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This Canadian LP Is Quietly Becoming Canada's Lowest Cost Producer

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Although they are new to the marijuana space, Village Farms International (VFF.V) (VFFIF) is making waves.

The company reported its second quarter financial results today and the numbers were impressive. During the quarter, Village Farms recorded $4.3 million in net income on $45.5 million in revenue.

Even though this revenue is not derived from cannabis, it shows that it has the ability to execute and operate at a very high-level.

A Strategic Partnership is Formed

In June, Village Farms executed on its plan to diversify into higher margin alternative crops by forming a joint venture with Emerald Health Therapeutics, Inc. (EMH.V) for large-scale, high-quality, low-cost cannabis production.

The cannabis joint venture, Pure Sunfarms Corp will be owned on a 50/50 basis and Emerald is contributing an aggregate of $20 million to fund the conversion of the greenhouse.

Under the terms of the agreement, Village Farms has contributed a 1.1 million-square foot (25-acre) greenhouse facility located on a 50-acre parcel of land in Delta, British Columbia. Subject to obtaining necessary licensing, the greenhouse will be converted to ACMPR-compliant production to address the recreational market.

Focused on Execution

Although this relationship was formed only two months ago, the companies have been executing.

Village Farms International CEO Michael DeGiglio said, "Immediately upon establishing the JV on June 6, the Village Farms and Emerald development teams began work toward conversion of the Delta 3 greenhouse and, completion of the application to Health Canada for a cultivation license for that site, leveraging Emerald's existing cultivation license through a "second stream" application, which Emerald expects to submit next month."

The goal of the joint venture is to be Canada's lowest-cost producer of high quality cannabis and it strategically positions Emerald for rapid production capacity expansion and should be ready in time for the opening of the recreational cannabis market. Emerald has proven that it can produce a high-quality product and are favorable on what Village Farms brings to the relationship.

A Massive Footprint for Future Cannabis Production

The June transaction closed concurrently with the signing of a definitive agreement, at which time the partnership leased (with the option to buy) the greenhouse.

The joint venture also entered an agreement with Village Farms for options to lease or purchase a second, 1.1 million square foot greenhouse (25 acre) and a 2.6 million square foot (60 acre) greenhouse from Village Farms. Both properties are located adjacent to the greenhouse and the three assets could provide 4.8 million square feet (110 acres) of potential aggregate production capacity.

The companies believe that all of Village Farms' greenhouse operations could be converted to grow cannabis and yield more than 300,000 kilograms a year.

A Long-Term Opportunity

We are favorable on the combination of these two businesses and believe the joint venture will create significant value for shareholders.

Village Farms has the infrastructure needed to become one of the largest marijuana producers in the world while Emerald has the licenses and the proven track record of producing high-quality medical marijuana.

The financial results reported by Village Farms this morning was attractive and leave us even more favorable on Emerald. This is a story that investors need to watch!


This article was written by Mark Maulden for https://technical420.com/cannabis-article/canadian-lp-quietly-becoming-canadas-lowest-cost-producer on .

This article published in collaboration with Scutify, the best app for traders and investors. Download the Scutify iOS App, the Scutify Android App or visit Scutify.com.

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