Aurora Cannabis Inc (TSE:ACB NYSE:ACB) Awarded Maximum Lots in German Tender Process
Aurora Cannabis Inc (TSE:ACB) (NYSE:ACB) (FRA:21P) CCO Cam Battley discusses Aurora Sun, the company’s latest production facility, which promises to produce more cannabis than the company’s state-of-the-art Aurora Sky design. The 1.6 million square foot new facility in Medicine Hat, Alberta is significantly larger than Aurora Sky and Battley anticipates Aurora Sun producing more than 230,000 kilograms per year. Battley explains that Aurora is scaling rapidly to meet the global demand for legal, regulated cannabis. He highlights that there are eight EU GMP certified cannabis production facilities in the world and Aurora owns two, in addition to its EU GMP certified distributor, Aurora Deutschland. Recently, Aurora won 5 of the 13 German tenders to supply the German system with medical cannabis and to create a production facility in Germany. Battley emphasizes Aurora’s selection cements its place in the German market while still allowing the company to export considerable amounts of product to that country. Battley believes cannabis will remain a free and open market internationally because of the scarcity of legal and regulated production facilities around the world. Battley addresses the impact of Nelson Peltz joining the company and Aurora’s plans to make multiple partnerships across a variety of verticals.
James West: Joining me now is Chief Corporate Officer of Aurora Cannabis, Cam Battley
Cam, welcome back.
Cam Battley: Nice to see you again.
James West: Cam, the news is all about Aurora Sun these days.
Cam Battley: All of it? All of the news?
James West: Well all the news that I’ve been following and it’s largely because you’ve got a facility now that you’re basically saying is going to be more technologically advanced than Aurora Sky, is going to produce more cannabis than Aurora Sky and do so in a much more sophisticated manner. Tell us about that.
Cam Battley: Well, it is a big piece of news and I think you guys have a photo that I took this week of Aurora Sky itself. Okay, you guys are good!
So, what you’re looking at there is one of the 17 flower rooms at Aurora Sky, 34,000 square feet and what you’re looking at there in addition is incredibly happy healthy plants. Just look at them. They’re perfect. And in this particular photo and I actually have it up on my Twitter account at @CamBattley as well. We’re not using lights because we’re using the sun and we’re getting plenty of light from the sun, no need for the lights.
But, the beauty of this is we have validated the sky class concept. That’s what Aurora Sky has done. That’s an 800,000 square foot facility producing over a1 00,000 kilograms of cannabis per year and I believe that we’re going to do so at Sky for less than a dollar a gram. Now the news this week out of Aurora Sun in Medicine Hat, which we’re constructing right now is that we’re upsizing it or supersizing it from 1.2 million square feet to 1.6 million square feet and the amount of cannabis that will produce there we anticipate will be in excess of 230,000 kilograms per year.
James West: Whoa, that’s a lot of cannabis.
Cam Battley: It’s a lot of cannabis.
James West: So, if I was a betting man, I would suggest that you are obviously building feedstock for a global export market.
Cam Battley: Yeah, so our [00:03:52] based on a lot of travel, like you we’ve been traveling a lot. I recently came back from Australia and Israel and Europe, is the demand for legally regulated cannabis is exploding around the world. There’s more than 40 countries now with either intact or in place medical cannabis systems, or that have announced that they’re going to create and establish new medical cannabis systems. There’s a massive shortage of legal regulated product. There’s no shortage of cannabis in the world, but there’s a huge shortage of legal regulated cannabis.
So, we have the opportunity by scaling up now and producing a tremendous amount of premium cannabis at low costs. It puts us in the driver’s seat for now and that’s a very exciting position to be in. In addition, at some point in the future, you know, people have speculated that there could be oversupply in Canada. Well that doesn’t really worry us because we’re going to be producing premium product at a much lower price than virtually anybody else. I don’t think too many producers will be able to match the cost.
James West: Sure.
Cam Battley: That we’re able to achieve.
James West: One of the aspects of the global cannabis marketplace that is overlooked by many investors is not really front and center in the conversation is the idea that if you’re going to export a product for medical consumption in another country, it has to be EU GMP certified.
Cam Battley: Oh how I love those letters. E-U-G-M-P.
James West: I wish it spelled something more phonic.
Cam Battley: There must be some anagrams. We could come up with, maybe something rude. But yeah, so there are 8 EU GMP certified production facilities in the world. One of them is Bedrocan BV in the Netherlands. The other seven are Canadian. We have two of them and we also have our EU GMP certified distributor Aurora Deutschland formerly Pedanios and it’s our intention to continue with the audits and get the rest of our production facilities EU GMP certified.
James West: Okay.
Cam Battley: So that’s the highest level of certification in the world. The same level of certification demanded of European pharmaceutical companies, and we believe it will be adopted as a standard by other countries around the world as a means of ensuring that they have high-quality properly regulated products entering their newly created medical cannabis systems.
So right now things are going exceedingly well for Aurora. Production is hitting that hockey stick that we always anticipated once the first of our Sky class facilities came on board. We have every single room at Sky populated and in production right now and we’re getting the yields that we needed.
So, in order to say that we believe that we’ve validated this, you need to be able to say that you’re getting the yields that you expected so that you could end up with a hundred thousand-plus kilograms per year. In fact, we’re a little bit ahead of that. So, this gives us a tremendous amount of confidence. We’re doing exceedingly well.
James West: Right that’s very exciting and I’m curious now so right as of the last sort of data set, we know that Aurora and Canopy were over 50% of the cannabis sold in Canada.
Cam Battley: In Canada in the consumer market.
James West: In the consumer market. So, we and we know that currently the market is in undersupply. So, are you going to single-handedly cause oversupply in Canada by having suddenly this ton literally tons of cannabis for sale?
Cam Battley: I’ve been accused of a lot of things but never single-handedly causing oversupply [Laughter] So no, I don’t think that will happen. I think you may see some pressure on some of those smaller less efficient producers who are not able, who don’t have a differentiating or distinguishing feature and are not able to produce particularly economically. The products going to be there. The question is who’s going to produce it? Where’s it going to come from? How high quality will it be and at what cost?
We like to look to the future where we’re going to be producing a very significant amount of both the medical and the consumer cannabis consumed in Canada, but beyond that and I would say as a top priority we are going to be exporting our Canadian produced medical cannabis around the world. The demand is there. We’ve got the product now, we’re going to have a heck of a lot more of it next year and we’re going to be shipping it around the world.
James West: Sure. So, in your peregrinations around the planet.
Cam Battley: Peregrination?
James West: Do you like that one? Do you?
Cam Battley: I do.
James West: I spent all night thinking that one up. Do you get the sense that, I mean X of the United States which is obviously got a protectionist President in place but, X of the United States do you get a sense that the global marketplace for cannabis is going to be a free and open market?
Cam Battley: It has to be, at least for now it has to be. You take a look at Germany we just we haven’t talked about this but we won 5 of the 13 tenders to supply the German system which means we’re cemented into Germany and we’re going to be building a production facility there.
Great news, but the German government also came out and very realistically said we’re going to be importing for quite some time because they know that you know based on these initial tenders or even far more tenders, there’s no way that there would be enough domestically produced in Germany, in the short term, to be able to satisfy the needs of patients in a rapidly growing system, by the way.
So yeah, we’re going to be exporting into or from Canada into Germany for quite some time and a number of other countries. The reason for that is very, very simple, there just aren’t legal regulated production facilities in countries around the world. There’s only a very, very small number around the world. Most of them now in Canada and unfortunately, we’re one of the companies that actually has enough product to be able to supply the domestic medical system, the domestic consumer system and have excess to ship overseas and receive a premium price for so it’s a very enviable situation we’re in right now.
James West: Sure you bet and so far has you know, the other buzz that sort of surrounds Aurora when you bring it up in conversation.
Cam Battley: Sorry the what? The buzz?
James West: The buzz. Yes, the buzz, you know the conversation, the what do they the Zeitgeist. Surrounds, you know, what’s going to happen with Nelson Peltz there and you made it very clear that you’re not looking for a Constellation type of takeover arrangement. You’re looking to create multiple partnerships with global players around the world and I’m assuming that that’s something that we’re still anticipating that will be result of your recruitment of Mr. Peltz to the board.
Cam Battley: Yeah. Absolutely. It’s you know, it’s really funny. We were initially a little puzzled when you know Canopy did their deal with Constellation and then Cronos did their deal with Altria that everybody kept saying you have to have a deal like that, Aurora. Well, why?
Is that necessary? And quite frankly there was a little bit of everybody’s got to follow-the-leader ethic at play and you know, we stepped back and looked at things a little bit differently and I like to think that’s the way we do things at Aurora. We sit back and look at things a little bit differently, the way we do it with cultivation and our entire business strategy. And we said do we actually have to make a deal with one company in one mature industry and give up control? We don’t think so.
So, our plan is optimally, touch wood, we hope it works out, is to work with Nelson Peltz who’s frankly amazing. He’s really great to work with and and see if we can’t put together multiple partnerships in multiple different verticals.
If you think of all the verticals that are affected by cannabis either via disruption or by the creation of new and enhanced opportunities, it’s so many things. You know, we know about Cronos and tobacco but take a look at wellness products, take a look at not just beverage alcohol, but non-alcoholic beverages, cosmetics and beauty and Pharma. The list goes on and on if you want to add different segments of consumer packaged goods. So, the opportunities are significant and we want to see if it’s possible for a cannabis company to play in multiple verticals. We think it is possible and I can’t think of anybody better than Nelson Peltz to help us navigate this.
James West: Excellent Cam! Well, that’s a great update as per usual. We’re going to cut it there for now because there’s so much more to come and we’ll have you back soon. Thanks for joining me today.
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