The Canadian cannabis stocks on our list have margins that are rising rapidly
SmallCapPower | May 14, 2018: Today we have identified three of Canada’s largest marijuana producers that have improved their cost per gram of cannabis produced. Since it is still early days, marijuana growers have not been able to take advantage of economies of scale. As such, licensed producers that can reduce their costs today should reap the profits post-legalization. These three companies have all lowered their cost per gram since their last annual reports.
Hydropothecary Corp. (TSXV:THCX) – $4.97
Hydropothecary is a Canadian cannabis producer, operating a 50,000 sq. ft. grow facility in Quebec. The Company differentiates itself through its commitment to natural growth techniques and a focus on customer service. Current operations produce 3,600 kg of cannabis per year. In October 2017, construction began on a new 250,000 sq. ft. facility, anticipated to be operational by summer 2018. A second greenhouse construction project is expected to add an additional 1M sq. ft., scheduled to be completed by December 2018. With both new greenhouses operational, the company expects to be able produce 108,000 kg of cannabis per year.
- Market Cap: $877.9 Million
- Average Cash Cost/gram: $0.97
- Last Reported YoY % Reduction in Avg Cash Cost/Gram: 44%
- YTD Total Return: 22%
Aphria Inc. (TSX:APH) – $11.09
Aphria is a licensed producer and supplier of medical marijuana under the ACMPR. Aphria’s flagship greenhouse production facility is located on a 169-acre property in Leamington, Ontario. The Company currently produces 9,000 kg and plans to expand its production facility. Subsequent to the company’s release of its Q3 2018 report, Health Canada issued a license amendment to approve Aphria’s expansion project. The amendment approved an additional 200,000 sq. ft. of production space, increasing Aphria’s production capabilities by a further 30,000 kg annually. The company plans to produce 220,000 kg in 2019.
- Market Cap: $2,325.4 Million
- Average Cash Cost/gram: $1.53
- Last Reported YoY % Reduction in Avg Cash Cost/Gram: 57%
- YTD Total Return: -41%
Aurora Cannabis Inc. (TSX:ACB) – $7.96
Aurora Cannabis is a licensed producer and seller of medical marijuana and cannabis oil under the ACMPR. Aurora sells its products over the phone, online or through its mobile app and offers a delivery service to its customers. Currently, the Company is engaged in the construction of its new 800,000 square foot production facility in Alberta called Aurora Sky. On January 24, Aurora announced the acquisition of CanniMed Therapeutics Inc. (TSX:CMED) for $1.1 billion. In May 2018, Aurora entered negotiations to acquire MedReleaf Corp (TSX:LEAF). MedReleaf has since commented that Aurora is not the only company it is currently speaking to about a possible takeover.
- Market Cap: $4,504.9 Million
- Average Cash Cost/gram: $0.96
- Last Reported YoY % Reduction in Avg Cash Cost/Gram: 20%
- YTD Total Return: -17%
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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