VIDEO: Aurora Cannabis Inc (TSE:ACB) US Uplisting and Leadership in Europe
Aurora Cannabis Inc (TSE:ACB) (OTCMKTS:ACBFF) (FRA:21P) CCO Cam Battley shares the company’s plans to list in the US in October and details of recent acquisitions such as ICC Labs Inc and Agropro. Battley notes that Australis will list on the CSE on September 19th under the symbol AUSA. Hemp is a crucial part of the company’s strategic plan and by acquiring Agropro, Aurora now controls the largest hemp company in Europe. This acquisition adds to Aurora’s leadership in the European market, which includes Aurora Deutschland and a new million square foot Sky Class facility in Odense, Denmark as part of Aurora Nordic. Battley addresses how Aurora’s acquisition strategy has impacted shareholder value and indicates that when results from the current quarter are released in November the developments will be favourable for shareholders.
James West: Welcome back. My next guest needs no introduction, though I am going to introduce him. Cam Battley is the Chief Corporate Officer of Aurora Cannabis Inc., trading on the TSX under the symbol ACB and Cam, welcome to the show.
Cam Battley: How are you this fine day?
James West: I’m extraordinary, thank you.
Cam Battley: And that shirt is definitely extraordinary.
James West: Well you know, it’s a shout-out-from-the-rooftops kind of shirt, and there’s a good reason to be shouting from the rooftops today, blood in the streets notwithstanding.
Cam Battley: Yes.
James West: And I’m exceptionally excited about the idea that you might actually be a US-listed company very soon, and I’m not talking OTC.
Cam Battley: Not talking OTC.
James West: Can you give us any kind of hint at all whatsoever?
Cam Battley: We can talk a little bit about it. We’ve previously indicated very clearly that we plan to have a US listing, and now I can say that we’re targeting next month; it’ll be October. So that’ll add another piece to the puzzle, and we’ve been very, very busy adding pieces to the puzzle. It’s been business development and it’s been, you know, rising production, and it’s been adding science, and we’ve been incredibly busy, and it’s all coming together. If you take a look, for example, we announced a couple of acquisitions this week: ICC Labs in South America, and Agropro in Lithuania, in Europe. And both of those are exceedingly important to our future plans, and it’s an indication of just how big we’re going to be on a global basis.
So our head of global business development, Neil Belot, he and his team have really, really been killing it.
James West: Mm-hmm. I’m curious as to how do you guys keep – like, is there anybody who sits at a central control station and is watching everything that’s going on and actually coordinating all this, or is it more of a siloed approach?
Cam Battley: So there is an overall plan, and you can probably imagine that what we want to do is add all of the pieces required to be a fully integrated global cannabis company, and that means looking after our capabilities across the board. So, our science capabilities, our ability to extract and create derivative products, our planning for all of the segments of the market that we’re not allowed to be in yet, or immediately after consumer legalization on October 17th, but will be one year after that.
And also, the regional plan. So we want to make sure that we have market leadership everywhere we operate. That is the plan: wherever cannabis is legal on any level, whether it be CBD-only, whether it be medical cannabis and, in the future, additional consumer markets, we are going to be there – and where we operate, we want to be the market leader. That’s the plan.
James West: Well that’s, that’s an ambitious plan.
Cam Battley: It is, and it’s not something that’s achieved overnight.
James West: Well, obviously. But you’re making all these incredible moves. You know, the Australis transaction is something that really excites me as well. So, what’s exactly the plan with Australis now, again?
Cam Battley: So Australis, we made an announcement today that we’re going to be listing on the CSE on the 19th of September. So we just have to complete the distribution of shares and warrants; we did an initial, oversubscribed private placement for total receipts of $17 million. That’s the first step, and then of course we list on the CSE and begin trading under the symbol AUSA.
James West: AUSA, oh ho ho! Very clever. Okay, so let’s talk a bit about this Lithuanian organic hemp company, because that seems like quite a big deal, even though people think Lithuania and they think ‘where is that, exactly? Is that part of Russia?’ You know.
Cam Battley: Well, of course it is, it’s one of the former Soviet Republics, but of course now it’s part of the European Union, and it’s a lovely market. Very well managed, very stable, and Agropro is the largest organic hemp company in Europe. And as you know, hemp is a huge part of our story, so we’re called Aurora Cannabis, but we’re involved in every aspect of this plant, and a major commitment to hemp via our majority ownership of Hempco in Canada. There’s a hemp element to our ICC acquisition as well, and we’re interested in hemp for all of the reasons you might imagine. It’s not just as a low-cost source of organic CBD; that’s one of the pieces. There’s also a lot more that you can do with that plant, including making building materials out of it. You can actually build homes out of hemp, and perhaps the largest opportunity of all is hemp as a source of non-animal protein. And the demand for protein from non-animal sources is exploding around the world, particularly in Asia.
So we like the hemp business on its own, separate, completely separate, from cannabis, but it’s part of our overall integrated business strategy.
James West: Right. So, 4,000 acres under contract? That strikes me as a tremendous footprint.
Cam Battley: It’s a huge footprint, and it furthers our leadership in Europe. Remember, through our acquisition of Pedanios, now Aurora Deutschland, we have the largest by volume distributor of medical cannabis in Europe, and we’re also participating in additional markets like Italy and Malta, and all of the other European markets that are opening up now. And of course, we’re building Aurora Nordic, this massive Sky-class facility, a million square foot Sky-class facility, in Odense, Denmark.
So Europe, we’re exceedingly bullish on; that will be an outstanding market for us.
James West: Okay, so the facility you’re building there, then, is obviously directed towards premium dried flower?
Cam Battley: Yes. So there’s two facilities, as a matter of fact, in Denmark: we’re hitting the ground running with a 100,000 square foot retrofitted greenhouse, and that’ll be in operation first, and then I believe it’s next month we begin construction on Aurora Nordic itself, the million square foot Sky-class facility. And like the other Sky-class facilities – aurora Sun in Medicine hat and Aurora Sky at Edmonton International Airport, this is a concept that’s unique in the world. Nobody else is building such massive-scale indoor facilities. Happen to have a glass roof, so we can make use of the sun, but still have that precision control over all the environmental variables. And what that means is, what we think will be absolutely the highest product efficiency per square foot in the world, plus that precision control over the environmental variables means that we mitigate risk, because we will not have crop failures; we won’t be open to the air.
And then at the same time, we’re building exceedingly high quality cannabis, and we’re doing it at less than $1.00 per gram. So ultra-low cost of production, and so we’re checking off all the boxes: massive scale, high quality and low cost.
James West: Yeah. The volume of trading in the stock is like, it’s just overwhelming to watch.
Cam Battley: Isn’t it? I was just walking by the TSX with my little girl today on the way in, and we were the volume leader again, and that seems to be the case, but it’s not just Aurora; we’re seeing the other leading cannabis stocks are driving volume on the TSX virtually every day. It’s exciting time for cannabis.
James West: Well, it’s incredibly exciting time, because the market is so robust, people are making money, they’re – I mean, I don’t know how many new millionaires every month are probably minted as a result of cannabis, but it’s got to be in the hundreds. What do you make of the rumour mill? Well, there’s this continuous conjecture and speculation on who’s going to buy whom next…
Cam Battley: Well, you can understand where it comes from, right?
James West: Absolutely.
Cam Battley: You know, Constellation has been pulling this sector along with their major move in with Canopy, and it’s logical that the next largest players would be considered likely partners for major outside companies. But the big story here is that, you know, this is exactly what we said would happen. We’ve been saying for a long time that Canada is the leader in cannabis, first medical, now consumer, and now global. And that’s proof right there, that the big companies in the mature industries, all the usual suspects, are coming and talking to the market leaders in the Canadian cannabis sector in order to create the global cannabis sector. That’s a very, very exciting development.
James West: Do you think that Canada’s role as the global leader is cemented in perpetuity, or do you think that there will continuously be threats from emerging economies that incrementally adopt de-prohibition as the default set for cannabis?
Cam Battley: So, let’s be precise: we can’t be complacent here. And that’s one of the reasons why Aurora has been on such a tear, both with our organic growth and creating this new cultivation concept, our Sky Class facilities, but also with our M&A. And so now if you take into account all of the companies that we acquired, I think it’s something like 15 once we close ICC, and that’s in about two years. And there’s a reason for that: the logic behind it is, we’ve got to move quickly, we can’t take for granted that we will be in this leadership position as a country and as individual companies, forever. We’ve got to establish that global footprint and really cement that leadership, and do it before any other countries are able to threaten that leadership position.
So that’s part of the reason why we feel such a sense of urgency. That’s why we’re moving so fast, that’s why we’re all working seven days a week.
James West: Sure. One of the most common questions that we get in our chat forums as we broadcast when we talk about Aurora is, people who are earlier investors in Aurora are never happy about the continuous dilution implied by the acquisition strategy. So I’m just going to put you on the spot for a second and say, what would you say to an investor who, you know, who bought in at $6.00 or $7.00 and sees that value continually being distributed among a greater number of shareholders over time?
Cam Battley: So we are not diluting in the classical sense in that we’re not issuing shares for working capital. What we are doing, very specifically, is we are issuing shares in order to acquire assets that are less valuable today than they will be next year and the year after that. So we’re acquiring assets at very attractive prices, which by the way, is the same strategy that Australis will be pursuing in the United States: seeking assets that will increase in value over time, and that’s exactly what we’ve been doing.
But more than that, we’ve been creating this integrated concept of a cannabis company that does everything from facility design and engineering through production of cannabis and hemp, through the creation of derivative products, through the science, the genetics, the selective breeding and so on through Anandia Labs, which we acquired just a couple of months ago. And then with our distribution in Europe, in North America, or in Canada for now, in the retail side, on the medical side…it’s an amazing concept, and I don’t think any other cannabis company can touch the level of integration and the comprehensive nature of our business strategy.
And what we’re going to see is other companies have had their innings in recent weeks; you will see us have our innings as well, because we’re at a very, very exciting point where our production is starting to ramp up very, very rapidly. We’re going to be at full capacity at Aurora Sky in January; by the beginning of next year, we’re going to be producing on the order of 160,000 kilograms a year on an annual run rate, and then adding to that once Aurora Sun comes online in Medicine Hat, and then adding to that when Aurora Nordic comes online. So we’re headed, by the beginning of 2020, towards about 500,000 kilograms, or 500 million grams, of production.
At the same time, we’re going to have our US listing. At the same time, we’re advancing the science of cannabis in ways that I don’t think anybody else is doing. So this is going to be a very, very exciting Fall for Aurora.
James West: Right. So just to put a wrapper on that question, so you would say to the shareholder who’s seen dilution that just be patient, because the value will ultimately be reflected in the price of those shares?
Cam Battley: Well, and we’re already seeing it. Remember, when we talk about organic growth, it’s about building that capacity, and the last quarter that we reported, our Q3 2018, those results were essentially all based on one facility: our first facility, Aurora Mountain. We now have seven facilities in production across Canada, and so our capacity is increasing very, very rapidly. And this is what we have planned for. So you keep adding capacity, you keep adding the science, and some of that science is designed very specifically to lead us even beyond what we’ve anticipated thus far, into the realm of intellectual property. That is going to be the next layer of value that we add at Aurora.
James West: Okay. So as an investor in Aurora, my biggest focus is what quarter is it that I can expect to see this revenue and margins start to ramp to a bottom line on the balance sheet?
Cam Battley: Well, you’re going to see something interesting on the 25th of September, which is when we’re reporting our year-end.
James West: My mother’s birthday. A gift for mom.
Cam Battley: It’ll be a busy day, but I’ll have to call and say Happy Birthday to your mom, if you give me her coordinates.
James West: She’ll be floored.
Cam Battley: [laughter] And so what we’re going to do is, we’re going to, on a pro forma basis, we’re going to report the totality of revenues for Aurora plus CanniMed plus MedReleaf, even though we have fully consolidated MedReleaf. That’s going to be an initial indication of just how significant our revenues are, and how quickly they’re growing. Remember that we only started to sell cannabis in January of 2016; we were 18 months behind the first 13 companies to get licensed, the blessed 13. So all of the other peer companies in the sector, actually two of which we’ve acquired. And so we’ve played catch-up, I think, exceedingly well, and we’ve also done it with a very, very different concept: we haven’t retrofitted old greenhouses or warehouses, we’ve created a purpose-built concept. So, a little bit of a delay, but now it’s coming online. Now is the time for Aurora to shine.
James West: Okay. So this quarter is when we’re going to see the big balance sheet?
Cam Battley: You’re going to see Aurora’s revenues changing significantly.
James West: Okay. This quarter?
Cam Battley: Well, this reported quarter takes us to June 30th, right? That’s our year-end. The September quarter we’ll be reporting in November, and that will show, I think, some pretty surprising and favourable results, including increasing sales in Europe, which is such a great market for us because the margins are even higher in Europe than they are in Canada.
James West: Sure. How fast will Latin America come onstream?
Cam Battley: We think fast. It’s becoming almost an issue of fear of missing out – FOMO – by countries now, not just investors, but countries, and so we’re seeing an increased momentum in Europe, in South America, towards bringing in this new industry, and there are very good reasons for it. The same logic that applied in Canada, which is, you know, let’s take something that people use widely illegally – illegally, let’s put that almost in quotes – and have for decades, let’s take that and make it legitimate. Let’s make it safer, let’s make sure that there’s some regulation on it, and at the same time, let’s open up a whole new opportunity economically. So, the opportunity for significant investment and economic development spinoffs and new employment and innovation: who wants to miss out on that?
So we’re seeing countries across Latin America take that approach. They are looking for companies like Aurora to come in, and one of the nice things about ICC, for example, is that our management team there at ICC is so well-connected across Latin America, and respected. And so we think that’s going to be one of the significant aspects that go along with that acquisition, and it will allow us to build our presence in Latin America, very, very rapidly.
James West: You bet. Cam, as usual it’s a real pleasure talking to you. Thanks for joining me today.
Cam Battley: Always a pleasure, James.
More Great Cannabis Content:
Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.
Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.
Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.