Emerald Health Gains Extraction License

Emerald Health Therapeutics Inc. [stock_market_widget type="inline" template="generic" color="default" assets="EMH.V" markup="(TSXV: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] is getting into the extraction business after Health Canada awarded its Pure Sunfarms joint venture with a processing license.

It permits extraction and the manufacturing of oils, edibles, and other concentrates at the 1.1 million square foot Delta 3 greenhouse facility owned by Emerald and its partner, Village Farms International. The JV still needs to gain a sales license for derivatives, but it expects to have this in place in place by the end of the year.

It pledged to begin distributing to provinces and territories across Canada in Q4 2019. “Pure Sunfarms has hit its inflection point for significant sales growth,” said Emerald chairman Dr. Avtar Dhillon. “As it continues to build on its critical mass of infrastructure and licensure, and achieves vertical integration, we believe it will increasingly be producing and selling value-added products with higher margins.”

A Strong Recovery

Shares in Village Farms have since rallied significantly and they are now back above the levels seen on the day of the short seller attack.

A month ago, short seller Citron Research launched an attack on Village Sunfarms, accusing it of being a “failed tomato farmer” and a “pretender” that seeks to “separate investors from their money”. Dhillon came in for heavy criticism in the attack, as Citron branded him “an infamous penny stock promoter” following his involvement in Vitality Biopharma and OncoSec Medical, which both ended up mired in controversy.

Village Farms saw its share price crash from C$17.25 to C$13.99 on the day of the attack, April 17, while Emerald stock decreased from C$4.05 to C$3.66. Both firms remained tight-lipped in the wake of the attack, happy to let it blow over and to focus on delivering results at Pure Sunfarms.

Shares in Village Farms have since rallied significantly and they are now back above the levels seen on April 17. Its price closed at C$17.90 when trading ended on Friday, May 17. Emerald Health was trading at C$4.60 last week, before closing at C$3.66 on Friday. The markets are closed today for Victoria Day.

Expanding Capacity

Pure Sunfarms can produce 75,000kg of cannabis flower on an annualized basis, and that production capacity will double by 2020. That makes it a major player within the Canadian cultivation trade and some investors are clearly convinced by the potential of both Emerald Health and Village Farms.

Adding extraction services is another important string to the Pure Sunfarms bow, with the Canadian market set to open up for edibles and other concentrates earlier this year. Many licensed producers are outsourcing extraction services, and Emerald has previously worked with MediPharm Labs Corp. [stock_market_widget type="inline" template="generic" color="default" assets="LABS.V" markup="(TSXV: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"]. Last week it shipped 6,000 40ml units of its SYNC 25 CBD oil to the British Columbia Liquor Distribution Branch.

It should now benefit from reduced costs as Pure Sunfarms takes extraction in-house. The team there plans to develop a wide range of products for the adult-use market.

Earlier this month, Emerald expanded its footprint across Canada by securing agreements with the PEI Cannabis and Manitoba Liquor & Lotteries Corporation to supply branded products into those provinces. It already supplies Ontario, British Columbia, Newfoundland & Labrador, and Yukon, while it has agreements in place to sell to Quebec and Alberta.

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The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

Martin Green
Martin Green is an experienced journalist with a strong focus on the cannabis, alcohol, and gambling industries. He is particularly interested in the political issues affecting the global marijuana trade, and he has a keen focus on regulation changes and legal topics. He holds a BA English Literature, MA Creative Writing and a National Qualification in Journalism diploma. He has worked in journalism since 2009 and written for a broad range of newspapers, business titles and magazines, including The Sun, The Metro, The Journal, Livestrong, Drinks Retailing News, Harpers, Sportsbook Review, Vital Football, Essex Live and Surrey Live. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.
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