RavenQuest BioMed Inc (CNSX:RQB) Expanding Industry Disruptive Growing Technology
RavenQuest BioMed Inc (CNSX:RQB) (OTCMKTS:RVVQF) (FRA:1IT) CEO George Robinson joins Midas Letter to discuss the company’s ‘Orbital Gardens‘ and the advantages of using the rotational growth technology on a large scale. The RavenQuest Orbital Garden allows for production of large quantities of cannabis in smaller areas by maximizing the productivity of grow space and lighting. The technology is able to produce over 300 Grams per square foot – which is currently double the industry averages. The company is also expanding into the European medical marijuana sector, recently completing a joint venture agreement to construct cannabis production facilities using RavenQuest’s Orbital Garden grow technology. It is anticipated that production facilities will produce up to 35,000 kilograms of cannabis annually by 2021. The CEO also outline the company’s road to profitability, surmising EBITDA rates of between 38 to 42 percent and profitability by the end of calendar year 2019.
James West: I’m joined now by George Robinson, CEO of Ravenquest Biomed. George, welcome back.
George Robinson: It’s always good to be back, James.
James West: George, what’s the latest? What’s going on at Ravenquest Biomed? How many of those orbital gardens are spinning now?
George Robinson: There’s a lot of them spinning right now; it’s actually going quite well. Second crop’s going to come off in about another week and a bit, and the COAs for the first crop should be in today, so really a great time right now.
James West: Sure. When you say COAs, what do you exactly mean by that?
George Robinson: Certificate of Analysis. This is what tells us how good the product was after the first grow cycle, and that’s coming back now, and it should be in later today.
James West: Great. So you’re on track to produce 11,000 kilograms this year?
George Robinson: Well, that’s the annualized production. I think by the end of the year we’ll do about 6,000 to about 7,000 kilograms by the end of 2019.
James West: And so – end of 2019, fine, but what about the end of 2020?
George Robinson: We’ll be at 11,000 kilograms right here in beautiful Canada, and then as we look to our expansion, we’re going to be much higher than that.
James West: Sure. And is that when profitability begins for the company?
George Robinson: No, profitability will happen by the end of the year, this year, 2019, and then it really looks very, very nice coming in the end of 2020. We’re looking at EBITDA rates of somewhere between 38 to 42 percent.
James West: Wow, that’s great. So what – you’re expanding your production by licensing the equipment to partner growers. Have you signed any more of those agreements lately?
George Robinson: Yeah, we actually are. We’ve done a joint venture agreement with our friends out in Norway; we’ll be expanding into Portugal as our first destination the joint venture and us will do. This joint venture will put about 1,800 gardens into Portugal in two locations; that will produce about 35,000 kilograms of cannabis come 2021.
James West: Okay, and how does the economic model work for that when you’re dealing with a partner in, say, Portugal?
George Robinson: It works really good. So the joint venture partner of Norway is going to put up the money; we’ll build our two facilities in Portugal, one just south of Lisbon and one up by Porto. And how that works is, they put up all the money, and they have exclusive use of our technology, and we split that 50/50. So all of the revenues coming off come at 50/50; we’ll run and operate the facility with our expertise, and that’s how it’s going to work. And right now, we’re looking at about 35,000 kilos.
James West: Wow. So 2020 is going to be very profitable, by the sounds of things.
George Robinson: Yeah. That will get everything started up there. Luckily, both buildings that we’re looking at in Portugal are up and they’re there, so we don’t have to actually break down. It looks like construction schedules will be probably six to nine months, and then we can start first production in Portugal.
James West: Fantastic. So you just raised, you just closed on $2.5 million. Is that enough to get you through to putting all the gardens that you need in all these places?
George Robinson: No, the $2.5 million was actually quite strategic that we were up to. We didn’t really need the money; we had some things that we were doing on a convertible debenture, and we were allowing some people to come in and take some shares in place, and that was what that $2.5 million was. Right now, we’re cash flow positive. This was a more strategic event. All the money for all the gardens that are coming up outside of Canada are already going to be prepaid for by the joint venture, so no cash required, and all of our facilities in Canada are built.
James West: Sure. Now, you’ve demonstrated that you can actually produce more kilograms per unit of space than other growers. Tell me how that affects the energy consumption and, therefore, the cost of growing, as well.
George Robinson: Well, okay. Let’s start off with some basics: right now, just on electrical power and climate control power, we use 65 percent less, because we use the full cubic footage of the room. And since everything is inside the drum, we have a smaller area where we have to control the climate.
So power, right off the get-go, is 65 percent less. What it shows right now is, anyone in a greenhouse is using about 5.5 megawatts of power for 10,000 kilos; for us, we only use 1.1 megawatts for that same 10,000 kilos. So, a much better cost savings from the electrical side.
James West: And you get an extra growth cycle relative to a conventional grow environment?
George Robinson: Maybe two, depending on how good the people are in the flat table environment. We get six grow cycles. Some flat table environment may get four, four and a half, but we’re at six, minimum.
James West: Sure. So how does this translate into your all-in cost per gram produced?
George Robinson: Well, you know, we don’t always like talking about it too publicly, but let’s just say right now as we see it, and how everyone else is reporting, when we use less power, less water and less nutrients, we seemingly are about 25 to 30 percent less than the lowest cost producer that we see right now, different than, not putting into the equation, outdoor growing.
James West: And so going forward, George, is Ravenquest Biomed more focused on the recreational or the medical market?
George Robinson: I think it’s quite a, it has to be a balance in today’s world. You have to look at the medical side, and definitely out in Europe, it’s going to be 100 percent medical-focused. Here in Canada, we’ll have a small entry into the recreational market, but we really want to make sure that there’s enough product for the medicinal market in Canada, and then as we see a draw on the provinces that ask for more recreational cannabis, we’ll take a look at that. But right now, we’re going to put about 80 percent of our product into the medicinal market.
James West: Wow, fantastic. George, that’s a great update. Let’s leave it there for now. We’ll come back to you soon. Thanks very much.
George Robinson: Thanks again for chatting.
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