The Health Canada cultivation license will facilitate production and distribution of cannabis at Canopy’s facility in Fredericton. The announcement also revealed that the license will allow the facility to run its operations under the Tweed banner. The license has also paved the way for a long-term cash flow that will run for 25 years. The cash flow stream is expected to commence in September this year with roughly $2.85 million available each year.
“The long-term income stream from Spot, combined with our existing royalty portfolio, will further stabilize Canopy Rivers’ operating cash flow profile,” stated Eddie Lucarelli, the Chief Financial Officer of Canopy Rivers.
The on-going focus on value creation
Lucarelli also noted that the long term income stream will also provide his company with more financial muscle that will allow it to roll out its strategy and products to generate long-term value. Canopy Growth implemented its expansion strategy in 2017 in Atlantic Canada by acquiring Spot. It also teamed up with Canopy Rivers to make noteworthy investment commitments in the Canadian region.
The strategic efforts made it possible for Canopy Growth to secure one of the initial cannabis industry provisional supply contracts. It was also part of an important memorandum of understanding (MOU) with New Brunswick’s government.
Canopy Rivers struck a long-term lease agreement with Canopy Growth for the Fredericton facility right after acquiring it. The lease agreement also involved a capital commitment which would facilitate the development of the Brunswick facility through a repayable debenture.
The cannabis growth license comes at an opportune time when the cannabis industry has been enjoying rapid growth. This is particularly due to the legalization efforts in Canada and the U.S for both medicinal and recreational use. This means that the demand for cannabis and cannabis products will surge and the license will thus allow the company to place itself in a position that will allow it to make the most of the opportunities.
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