Village Farms, we’re expecting a quarter of that facility, of the first 25 acres, to be in production before July 1st of 2018. So we’re going to have our first harvest prior to that, and the additional facility, we’re very concerned about particular strains, and the environment will be extremely tight. We’re looking at having about 150,000 square feet in production there.

James West: Okay. So you’ve got a lot sort of coming up in stages.

Avtar Dhillon: Oh, absolutely.

James West: Okay. Well, let’s leave it there, Avtar. That’s a great introduction to Emerald Health, and we’ll come back to you in a quarter’s time or so and see how you’re making out. I’d like to come and visit the facility, and we’ll talk to you then. Thank you for joining us today.

Avtar Dhillon: All right, it’s been a pleasure. Thank you for inviting me.