48North Cannabis Corp. (TSX-V: NRTH) got the green light to grow outdoors on one of the largest licensed cannabis operations in the world to cultivate an expected lowest costing gram in Canada, the company announced last week.
48North received an outdoor cultivation license May 17 from federal pot regulator Health Canada for its 100-acre (3.7 million square feet) farm in Brant County, Ontario. The Toronto-based company said the organic farm will produce over 40,000 kilograms of outdoor-grown cannabis this year at low costs to help keep up with demand once edibles are legal this fall.
Company co-chief executive Jeannette VanderMarel told The London Free Press the cost of growing cannabis outdoors will be around 25 cents a gram compared to $2 in an indoor facility and $1 in a greenhouse.
Receiving the outdoor cultivation license from Health Canada for our Good Farm is an absolute game changer for 48North and the cannabis industry. Overnight, the company expands its annual expected capacity from 5,000 kg to over 45,000 kg. As a result, I am confident that 48North will deliver on its promise to produce, high-quality, low-cost, organic cannabis for the next-generation of cannabis products, and the dried flower market.
– Jeannette VanderMarel, Co-CEO of 48North
48North has also secured supply deals in multiple provinces to help lock up demand for some of its production. The farm, referred to as ‘Good Farm’ by the company, has many advantages as well, as noted in 48North’s press release, including: “ultra-low-cost cannabis, environment-friendly and energy-efficient production.”
48North growing industry threat?
With minimal revenue the past four quarters and a small market cap of around $170 million, 48North was not on many investors’ radars up until now. The significant increase in production will deliver some hype around the stock which has been hovering around $1 per share.
If 48North can produce high-quality cannabis while keeping costs down, it could certainly turn the tide. Rising costs are a big reason why many cannabis companies have failed to turn a profit so far and are burning through lots of cash. But the Ontario company could gain more market share by offering lower prices or taking a higher margin straight through to the bottom line.
But with outdoor cultivation comes increased risk for 48North. While indoor growing is more expensive the process is more controlled and can ensure a high-quality product in the end. Whereas, outdoor growing depends on weather conditions and results can be inconsistent.
48North is the first pot company to apply for an outdoor grow license and Health Canada said 191 applications are in queue for a license that includes an outdoor area. The low cost of growing outdoors is expected to help the Canadian legal industry reduce prices to compete with the black market. But the clock is ticking as the warmer growing season has already begun across the northern nation.
Being one of the first to get outdoor approval should allow 48North to become a larger producer in the industry, but keeping quality high will be key. Capacity alone doesn’t make a cannabis company a good investment but 48North’s stock might be worth keeping an eye before its first outdoor harvest.