While at the CanEx Jamaica convention I came across LGC-Capital (LG.V) (LGGCF). An international investment company interested in licensed and legal marijuana grow acquisitions. It seems a fitting time to discuss the international marijuana industry now that Canada is officially selling adult-use marijuana nationwide and expunging cannabis related arrest records. Actually, this is what happened; On the morning of day one of the convention after the first set of speakers had finished, including Montego Bay’s own Mayor Homer Davis, I anxiously made my way to the front of the room to meet ex-CIA director James Woolsey Jr. I had never met anyone from the CIA before, certainly not a director of the CIA, and certainly not one that had turned into a hemp legalization advocate. I didn’t find him though. Instead I found another journalist and the smiling face of John McMullen, the CEO of LGC-Capital.
Mr. McMullen shook my hand, we exchanged cards, and I moved on to prepare for my next interview. I had no idea that I had just met the CEO of one of the fastest growing and diversified marijuana companies in the world. I hadn’t figured that out the next time I met him that day either, but I started to connect some of the dots later that night. By the time I encountered him again that evening at the 2727 Lounge on the Hip Strip in Montego Bay, an organized networking event by CanEx, I was feeling a little foolish. CEOs of big companies tend not to be all that approachable, so maybe I was a little thrown off by the amicable personality of Mr. McMullen. Excuses, excuses.
LGC-Capital trades in the OTC market under stock symbol LGGCF and LG.V on the TSX. They have a market capitalization of nearly $60 million. They own assets in Australia, Italy, Switzerland, Canada and Jamaica, and plan on expanding further. The only place they are not really interested in working is the US and that is only because the cannabis industry is entirely too challenging to work with here due to our strict federal laws, especially for an international company. One of the most remarkable revelations I had while taking a closer look at the international marijuana industry was that it did not feel like walking through mud. Needless to say, I became intrigued with LGC-Capital and started doing some research. This is what I found out.
LGC stands for Legal Global Cannabis and one of their very first acquisitions was Little Green Pharma out in western Australia in a town near Perth. Little Green Pharma is the first and only licensed medical marijuana grow facility in western Australia. They are currently on their third grow cycle and their cannabis oils are being sold throughout Australia to patients. Our friends down-under are still trying to figure out how exactly they want to regulate their medical marijuana program, but as of now patients can be prescribed medical cannabis by a certified doctor. Australia produces roughly 50% of the poppies in the world for pharmaceutical opiates such as codeine and morphine. Now, they have aspirations to become the world leader in legal medical marijuana exports as well.
Canada is the global leader in marijuana exports and LGC-Capital is unsurprisingly headquartered in Montreal. According to their investment deck, LGC-Capital looks to invest in entry-level companies that are near-term growers. It means that they are interested in startups that have created a solid cannabis business plan, achieved licensing and need funding to grow. As an example, LGC invested into Tricho-Med Corporation earlier this year which is also headquartered in Montreal. They are still in phase 1 of their cultivation center but expect it to be completed soon. The plan is to not only supply Canadians with medical marijuana but also to export cannabis as well. Both Little Green Pharma and Tricho-Med are great examples of the sorts of companies LGC is interested in. Let’s see what else they are working on.
In Jamaica they acquired 30% equity interest in Global Canna Labs. I visited the Montego Bay facility while attending the conference. Just like Tricho-Med, Global Canna Labs is still in the process of growing its first batch of marijuana plants. It took nearly three and half years for them to get this far with Jamaican regulations first needing to be met. The production capacity of this facility is astonishing. A lot of that has to do with Jamaica being a perfect environment to grow weed in the first place. Beyond that though, they have the ability to expand to over 58,000 square feet and anticipate by 2021 they will be able to produce more than 60,000 kg of cannabis per year, which puts them right up there with some of the major Canadian producers like Supreme Cannabis and Cronos Group, two publicly traded companies. Cronos even trades here in the States on the Nasdaq. Global Canna Labs also has a grow facility in process in Kingston and will have dispensaries in Montego Bay and Negril. They have applied for a license to have an Amsterdam style cafe which Jamaica refers to as an, Herbhouse, as well. Not only that, Global Cann Labs plans on providing tours to the millions of tourists that visit Montego Bay every year. The grow facility is only a ten minute drive from where the cruise ships dock in Montego Bay.
Let’s take a look at Europe for a moment. In Switzerland, (which by the way, the World Health Organization is meeting in Geneva in November to decide whether to reschedule marijuana) LGC has two operations. VIRIDI Unit is a grower that produces cosmetics, cigarettes and other wellness products including cannabis seeds. They sell to over 80 stores throughout Europe. LGC also owns CLV Frontier Brands in Switzerland, a beer producer that is making both non-alcoholic and alcoholic hemp flavored beer. Recently, CLV won three medals for each of their beers at the London Boutique Bar show. We see more and more of the alcohol industry being intertwined into the marijuana industry. We have always expected the two industries to co-mingle, but watching it unfold is interesting to say the least.
LGC also has a stake in Evolution BNK in Italy, which really caught my interest. Evolution BNK is a cryptocurrency company, which I have always been and remain a skeptic of the validity of crypto’s such as bitcoin. Blockchain technology though is very fascinating, but cryptocurrencies simply seem to have evolved from blockchain because the coders that created it did not know what else to do with it. That being said, it does not seem reasonable that keeping a strict ledger is sufficient enough by itself to give any form of currency a value. There needs to be some sort of scarcity involved for something to have value and technically there is a limitless amount of bookkeepers out there. Those that work with blockchain have acknowledged the need for scarcity which is why they have created hash scores that basically gives a cryptocurrency miner a 50/50 shot at getting paid in the end. Evolution BNK, among other things, is a crypto miner looking to get paid for completing the blocks in a blockchain. It is a numbers game that takes ASIC computers with incredible processing power which also means high energy costs. The energy cost part is a real problem. A crypto miner has to bear in mind energy costs to see if all of this time and effort logging crypto transactions is worthwhile. This is where the cannabis comes in.
LGC invests into marijuana grow facilities mainly. The people in Italy love what they call, cannabis light, which is hemp based products with very low THC. In a nutshell, Evolution BNK is planning on refurbishing over 215,000 square feet of greenhouses in Sanremo, Italy to grow a variety of the 64 different strains of hemp the Italian union has certified. How will Evolution BNK heat all of these greenhouses? With their ASIC computers they use to mine cryptocurrency. It is truly astonishing if you think about it. Figuring out how to overcome the energy costs of running super processing units that are logging cryptocurrency transactions by growing and selling cannabis products from the heat they generate, is simply genius. It is this sort of smart financial thinking that is going to power our future. If we bring the conversation back to Jamaica, how do they water their plants? Through rain supplied streams they have strategically located their facility near. They are also using the ample amount of solar heat in Jamaica to power the Global Canna Labs facility. It’s efficient. LGC has a 49% equity interest in Evolution BNK.
I cannot say enough about the ingenuity and breadth of LGC-Capital. It is not terribly surprising considering their board of directors. Mr. McMullen’s 20 year career advising micro and small-cap publicly traded companies makes him a perfect fit for vetting new cannabis companies. David Lenigas is a co-chairman at LGC and was the executive chairman of Rare Earth Minerals PLC, a company similar to LGC in many ways but instead of looking for cannabis companies, Rare Earth Minerals vets young companies that mine for lithium, the metal we will all need for a future of battery operated vehicles as we transition away from fossil-fuels. What stood out most for me though was that LGC’s business model for the cannabis space looks and feels like proper business. While they are not obstacle free on the international side of the marijuana industry, they are also not running into hurdle after hurdle on the international side of the cannabis industry like cannabis companies do here in the US. They invest in domestic operations globally so as to work with local governments and grow and expand businesses where cannabis is legal. There will be many cannabis brands when it is all said and done, but only a handful of top players. It is refreshing to see the cannabis industry finally move out of prohibition and into mainstream business.
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