One of Australia's leading cannabis companies is issuing new shares at a 51.2 per cent discount to raise $24.3 million for working capital.
Cann Group, which was the nation's first to receive medicinal cannabis production and research licenses, will raise capital at 40 cents per share including a $14.3 million placement that has already been oversubscribed.
That placement will be followed by a share purchase plan (SPP) opening on 22 July to raise $10 million.
Cann highlights the extra funding will support near-term plans, which include delivering on commercial supply agreements, medicinal cannabis products, and dried flower material for sale in Australia and export markets such as the UK and Europe.
The Melbourne-based group - which ranked second in this year's Australia's top 20 cannabis companies list - has a five-year offtake agreement until 2024 with major Canadian industry player Aurora Cannabis, covering 25 medical cannabis markets including Europe and South America.
Cann Group is also pursuing additional supply contracts with third parties in Australia and overseas.
But a centrepiece of the company's future plans is the expansion of its Mildura facility, which contemplates annual production of 12,500kg of dried cannabis flower in Phase 1A.
After already delaying a decision on when to proceed with Mildura due to the oubreak of COVID-19, the course of action is still in limbo although the board reiterates its status as a critical component of Cann's growth strategy.
Today the company said coronavirus impacts had slowed progress of potential funding options for Mildura as well as the practical timing of any construction, due to the need to engage European-based specialist contractors.
All funding options for the Mildura expansion continue to be pursued, including discussions with a Tier 1 Australian bank to secure a debt facility for the project. The group notes discussions with the bank have taken longer than anticipated.
The Company is forecasting revenues of $15 million in FY21, underpinned by existing supply contracts, and is confident a proven track record of sustainable revenues will support both the business case for Mildura and help secure the support of financiers.
"Cann is now established as a vertically integrated medicinal cannabis company with strong capabilities and partnerships across its research, cultivation, manufacturing, product development and distribution activities," says Cann Group CEO Peter Crock.
"We have strong commercial momentum and we are confident of generating meaningful near-term sales while we continue to develop new and exciting medium and longer term market opportunities.
"We have executed supply and offtake agreements with customers in Australia and overseas and we are in discussions with additional potential customers."
Crock concludes Cann Group's commitment to genetics research and thorough clinical evaluation will help ensure Australian patients - and patients in overseas markets - have access to safe, innovative and high-quality medicinal cannabis treatment options.Never miss a news update, subscribe here. Follow us on Facebook, LinkedIn, Instagram and Twitter.
Business News Australia