A budding new relationship with a medical marijuana company Village Farms International Inc. is resulting in plans to grow 25 acres of greenhouse cannabis to start.
Emerald Health Therapeutics Inc. and Village Farms announced recently they’re forming a joint venture for large-scale, “high-quality, low-cost” cannabis production in one of Village Farms’ British Columbia greenhouses.
Village Farms will initially contribute a 25-acre greenhouse facility in Delta, British Columbia under the terms of the agreement. It will be a 50-acre parcel of land, which will be converted to marijuana production for medical use and — where law allows — the recreational market, the companies said in a news release. Emerald Health Therapeutics is a Health Canada-licensed producer of medical cannabis.
Each company will have a 50 percent ownership stake in the venture.
The partners said they are planning for 1.1 million square feet of initial potential greenhouse marijuana production, estimated to yield more than 75,000 kilograms of product per year upon completion of full licensing and greenhouse conversion.
The deal also allows for an option to add two more greenhouse facilities in the future.
Mike DeGiglio, CEO of Village Farms, said the partnership is a “transformational opportunity for their company,” which grows vegetables in greenhouses at several sites in Texas and British Columbia. He said the partnership with Emerald Health is a chance to grow “a substantially more profitable agricultural product.”
“This is a tremendously exciting and potentially lucrative opportunity for Village Farms,” he said on a conference call announcing the venture.
Taking on cannabis production won’t come at the expense of Village Farms’ established tomato and cucumber production; it assures that end of the business will grow from its current 240 acres of production, DeGiglio said.
“I want it to be very clear that Village Farms remains steadfastly committed to our produce business and to provide our customers with the same quality and surety of supply and old-world experience they have come to know and expect over our three decades in business,” he said. “We fully expect to continue to expand capacity in our produce business to meet customer demand by exploring consolidation opportunities, as we have successfully done in the past, and through organic initiatives at our U.S. operations.”
The Delta greenhouse is expected to begin cannabis production by late 2018. which includes options for Emerald Health to lease or purchase from Village Farms additional 25- and 60-acre greenhouses adjacent to the first facility.
“Demand in the medicinal market is forecast to grow tenfold by 2024,” he said, noting that the new business has a potential for $9 billion in revenues.
DeGiglio said Village Farms production costs for cannabis will be less than $1 per gram, compared with an industry average of more than $2.
“We are confident we can be the low-cost provider in the industry,” he said.
The Village Farms/Emerald Health partnership has the potential to expand to up to 4.8 million square feet of greenhouse cannabis production — estimated to yield more than 300,000 kilograms of product annually — which would supply a considerable portion of the expected future cannabis demand in Canada or for export abroad, DeGiglio said.
“Based on our conservative market pricing forecasts and yield projections, conversion of our Canadian greenhouse facilities to cannabis production could generate revenue of 10- to 15-times that of our current Canadian vegetable production with EBITDA margins potentially expanding to more than 50 percent compared with our current Canadian vegetable margins,” DeGiglio said.