ECS Botanics is making the most of its Tasmanian location, announcing today that the company will be beginning a large-scale, low-cost, outdoor medicinal cannabis operation.
ECS Botanics Holdings (ASX: ECS) today announced its plans to develop an outdoor medicinal cannabis project at its wholly-owned site in northern Tasmania, using funding from the company's recent cap-raise. Through this, ECS has thoroughly differentiated itself from other Australian cultivators, by becoming a first-mover in outdoor cannabis cultivation.
As we discussed recently, growing cannabis outdoors removes many expenditures that come with greenhouses and artificial lighting that are required for indoor cultivation. On the affordability of outdoor growing, the Office of Drug Control has previously stated that:
"Broadacre (outdoor cannabis cultivation) is the lowest cost option at $75 per square metre or $888 per kg dried flower, and indoor the most expensive at $2,291 per sqm or $1,909 per kg dried flower. This translates to an annualised cost at maturity of $9.9 million per annum for broadacre and $21.2 million for indoor cultivation."
With this in mind, ECS seeks to leverage the natural conditions present in Tasmania to reduce operating costs and provide a less expensive end-product when compared with its other ASX-listed counterparts. To give an idea of comparison, Cann Group (ASX: CAN) announced in May that the company expects to cultivate 25,000 kg/pa by 2024. In order to reach this goal, the company will spend between $65m-$75m in construction costs alone.
Let's compare those figures to the statistics provided by ECS in its three-stage expansion plan for its medicinal cannabis project:
Stage Total Production Ranges (kg dry flower p/a)
1,313 – 2,188
9,844 – 16,406
3 19,500 – 32,500
As the company progresses through Phases 1 through 3, ECS plans to expand its cultivation area from 25,000 metres squared to 325,000 over three years. By Stage 3 of the project, ECS will be growing 32,500 kg of dry flower p/a compared with Cann Group's 25,00kg/pa.
And the costs?
In total, ECS Botanics predicts that its three-stage medicinal cannabis project will cost just shy of $3m, with the first stage of the project (costing $1.7m) being fully funded already thanks to recent cap-raising activities.
Additionally, the completion of phase 1 includes a majority of the infrastructure required for the entire project, and as such, Stages 2 and 3 will be much cheaper, only requiring a total of $1.2m in capex combined.
This means that ECS may well be growing more cannabis than Cann Group over the next four years, while saving over $70 million in construction costs.
In year 1, ECS will grow medicinal CBD plants before broadening the strategy from year 2 onwards to grow both CBD and THC plants. The company is aiming to have the facility built by December 2020.
On July 16th the company received approval to build the facility from the Town Planning, and now ECS is awaiting a license variation and permit from the Office of Drug Control (ODC) – though the building of the medical cannabis facility is expected to commence in the coming weeks.
Is Outdoor the Future of Cannabis Cultivation?
As ECS states in its announcement, Tasmania is home to some of the best possible conditions to cultivate cannabis outdoors. A low-risk, cool climate with excess UV allows ECS to simply sit back, and let nature take its course with the cannabis. This is a fairly forward-thinking approach by the company, with its Managing Director, Alex Keach, stating that he believes the company is taking a "next-generation" approach to cultivating medicinal cannabis.
As it stands, one of the biggest barriers to the prescription of medicinal cannabis in Australia is pricing, with epilepsy patients spending roughly $50 per day on cannabinoid medicines. These high prices can make cannabinoid medicines inaccessible for many lower-income families, which contributes to Australia's persistent cannabis black market. Through its first-mover advantage in being an outdoor cultivator in Australia, ECS Botanics is positioning itself to have much lower operating costs than its competitors.
On affordability and outdoor growing, Mr. Keach went on to say that:
"We believe the power prices and cost of labour in Australia are in many cases restrictive to the business case of growing indoor long term, so we are adopting a practical approach whereby we are applying our skills in growing cannabis with a vision of where the industry is headed and how the industry is already evolving overseas."
To find out more about ECS Botanics, visit their company HQ here.
Figure 1: architects aerial view of stage 1
Figure 2: Site plan & artist rendition of ECS medicinal cannabis processing site
Get the Latest Marijuana News &
Content in your Inbox!
All your support helps The Green Fund keep writing content for all you
marijuana enthusiasts and potential pot stock investors