The Green Organic Dutchman Finally Wins Over City Council

The Green Organic Dutchman (TSX: TGOD) announced yesterday that after a close to year long battle with the City of Hamilton, it has emerged victorious in obtaining the ability to operate an oversized cannabis facility. The city had initially denied the application in July 2018, stating that the proposed facility was larger than what bylaws allowed.

Presently, cannabis operations within Hamilton may not exceed 20,000 square feet in size without special authorization to do so. The bylaw was enacted largely due to historical issues with grow operations, such as odour concerns, increased crime, and the glow many facilities put out at night from grow lights. It culminated in the murder of a known grower in 2017, which heightened the distaste for cannabis operations in the area.

The ruling by council in favour of the Organic Dutchman comes after a drawn out battle which saw the company fight to win over the town. To entice community approval, the company has taken many steps in the past to appear more community centred.

In November, the facility hosted a local open house to show members of the community how different they are from past operations in the area. With members of the public onsite, they demonstrated the efforts they take for odour control, the intense security featured at the facility, as well as to educate the public on the grow cycles being utilized that reduce light pollution.

The company has also taken further efforts to appease the community by establishing a community farm on the property. The Organic Dutchman proudly boasts that they have already donated over 6,000lbs of food to local food banks through the use of the community farm. TGOD has also planned to implement a community garden roughly an acre in size for members of the community to maintain their own garden plots.

These actions however follow efforts by TGOD to undermine the regulations implemented by city council. These efforts began back in July, when the Organic Dutchman continued to proceed with construction of its Ancaster facility even after being denied the proper exemptions to do so. To justify their actions, in August they applied for the same permits for the greenhouse, this time under the guise of growing potted mums.

This action alone lead to the loss of confidence from certain members of the local council, who viewed the new application as misleading at best.

To the Organic Dutchman’s credit however, they appear to have won over the local council after all. Following their potted mum gimmick, they now have a large new facility that is nearing completion in the next several months which will bring a further 17,500KG of annual grow capacity online. Based on the company’s estimates of $9.24 – $12.33 in gross revenues per gram of cannabis sold, this equates to roughly $161.7mm – $215mm in revenues – however we believe it’ll be much closer to $7.00 per gram. This of course also assumes that the firm can grow at the stated capacity without crop loss – something organic growing is more likely to fall victim to.

It should also be noted that this regulatory win comes on the back of another recent win – the sale of the first certified-organic cannabis produced by The Green Organic Dutchman. It was announced on the 25th of March that the company had started to ship its first sales to a select group known as the “Growers Circle”. The group consists of 200 members with medicinal prescriptions for the use of cannabis.

The group is being utilized as a pilot to perfect TGOD’s distribution processes prior to a scaled ramp up and rollout of operations. Although no figures were given on the price per gram paid by the select patients, it was noted that the consumers are located across Canada. The company intends to expand the list of members as supply allows, as well as it plans to step a heavy foot into the recreational market when viable.

The Green Organic Dutchman closed at $4.78 on Thursday, up $0.16, or 3.46%.

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Information for this analysis was found via Sedar, The Hamilton Spectator, and The Green Organic Dutchman Holdings Ltd. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security.