LGC Capital Ltd (TSXV: LG) Has grow tremendously in the last few months and has acquired strategic partnerships around the globe with the aim of producing medicinal and recreational marijuana products.
What makes the company unique is that they are focusing on nascent marijuana markets with huge growth potential, all outside of the United States. Moreover, LGC only partners with established businesses that add strategic value to the company’s portfolio.
South Africa JV
LGC Capital has begun a joint venture with AfriAg South Africa Ltd, one of southern Africa’s largest agro-consultants and logistics companies. The LGC and AfriAg South African JV, own 60% of House of Hemp, with the goal of supplying marijuana for the medical market in southern Africa.
House of Hemp is South Africa’s first private company with the license to import, cultivate, and process hemp. LGC Capital has clearly chosen an excellent strategic partner.
The facilities, located in the government sponsored and protected Dube Agriport Zone, are already built, state-of-the-art, automated, and ready-to-go. Currently boasting 405,000 square feet, the facility will eventually total 1.5 million by full operation.
Phase 1 of production will see 7,000 KG of dried marijuana produced. Phase 2 will see 19,000 KG produced. Management expects their cost per ounce to be $1 / gram, meaning excellent margins for the company’s bottom line.
Currently, House of Hemp is in the late stages of research and development.
LGC Capital has partnered with another strong company, this time in Australia, where medical marijuana production has recently become legal but is heavily regulated. Currently, there are thirteen companies licensed to produce medicinal cannabis in Australia, but only a select few have a permit to actually begin production.
Little Green Pharma (LGP), the only company in Western Australia to have both a license to produce medicinal cannabis and a permit from the Office of Drug Control to commence growing locally, is another great example of LGC’s ability to acquire excellent strategic partnerships. LGC has recently increased its stake to 11.91% in Little Green Pharma.
LGP’s core competency is creating accurate medicinal cannabis products, mostly oral, that contain high bioavailability of the active cannabinoids, meaning a lower dosage is needed. This is important for patients who are sensitive to cannabinoids or who are apprehensive about trying them.
They has begun cultivating there first crop, which represents the first time medicinal cannabis has been cultivated locally. Products should be available for patients in the first few months of 2018.
LGC Capital recently announced a joint venture with Creso Pharma Ltd and Baltic Beer Company Ltd (CLV) to produce hemp-derived beverages. Each partner owns a third of the joint venture.
CLV is on target to ship its first test batch containing a four-beer range with cannabis-derived terpenes (fragrant oils that give cannabis its aromatic diversity) for May delivery of this year. Commercial sales are expected to begin in July of 2018.
CLV also plans to build a R&D brewing facility in Estonia that will allow innovative recipes and intellectual property to form.
With the global craft beer market expected to grow at a compound annual growth rate of ~11% between 2017 and 2022, and the European, Middle East, and African markets to reach US$38.36 Billion by 2021, it seems LGC is ahead of the curve with yet another strong joint-venture.
LGC Capital has provided Quebec based Tricho-Med Corporation (AAA Trichomes) with a $4 million loan, which, upon the latter receiving a license to produce marijuana, will convert into 49% of AAA Trichomes stock. LGC will also be receiving a 5% royalty on AAA Trichomes’ net sales.
A 30,000 square foot state-of-the-art production facility is expected to be completed in fall of 2018. Management expects the facility will be expanded to around 1 million square feet some time around 2021.
In the event that AAA Trichomes is denied TSX Venture listing status in the following twelve months, LGC’s ownership will be increased to 54%.
This represents LGC’s first venture into the Canadian marijuana market.
They recently announced that they are establishing a Global Cannabis Blockchain platform to to create a new transparent workable global cannabis supply chain platform. This is the over view of the Blockchain initiative they are working on for the global cannabis industry.
- Enabling global transparent payment record for cannabis product, supply and payment
- Allow regulatory compliance with government entities
- Give consumers assurance on product sourcing and quality
- Offer an efficient and compliant payment infrastructure for the supply chain
- Provide global supply chain register and smart contract framework to track physical product across the supply chain.
This initiative fits well with their international portfolio they are building out and its whitepapers they will be sharing with the industry participants for comments, as the project will need global consensus for it to be adopted.
As we have seen, LGC Capital Ltd has a knack for acquiring strong strategic partners in world markets that are becoming more marijuana friendly. It has focused on the medicinal approach, which allows it to be a first mover in most countries as medicinal usage is often legalized prior to recreational.
We can expect the value of LGC to increase as the world opens up to marijuana and if they continue on their pathway with creating global joint ventures with local organizations.
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