CannTrust expands into the US, starting with California grow deal

CannTrust Holdings Inc., a producer of medical and recreational cannabis with more than 72,000 patients in Canada, is establishing operations in the United States – with a $20m initial investment.

This expansion will start in the State of California, where CannTrust has signed a non-binding letter of intent that will provide access to over 3,000 acres of farmland for hemp production with Elk Grove Farming Company to secure low-cost hemp with high cannabidiol (CBD) content.

CannTrust and Elk Grove will each have 50% ownership of a new joint venture entity.

CannTrust says its opportunity in the US is to become a trusted supplier of consistent, standardized and high-quality hemp-derived CBD formulations at scale. It believes there will be increasing demand for hemp-derived CBD formulations from international retailers and product manufacturers, and those organizations require expertise in genetics and value-add processing to ensure products are desirable and meet the highest safety standards.

CannTrust will guarantee the off-take of biomass produced by the joint, and says it will use its expertise to process, formulate and sell hemp-derived CBD products in US markets where such sales are lawful.

“This agreement represents another bold move for CannTrust. Our U.S. operation is expected to deliver a significant increase in low-cost production capacity, which will leverage our expertise in standardized CBD-based product formulation, and will give the Company a foothold in the largest international CBD market in the world with an experienced and knowledgeable partner,” said Peter Aceto, Chief Executive Officer.

“Following our successful equity offering, we have the liquidity we need to fund our ambitious growth plans including our greenhouse expansion in Niagara, our outdoor cultivation operation in British Columbia, our global footprint expansion and now our U.S. operation. We continue to focus on delivering on our vision of becoming a global provider of innovative cannabis-based and hemp-derived products.”

Elk Grove has multi-generational experience in farming across a wide variety of commodities and value-added expertise in leading crop protection products, application and input supply with operations throughout the State of California.

“We are thrilled to be partnering with CannTrust. Our knowledge of farming operations in California coupled with CannTrust’s expertise in developing award-winning formulations is the perfect match to become a trusted supplier of CBD products in the U.S,” said Morgan Houchin of Elk Grove Farming Company, LLC.

This initiative is the first step in CannTrust’s development of full-scale U.S. operations.

Prior to commercial scale cultivation from the new Joint Venture in 2020, CannTrust plans to execute on (i) its processing strategy from the biomass produced from the Joint Venture, and (ii) its product development strategy.

Investment in the US operation is expected to be up to $20 million through to the end of 2020. This capital investment includes the company’s share of cultivation, harvest and post-harvest processing for the Joint Venture, as well as extraction and processing investments that will be funded by CannTrust. This level of capital investment assumes starting with up to 300 acres for cultivation in 2020.

CannTrust is a federally regulated licensed producer of medical and recreational cannabis in Canada. Founded by pharmacists, CannTrust brings more than 40 years of pharmaceutical and healthcare experience to the medical cannabis industry and serves more than 72,000 medical patients with its dried, extract and capsule products.Cannabis Business Worldwide

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