David George-Cosh

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Aphria Inc. plans to bring its newly-licensed Diamond facility to full capacity in the coming weeks to meet demand for vaping and edible products, the company’s chairman and interim CEO said while shrugging off any concern about oversupplying the Canadian cannabis market.

The Leamington, Ont.-based company announced Monday it received a cultivation licence from Health Canada for a cannabis greenhouse facility that will add 1.3 million square feet of production space and 140,000 kilograms in annual capacity to its operations.

However, some analysts have calculated that Canada’s recreational cannabis producers will soon make enough legal pot to meet consumer demand by the end of the year, raising the prospect of oversupply as new production comes on line.

Those concerns don’t appear to faze Aphria chairman and interim CEO Irwin Simon, who stated in a phone interview the company’s Diamond facility will focus on low costs and take advantage of a largely-automated process where robots will handle the bulk of its legal pot cultivation.

“Diamond, I would want to run at full capacity because it’s so automated from a low-cost production standpoint,” he told BNN Bloomberg. “It will be one of the lowest-cost production facilities to run.”

Canaccord Genuity said in a recent research note that once Aphria has its new facility up and running, it should see its share of the Canadian recreational market increase to 12 per cent next year, from 10.6 per cent in 2019.

The company’s new facility was designed with low costs in mind and incorporates several features already used in large-scale greenhouses to grow produce, he added. Aphria One, its main existing cultivation facility which can produce 110,000 kilograms of cannabis annually, will also continue to operate at current capacity, he said. Simon didn’t disclose expectations for Diamond’s production costs; Aphria recently reported 2019 full-year costs of $2.72 per gram, up from $1.86 per gram a year earlier.

Additionally, Simon told BNN Bloomberg he “absolutely” expects to sell more of the company’s non-critical assets in the coming months to add to a growing war chest that stands at about $449 million. Aphria recently announced plans to divest a portion of its 25 per cent stake in Althea, a medical cannabis company based in Melbourne. It also sold its interest in U.S. cannabis producer Liberty Health Sciences for $47 million in February and received another $89 million after Green Growth Brands Inc. agreed to buy 27.3 million of its shares in April.

“What I’m trying to do here is that I want to get the complexity out of Aphria,” Simon said. “I want to get out of deals that don’t make sense and where we can’t really add value.”

Simon also said his company plans to unveil its next-generation cannabis products “very shortly”, including vapes and edibles produced at Aphria’s Leamington extraction facility.

Cannabis Canada is BNN Bloomberg’s in-depth series exploring the stunning formation of the entirely new — and controversial — Canadian recreational marijuana industry. Read more from the special series here and subscribe to our Cannabis Canada newsletter to have the latest marijuana news delivered directly to your inbox every day.