ECS LAUNCESTON HEMP OPERATIONS

The Green fund recently headed down to Launceston to check out ECS Botanics’ hemp and medicinal cannabis operations.

The Green Fund recently took a trip down to Launceston in Tasmania to have a look at ECS Botanics (ASX:ECS)operations, hosted by Sally Allport and Alex Keach.

The trip began at a farm close by, where we saw a 50-acre field of beautiful fledgling hemp crops being contract grown for ECS, and planted less than a month prior to our visit. The hemp will be harvested for seed and used for ECS’s hemp food product range, from hemp soup to hemp seed oil that is currently being distributed throughout Woolworths.

Following a September update from the ODC, reduced security is now required for low-THC hemp plants, with the ODC stating: “The low THC content means that it is not attractive for ‘recreational’ use and it would therefore be far less attractive to black market diversion. Essentially, low THC medicinal cannabis is no more attractive to criminal diversion than is industrial hemp.”

This may allow ECS to grow their medicinal crops like the above 50-acre hemp seed crop without heavy security fencing, saving the company on infrastructure costs.

ECS also has ODC licenses to cultivate and manufacture medicinal cannabis, plus import and export licenses. Therefore, ECS has the full suite of licenses also required to grow hemp for medicinal purposes, of which it already has plenty of experience growing at scale for food production. With the changes to security requirements, we expect ECS to be the first mover in growing CBD at scale outdoors like it does with hemp seed crops. The timing couldn’t be better for ECS with CBD demand expected to skyrocket in coming years following the TGA decision to make CBD available over-the-counter at pharmacies.

Tasmania is also the perfect location for hemp cultivation according to Alex Keach who said that Tasmania has “a cool climate but warm long summer days which are perfect for producing hemp seed and a consistent and concentrated profile of secondary metabolites.”

“Tasmania has an abundance of water supply, the state has a moratorium on genetically modified crops, some of the cleanest air in the world, plus has a clean, green image which is a marketeer’s dream recognized globally. We have already started growing crops organically too” concluded Keach.

We then progressed to ECS’s medical cannabis facility in Cressy, which is currently under construction and will be used for cultivation, processing and fulfilment. ECS will be undertaking a pilot grow for the facility this season, and is installing extraction equipment following a deal recently announced to the ASX.

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. This will make ECS the largest cannabis producer in Australia.

In total, ECS Botanics predicts that its three-stage medicinal cannabis cultivation and processing 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.

In year 1, ECS will grow medicinal CBD plants before broadening the strategy from year 2 onwards to grow both CBD and THC plants.