During the last year, we have seen a significant increase in the number of companies that are focused on the international cannabis opportunity and this is a trend that our readers need to be aware of.
Earlier this week, we published an article that highlights 5 leading Israeli cannabis companies and today, we are following up on this article by highlighting 5 companies that are executing on the Colombian cannabis opportunity. The reason why we are favorable on these two markets is simple; economics.
When compared to Israeli, the Colombian cannabis market represents a more saturated market and over the lsat year, we have noticed a significant increase in the number of companies that are focused on this market. One of the reasons for Colombia becoming a popular destination for cannabis businesses is due to the climate. In Colombia, companies can produce cannabis for less than $0.40 per gram and most of this product will be processed into cannabis oil. We are favorable on the growth prospects associated with this market and the 5 businesses we have highlighted today are highly levered to this opportunity.
Blueberries Medical: A Latin American Execution Story
Blueberries Medical Corp. (BBM.CN) (BBRRF) is a Latin American cannabis producer that is focused on the cannabis oil market and has significant catalysts for growth. When compared to other Latin American cannabis companies, we believe that Blueberries Medical has been flying under the radar and is an opportunity to be watching.
Over the next year, we expect to see Blueberries Medical report several major milestones and are more confident in this opportunity after the company issued an update that highlights the recent operational achievements and the upcoming milestones. We believe that Blueberries Medical has several major potential catalysts for growth and wanted to provide an update on this opportunity.
Last week, Blueberries Medical finalized a definitive share purchase agreement to acquire cannabis cultivation, processing, manufacturing and other rights in Argentina from BBV Labs. Pursuant to a definitive joint venture agreement with the Argentinean state-owned company Cannabis Avatara, BBV Labs entered into a joint venture with Cannava to develop and cultivate cannabis on a 3.2 million sq. ft. property.
The signing of a definitive agreement represents a major milestone for Blueberries Medical as it gains rights to one of the limited cannabis licenses in Argentina and further expands its production footprint. Going forward, Blueberries Medical will construct a large-scale modern cultivation facility and processing center of excellence in Argentina, while Cannava will contribute the necessary licenses and permits to import seeds, cultivate cannabis, process and extract cannabis oil, export cannabis and derivative products, and import/export equipment and products.
The first phase of the joint venture will be a pilot cultivation program that consists of the preparation and cultivation of cannabis on a 107,000 sq. ft. area, with the goal of producing 4,000 kilograms of dry cannabis flower. The company has prepared a proposed pilot project plan to be approved by Cannava and hopes to complete the pilot program by May 2020. This represents a significant opportunity for Blueberries Medical and we expect to see the company quickly expanding its operations in Argentina, following the successful conclusion of the pilot program.
Prior to the expansion into Argentina, Blueberries Medical was solely focused on the Colombian cannabis opportunity and has been able to significantly advance operations in regards to this market over the last few months. In the operational update reported last week, the company announced that the newly constructed state-of-the-art open-air greenhouses are completed and fully operational. The completion of these facilities increased production capacity by approx. 40% to 150,000 sq. ft. and we are bullish on the growth prospects associated with the expanded production footprint.
When it comes to the Colombian opportunity, Blueberries Medical has two separate locations, (Guatavita and Zipaquira) and is currently cultivating cannabis in more than 50,000 sq. ft. at the Guatavita property. In the operational update, Blueberries Medical said that the initial extraction line has the capacity to process up to 75,000 kilograms per year and is currently in the process of upgrading the equipment to meet EU-GMP standards. The company is also advancing the process of commissioning an EU-GMP compliant facility that has the capacity to scale up its extraction, processing and manufacturing capabilities.
Another attractive aspect of the Blueberries Medical story is related to the letter agreement to become a strategic supplier of medical cannabis products to Canurius UG for the sale and distribution of cannabis products in Germany with the potential for expansion into Austria, Switzerland and the Netherlands. The European medical cannabis opportunity represents, and we are favorable on the growth prospects associated with this relationship.
When looking at the Blueberries Medical opportunity, there is a lot to be excited about and we are bullish on the growth prospects associated wth the current strategy. Over the next year, we expect to see the company increase production capacity and enter new markets. The cannabis concentrate market represents a significant opportunity and we are favorable on Blueberries’ leverage to this side of the business.
During the last month, Blueberries Medical has been under significant pressure and has bene trading lower with the market. The recent expansion into Argentina is significant and we will monitor how the company continues to advance its Latin American operations. When compared to its peers, Blueberries Medical is trading at a significant discount and this is an opportunity to be watching.
Next Green Wave: A North and South American Cannabis Opportunity
Next Green Wave (NGW.CN) (NXGWF) is one of the few US focused companies to be levered to the Latin American cannabis market and we have been closely following this opportunity. Earlier this year, the company signed definitive agreements to make a strategic investment in Organic Medical Growth OMG3 INC. (OMG), which is focused on producing and commercializing CBD products derived from medical and industrial cannabis in Colombia.
OMG is positioning itself to become a lowest cost producer of premium cannabis in Colombia and its wholly owned subsidiary, Proymed S.A.S., is a medical cannabis company that is focused on producing and commercializing non-psychoactive cannabidiol (CBD) products derived from cannabis. The CBD market represents a burgeoning opportunity and we are favorable on the growth prospects associated with Next Green Wave’s strategy.
Currently, Proymed is also finalizing its transformation and psychoactive licenses for THC products in Colombia as well as finalizing international distribution agreements. We believe that OMG represents a strategic partner and will monitor how the company is able to execute on the Latin American opportunity. Through OMG’s current distribution channel of 7,300 pharmacies, Next Green Wave has the opportunity to license its collection of brands and products into the Colombian market. We are favorable on the growth prospects associated with the Colombian cannabis market and are of the opinion that it could prove to be a major value driver for the overall business.
Following the signing of the initial agreement, OMG formed a joint venture with Cannabolland Cluster S.A.S, a vertical biotech cluster based in Colombia that groups companies with cannabis licenses with the goal of structuring the companies, consolidating the licenses, providing technical knowledge and infrastructure. According to the agreement, OMG has access to the planned production of cannabis on 5,000 hectares with the possible extension of the cultivation licenses to the geographical area of the cluster (up to 12,000 acres). The six companies within Cannabolland, that include 2,500 associated growers, have 3 psychoactive (THC) and 3 non- psychoactive (CBD) licenses, as well as 2 transformational (extraction) licenses.
OMG is actively pursuing a go-public transaction and focusing on becoming a significant producer and supplier of medicinal cannabis products and services in Colombia. If the company completes a go-public transaction, Next Green Wave should benefit from this in the form of price appreciation and we are favorable on OMG’s plan to create value.
Over the next year, we expect the Latin America cannabis market to report strong growth and we are favorable on the leverage that Next Green Wave has to this burgeoning international market. We believe that the market has not associated much value with this side of the business and believe that this could prove to be a major growth driver for the entire operation.
Chemesis: A Burgeoning Latin America Opportunity
Chemesis International Inc. (CSI.CN) (CADMF) has been highly focused on the cannabis opportunity in North and South America and we continue to monitor this emerging cannabis company. During the last year, the company has been able to significantly enhance its position in these two markets and we are favorable on the growth prospects associated with the continued execution.
Chemesis has been highly focused on the Latin American cannabis opportunity and signed a definitive agreement to acquire La Finca Interacviva-Arachna Med SAS., an integrated cannabis company that has been operational since late 2017 and has access to over 1,000 acres of outdoor cultivation land.
Earlier this year, Chemesis announced that La Finca plans to commence construction of its GMP certified extraction facility which will also house a certified production lab. The facility will have a large production capacity for both domestic and international markets and this represents a significant opportunity for Chemesis. Once the company has constructed a GMP certified extraction facility, it will be able to export products to international cannabis markets and we will monitor how the team executes on this.
Last month Chemesis reported to have received three additional cultivation licenses for three additional properties in Colombia. We are bullish on this development as it significantly expands Chemesis’ footprint in the region and will increase production capacity in the near future. Currently, the company has 5 acres planted for its pilot spring harvest and has the ability to expand to over 100 acres once the initial harvest is complete. These new acres, to be planted soon, not only will be focused on producing biomass but will also contribute in expediting the expansion of La Finca`s seed stock, a crucial step in guaranteeing acreage growth is in sync with seed availability.
At the time of this announcement, the company also reported to have established a non-profit organization with the sole purpose of promoting cannabis cultivation. The Association for the Promotion of Cannabis Cultivation offers a new agricultural model with focus on the inclusion of farming communities such as indigenous, afro-Colombians, agroindustries and other small farmers with technical advice, seed, and a crop purchasing program.
The Association has joined forces with Ricardo Garzon, one of Latin America’s leading experts in the implementation of sustainable projects. Mr. Garzon has worked for several major organizations including the International Development Bank, USAID, The World Bank, the International Finance Corporation and is a recognized expert in the development and structuring of associative models throughout Latin America. The proposed model will be presented to Colombian communities and will allow La Finca to extend its sowing prospects to add an additional 2,000+ farming families and over 10,000 acres within the next three years to its previously announced land package. Chemesis believes this puts La Finca on the frontline of the transformation of agriculture in Colombia and we are favorable on this approach.
When looking at the economics associated with this strategy, we are favorable on the low-cost nature of the project and the potential upside if the initiative proves to be success. By securing a strategic partner like La Finca, the company is well positioned to execute on this strategy and this is an opportunity that we are excited about.
The Colombian cannabis market represents an attractive opportunity for Chemesis to produce high-quality low-cost cannabis concentrates. Over the next year, we expect to see a significant increase in demand for these products and Chemesis should be a beneficiary of this. During the last month, the company has been under considerable pressure and the shares are trading at oversold levels. This is an opportunity that we have on our radar and one that we will continue to closely monitor.
Khiron Life Sciences Continues Expand and Execute
2019 has proven to be a volatile year for Khiron Life Sciences (KHRN.V) (KHRNF) and this is a Latin American cannabis opportunity that we have been watching. In July 2018, we highlighted Khiron after we met with the company’s management team and were very impressed with what they have already been able to accomplish.
Although Khiron has been nothing short of an execution story and has been able to significantly improve its position in Latin America, the shares have been under massive pressure and have come well off its 2019 highs. This is a trend that we have been watching and will be keeping an eye on how the company continues to execute.
In late 2018, Khiron completed its acquisition of the Latin American Institute of Neurology and the Nervous System (ILANS), one of the most respected, fastest growing, and largest health service network providers in Colombia and Latin America. The ILANS network represents 100,000 patients in Colombia and will position Khiron with approximately C$10.5 Million in gross revenue and C$1.8 Million of EBITDA (2017 Audited Financial Statements). The ILANS acquisition provides a secure and scalable revenue stream and opportunity to enhance profitability from introducing medical cannabis to ILANS patients.
Through organic and inorganic growth initiatives, Khiron has significantly advanced its fundamental story and has attractive growth prospects on a going forward basis. During the last month, the shares have plunged lower and momentum has been pointing lower over this time period. Although we are favorable on Khiron’s long-term growth prospects, we are cautiously monitoring price movements from here and will keep an eye on this opportunity.
PharmaCielo: A Latin American Cannabis Firm to be Watching
In early 2019, PharmaCielo Ltd. (PCLO.V) (PHCEF) commenced trading on the TSX Venture exchange and we have been closely monitoring the Colombian cannabis company. Following its listing on the TSX Venture, PharmaCielo was a top performer and was valued at more than $1 billion at one point.
During the last quarter, PharmaCielo has been under considerable pressure and has been trading lower with the market. We have been following the recent performance and have been watching how the team is able to execute and advance its fundamental story. The company has been focused on expanding into additional markets in Latin America and has been working tirelessly on this initiative.
Earlier this year, PharmaCielo announced a major development and entered the Mexican cannabis market through an equity joint venture with MINO Labs S.A. de C.V., a specialty pharmaceutical company and medical supply distributor based in Mexico. The joint venture is called PharmaCielo Mexico and we are monitoring how the companies execute on this emerging opportunity.
The announcement represented a significant milestone for the Latin American cannabis company which supports its plan to become a leading global exporter of high-quality medical cannabis oils and derivative products. The company expects to start delivering cannabis oil to the Mexican market in the fourth quarter of 2019, subject to the joint venture and PharmaCielo obtaining the required registrations and licenses.
PharmaCielo has several significant catalysts for growth and we are favorable on the leverage to the Latin American cannabis market. This market represents an attractive opportunity and we expect to see the company capture significant market share due to its first mover advantage. PharmaCielo has significant growth prospects and this is an opportunity we are closely monitoring.
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