Aurora Cannabis (NYSE:ACB), one of the world’s largest cannabis producers, announced July 15 that it received two licenses from Health Canada for outdoor cultivation of marijuana. The move could be a significant catalyst for ACB stock.
The Details of the Licenses
The two licenses are for sites in Quebec and British Columbia.
The Quebec site is a 21,000 square-foot operation at the company’s Aurora Eau facility in Quebec. The B.C. site is a 207-acre property in British Columbia. It will be called Aurora Valley. The Quebec operation has already been planted; the B.C. site should be planted shortly.
Now before any owners of ACB stock get excited about Aurora jumping head first into outdoor growing, they might want to take a deep breath. These facilities are for cultivation research. However, the research ACB does at both of the facilities will ultimately enable it to grow cannabis outdoors.
But first, it needs to figure out what grows best and where. Once Aurora figures that out, it will go all-in on outdoor production.
“For this season and next, our focus will be on researching cultivation methods and evaluating genetics to produce high THC and CBD cannabis in outdoor-grown plants, with the ultimate goal of extracting these components,” Dr. Jonathan Page, Chief Science Officer at Aurora stated in its press release. “The unique climates of each site also presents a great opportunity to determine which cultivars will perform best in different outdoor environments,” he added.
A smaller detail from its July 15 press release, but equally important to Aurora’s future and the future of Aurora stock, is that the company received a processing license from Health Canada to produce cannabis gummies and chocolate edibles once they’re legally available for sale in mid-December.
I’ve said for a long time that the most lucrative sector of cannabis is going to be edibles and cannabis-infused drinks. This license ensures that Aurora will be ready to go as soon as selling edible cannabis is legal in Canada.
Outdoor Cultivation Can Boost Aurora Stock
Health Canada only approved outdoor cultivation in June 2018, 17 years after medical pot became legal in Canada.
Regulators took their time approving outdoor cultivation because they were worried about theft and quality control. Since outdoor cultivation was approved, several companies, including Canopy Growth (NYSE:CGC) have started growing cannabis outside.
On July 12, 48North Cannabis announced that it had completed the planting of its first outdoor crop at its outdoor cultivation site in Ontario. The company planted a total of 250,000 cannabis seeds at its Good:Farm facility, which has 3.7 million square feet of cultivation space. The company expects to produce more than 40,000 kilograms of dried cannabis per year.
The biggest attraction of 48North’s cannabis facility is that it’s expected to produce cannabis at the lowest cost in Canada.
That’s a big deal, considering that Stats Canada recently produced a report that suggested legal pot in Canada costs as much as 65% more per gram than illegal cannabis.
The Canadian government is working on ways to shrink the gap, including lowering the minimum tax on cannabis and switching to a system that taxes cannabis solely based on wholesale prices.
Aurora, Canopy Growth, and North48 are all thinking along the same lines. It’s cheaper to produce cannabis outdoors, and cheaper, legal cannabis will attract more buyers. By following that philosophy, Aurora should be able to boost its top and bottom lines, elevating ACB stock in the process.
The Bottom Line on ACB Stock
Here in Canada, the cannabis industry has been under fire in recent days due to the troubles facing CannTrust Holdings (NYSE:CTST) and its failure to follow Health Canada’s rules. It could permanently lose its cannabis license as a result.
CannTrust’s failure is a sign that the cannabis industry still in the early stages of growth. It’s not good news for owners of Aurora stock or theshareholders of the other big Canadian cannabis stocks because it puts their reputations under a microscope.
However, if Aurora continues to grow its outdoor cultivation business, I believe its future profits could be a lot higher than people currently estimate. That, in turn, would certainly be great news for Aurora Cannabis stock.
At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
