THE company building a medicinal cannabis production hub near Mildura estimates $65 million to $75 million will be needed to complete an “initial stage” of the project.
Cann Group told investors last week the coronavirus pandemic had slowed potential funding options, as well as construction timing, for the Mildura greenhouse.
The Australian Securities Exchange (ASX) listed company gave the update as it announced an effort to raise $24.3 million by issuing new shares.
These funds would provide working capital to pursue near-term growth opportunities, the company said.
To complete the Mildura project, a bank debt facility was said to be a possible source of funding.
“COVID-19 impacts have slowed progress of potential funding options for Mildura as well as the practical timing of any construction, due to the need to engage European-based specialist contractors,” a Cann Group statement to the ASX said.
“The Mildura facility is based on world-leading design principles that require specialist construction support.
“That support — including the contractors who will assist with the build — is based overseas and the personnel involved are currently unable to enter Australia due to travel restrictions.”
Cann Group said about $50 million had already been invested in the Mildura hub, including the completion of site works, service connections and building of the structure, which could eventually house an annual capacity of 70,000kg of cannabis dry flower.
The initial stage, estimated to cost between $65 million and $75 million to finish, would include a production capacity of 12,500kg.
Cann Group said it had secured multiple new offtake and supply agreements since a strategic reset in January.
The company was forecasting revenue of $15 million in the 2020-21 financial year, underpinned by existing supply contracts.
Chief executive Peter Crock said the company had strong commercial momentum and was confident of generating “meaningful near-term sales”.
The new shares in the capital raising were valued at 40c each, more than a 50 per cent discount on the pre-announcement trading price.
In its quarterly report, also released last week, Cann Group reported having $1.6 million in cash or cash equivalents at the end of June, down from $6.6 million at the start of the quarter and $46.5 million 12 months earlier.
