Apr 10, 2019

Aurora to expand cannabis facility in Medicine Hat by 33%

Some investors speculating on pot stocks without knowing it: WisdomTree's Jeff Weniger


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Aurora Cannabis Inc. (ACB.TO) said it is expanding the size of a marijuana production facility currently under construction in Medicine Hat, Alta., by 33 per cent.

The Edmonton-based pot producer said in a release Wednesday that it is increasing its high-tech Aurora Sun facility from an original plan of 1.2 million square feet to 1.62 million square feet, as the firm seeks to ramp up production amid growing global demand for medical cannabis.

Aurora said it expects the Medicine Hat facility will produce more than 230,000 kilograms of cannabis per year.

“The increased scale of Aurora Sun reflects our expectations for the long-term growth in global demand, especially the higher margin international medical markets which will be faced with significant supply shortages for the foreseeable future,” said Aurora CEO Terry Booth in a release.

“Sun is also designed with flexibility in mind to enable us to quickly meet changing market demands, particularly as breeding and cultivation technologies evolve and as customer preferences and requirements change."

The company first announced it acquired land to build the Sun facility in April 2018, and forecasted completion for the second half of 2019.

Aurora said in its Wednesday release that the operation’s ground work is near completion, its steel structure is being erected and glass at the Sun facility is slated for installation in May.

GMP Securities analyst Martin Landry said that the facility’s expansion could make Aurora Sun one of the largest production facilities in Canada and potentially the world.

“Large scale facilities like Aurora Sun are a differentiation factor for [Aurora] and could provide supply chain benefits,” Landry wrote in a note to clients Wednesday.

Landry noted that the upgraded facility will be built to EU Good Manufacturing Practice standards, which could allow Aurora’s cannabis to be sold in European medical markets. He also called Aurora’s estimates on its payback period of six months “aggressive,” and said he estimates it could take about two years for the company to break even on its facility.

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