Canada's marijuana legalisation a boon for Aussie companies
Written on the 17 October 2018 by David Simmons
While Australia may be known globally for its pioneering spirit in sectors like mining, medical research, water management and technology, our local cannabis industry is being cultivated as the next frontier for savvy entrepreneurs.
The incoming trend is no more apparent than the significant and serious investment Australian cannabis companies are making in Canada, the latest country to fully legalise recreational marijuana nationally.
With legalisation of recreational marijuana coming into effect today (17 October) in the North American country, Australian companies are hoping to capitalise on what is expected to be a $6.5 billion industry. Canada is just the second country to legalise recreational marijuana use nationally, following in the footsteps of Uruguay. The law is more complex in the United States where nine States and Washington D.C. have legalised marijuana. In Australia, recreational marijuana use is illegal, but has been decriminialised in South Australia and the Northern Territory.
Two of the more prominent ASX-listed medicinal cannabis groups, THC Global (ASX: THC) (formerly known as The Hydroponics Company) and Creso Pharma (ASX: CPH), have outlined their plans for the Canadian market this week, and have seen their stocks soar as a result.
Ahead of this momentus day, THC Global has undergone a rebrand and has incorporated a new subsidiary in Canada Vertical Canna Inc to undertake further investment in what is the most exciting new cannabis market globally.
THC's wholly-owned subsidiary, Crystal Mountain (CM), already manufactures and distributes hydroponic equipment and supplies to Canada as its principal market. Ahead of legalisation, CM has expanded its warehouse complex and product range to meet what is expected to be a hugely increased demand.
With recreational cannabis legalised, CM and THC hope to capture a new niche market: micro-cultivators and home-growers that will take full advantage of the relaxed new laws.
However, it is THC's new subsidiary Vertical Canna that will be the main powerhouse for the company's global ambitions.
THC Global CEO Ken Chateris, who is currently in Canada promoting the new subsidiary and securing investment for its overseas push, says legalisation of recreational marijuana in Canada is "historic".
"This is a historic time to be in Canada, on the eve of legislation of recreational cannabis," says Chateris.
"Whilst our focus remains on revenue generation from our global medicinal cannabis operations, our expanding presence in the Canadian market through Crystal Mountain and our partners will enable us to take advantage of the broadening Canadian market."
Cannabis pharmaceuticals group Creso Pharma is similarly ramping up its operations in Canada.
In an ASX statement, Creso is particularly optimistic, forecasting that demand is expected to outstrip capacity "immediately".
The Aussie group already has a presence in Canada, with its subsidiary Mernova Medcinal well positioned to introduce its premium brand Ritual Green to the new market.
Creso CEO Miri Halperin Wernli says the ripple effect of Canada legalising marijuana will be felt far and wide across the world.
"This is a historic milestone for progressive policy in Canada and one which will change the global debate on drug policy," says Wernli.
"Canada has set the stage for a movement that will be followed by other countries."
Though not the only cannabis and cannabis-affiliated company operating in Canada, Creso is the only listed Australian group to have a cannabis production facility in the North American country, leaving it well placed to take full advantage of the incoming boom.
Shares in THC Global are down 3.25 per cent to $0.60 per share and shares in Creso Pharma are up 1.80 per cent to $0.56 at 11.24.
Business News Australia
Author: David Simmons