A recently created Canadian company, Alliance Growers Corp. (CSE: ACG – $0.56 & OTC: ALGWF – $0.45 & Frankfurt: 1LA – €0.38), has recognized the near term potential for exceptional growth in the emerging cannabis sector and is working to establish a diversified platform that will position shareholders for long term upside across the full spectrum of the sector.
Alliance has been active with an acquisition strategy to build direct cannabis production leverage. The Company is also working towards a more diversified and balanced approach to the sector, with investments in Research & Development partnerships. The strategy will assist the Company to remain in the forefront of this dynamic sector by investigating methods to optimize production techniques and refine high value strains of cannabis plants. In addition, it will participate in the development of new cannabis products that can be created, opening greater marketing opportunities for medical and recreational uses.
Establishing a Production Beachhead in Key Canadian Provinces
The Company has entered into an agreement to acquire Biocannatech, a Quebec-based company committed to a production strategy of medicinal cannabis with an advanced stage license application in process. Biocannatech has submitted an application with Health Canada for permitting approval to construct a 10,000 square foot facility for the production of cannabis, plus a 120,000 square foot warehouse. The plan is to become an integrated producer and supplier of cannabis for medical purposes that may rapidly generate an estimated $10 million in gross annual revenues.
Since about 20% of the Canadian population resides in Quebec, and the province is currently under-represented among the aspiring cannabis producers, there is attractive growth potential associated with this region. In addition, Alliance Growers’ management has suggested that it remains open to completing other acquisitions within the province to further expand its production capacity.
A second partnership is currently in process in the larger Ontario market, with Canwe Growers Inc. As an advanced stage applicant in the process to secure a production license, Canwe has also purchased a 22-acre land position where it plans to establish a cannabis production facility. Alliance has announced its intention to buy 5% of Canwe.
The Company is also building leverage to early stage cultivation of cannabis plants with optimum characteristics that may become more attractive as the market matures. In order to do so, Alliance has partnered with WFS Pharmagreen, a British Columbia based company that plans to build and operate a new 40,000 square foot botany facility near the Town of Mission. The establishment of the Cannabis Botany Center will enable more efficient and controlled cultivation of cannabis plants. Alliance has committed to purchase a 30% interest in Pharmagreen’s subsidiary corporation, BC New Co.
Will Cannabidiol Oil Become the Next Growth Story for the Sector?
Meanwhile, an emerging market of refined cannabis products is also demonstrating attractive growth characteristics. Cannabidiol Oil (CBD Oil) is gaining worldwide acceptance as a product that provides enhanced medicinal properties without the psycho-active effects related to cannabis.
Alliance has commenced formal discussions to secure 20% ownership of a leading CBD Oil extraction company based in Israel. The objective is to form a partnership and Alliance would earn the rights to buy 20% of the CBD Oil production from the venture. The partnership would invest in further research and testing to produce a high quality CBD Oil, and also establish a production facility in Israel.
Further emphasis on R&D for cannabis plants has led to yet another partnership, with Botanical Research In Motion (BRIM) of British Columbia. BRIM develops licensed technologies for the production of cannabis plantlets, with a plan to launch commercial development of these plants once the Cannabis Botany Center is operational. The partnership will operate with the objective to market improved strains of cannabis with more desirable traits that have greater commercial appeal.
BRIM has developed the Chibafreen Process, which enables cultivation of plants that have higher growth rates and therefore a 30-50% shorter production period. The process also affords a more controlled environment for cultivation, free of contamination from pests or pathogens, and with a marketable advantage to provide the exact genetic makeup for each plant with its parent tissue stock.
Taken as a whole, the overall corporate strategy has been dubbed the ‘Four Pillars Plan’, whereby Alliance is integrating direct leverage to production and distribution of cannabis, along with participating in R&D towards improving the quality of the strains of the cannabis plants that are cultivated. Supporting this, the Company has invested in production of the cannabis plants themselves, which may become a profitable business unit supplying the industry. An additional measure of diversification has been added through the pending partnership to invest in research and production of CBD Oil with an Israel-based company.
Alliance has been very active to put together its plan that will position the Company as a leading player in the emerging cannabis sector within Canada, but to also ensure that shareholders gain leverage in several other worldwide markets that have tremendous growth potential. The focused acquisition strategy has targeted partnerships at the very early stages of corporate development, and by securing these agreements at the ‘ground floor’ stage Alliance arranges the transactions at the entry-level investment range.
For a sector that is still evolving in terms of the overall regulatory framework, both within Canada and in many other countries, Alliance has the vision to become positioned in key growth areas, and has boldly established a niche as an integrated cannabis company. With its diversified approach, the Company will offer shareholders a more dynamic exposure to the entire sector at a very early stage. This enhances the longer term potential for success and the outlook for creation of shareholder value as the Four Pillars strategy gains traction. Recommendation BUY.
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