Funding for cannabis operations in Canada is drying up quick, as demonstrated by today’s news release issued by The Green Organic Dutchman (TSX: TGOD). The firm announced that, in short, commercial banks are not willing to provide the firm with additional funding – at least not at terms that TGOD is in favour of.
The Organic Dutchman cited prevailing market conditions as a reason for being unable to obtain the required funding in the short time frame required to keep construction rolling, and as a result the firm is looking for sources of alternative financing. The firm also indicated that it holds no debt (which goes against the latest financials), and currently has $56.7 million in cash available within Canada – which includes $40.2 million that is currently restricted due to escrow conditions of current construction contracts.
The result of the cash crunch however, is that the firm essentially announced that there will be construction delays at both its Ancaster and Valleyfield facilities due to not having the required funding to complete the projects at this time without additional capital sources.
With respect to Ancaster, the firm indicated that six weeks of construction is required to complete the processing facility – a space required to acquire revenue streams from its recently licensed grow rooms at the facility. While the grow rooms have achieved licensing from Health Canada, the required processing facility is expected to submit for licensing by the end of November, with any newly sourced capital to be put towards the project to ensure completion.
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While The Green Organic Dutchman did not provide revised construction schedules as of yet, without additional funding sources the delay can likely be expected to be announced in the coming weeks. As of the latest financials, the firm indicated that $7.64 million was required to complete the structure at Ancaster, with a further $16.28 million being required to acquire the necessary operating equipment. All of which was expected to be required by the end of 2019.
At Valleyfield, the necessary funding for construction and operating equipment is much higher, with the structure itself anticipated to need $69.88 million for Phase 1a alone. Valleyfield’s operating equipment expenses are slightly murkier, with $47.47 million expected to be spent through to 2021, which is subject to potential decreases due to manufacturing outsourcing. $19.27 million is expected to be spent through 2020 in terms of operating equipment at Valleyfield. An additional $27.25 million is also expected to be required as a result of accelerating Phase 1B at the Quebec facility.
The news of funding limitations comes shortly after the announcement in late September that The Green Organic Dutchman was still on track to complete its Ancaster facility in the near term, while also maintaining that it expected the first phase of Valleyfield to be completed in the fourth quarter of 2019. This was reaffirmed via an analyst day event and subsequent news release.
The Green Organic Dutchman closed yesterdays session at $1.73 after setting a new 52 week low earlier in the day.
Information for this briefing was found via Sedar and The Green Organic Dutchman. 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. The author holds no licenses.
