The Cann Group announced today that it will undertake the construction of its Mildura medicinal cannabis facility in stages.
Previously, Cann Group Limited (ASX:CAN) had intended to complete the Mildura facility as a single stage development—with a total capacity of 70,000 kgs—which would have come in at an estimated project cost of $184 million.
With commissioning scheduled for the latter half of 2020, work had already commenced at the Mildura site, and to date the Company has expended $47 million on its acquisition and construction.
As a result of its new staged approach, the company is now reviewing a "revised construction plan" for the project, which will also involve consultations with Cann's team of design and engineering consultants, which includes Aurora Larssen Projects.
We will continue to liaise closely with our strategic partner Aurora Cannabis Inc (Canada) in relation to future offtake requirements while also continuing to develop our further market opportunities overseas and in Australia. Cann Group CEO, Peter Crock
Although the details of the new project—such as the revised costings—have yet to be finalised by the company, the first stage of development is expected to allow for an annual production capacity of more than 25,000 kgs of dry flower.
According to the CEO of the Cann Group, Peter Crock, the company elected to pursue a staged construction plan allow for an initial capacity building period—on a timetable with considerably more certainty—while also substantially reducing the facility's initial investment requirements.
"Staging the commissioning of the Mildura facility over time will help ensure that our production capacity more closely matches anticipated growth in demand for medicinal cannabis," Crock said.
The company has currently set a commissioning target in late 2020—pending regulatory and license approval—however the timetable for stages 2 and 3 of the project will be determined based on Cann's ongoing product demand.
Cann also announced that it is currently in discussion with a Tier 1 Australian bank, to secure additional funding for the Mildura Facility. The company has already received a credit approved Term Sheet from the lender for a loan facility worth $95 million, which will be used to fund the ongoing construction and buildout costs of the Mildura site.
The loan facility has an assumed a total project cost of $184 million—which includes capital expenditures and the cost of the original site acquisition—while the lender has indicated that it will provide ongoing in-principle support for the company's revised construction plans.
This will involve an evaluation of the company's position on a new Term Sheet, which will only be accepted following the submission of key details concerning the revised staging of the project, including the associated costs.
To learn more about Cann Group visit their Company HQ here.
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Disclaimer: past performance is not an indicator of future performance
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