Newstrike Resources (HIP.V) seriously added to its production capacity when the company announced yesterday that its wholly-owned subsidiary, UP Cannabis, agreed to acquire a greenhouse facility on approximately 16.6 acres of land in Ontario’s Niagara region.
Pursuant to the agreement UP will get its hands on a ~200,000 square-foot facility with approximately 160,000 square feet dedicated to growing.
Newstrike CEO, Jay Wilgar, commented, “This Acquisition marks the attainment of another strategic milestone by providing a potential five-fold increase over existing cannabis production capacity to an estimated annual total of almost 15,000kg, along with the attendant economies of scale, all in a modern, automated facility that will allow us to reduce production costs while preserving and ensuring the character and quality of our product.”
The acquisition also has an expansion potential which would possibly add another 140,000 square-foot of growing space, increasing aggregate potential capacity of 25,000 kilograms annually.
According to the news release, the transaction, valued at approximately $7.3 million, will be financed in part by a new $4.0 million secured acquisition facility which has been committed by a syndicate of Newstrike officers, directors and shareholders led by Beechhill Capital. The remaining $3.3 million will come from existing capital.
Newstrike is expected to make monthly interest-only payments of 1.25% until the end of term when the facility is scheduled to be repaid in full. If things go better than expected, Newstrike can repay the facility at any time subject to a 1.0% cancellation fee on all amounts outstanding.
Wilgar continued, “The continued support of Beechhill Capital Corp. and fellow Newstrike shareholders, demonstrated in the provision of this flexible $4.0 million facility on favourable terms, further validates our growth strategy and accelerates the execution of our business plan.”
As a result of this transaction, UP is planning to develop and apply for licensing of this facility under the Access to Cannabis for Medical Purposes Regulations (ACMPR) as an adjunct to its existing licensed facility in Brantford, Ontario.
The Niagara region purchase is expected to close by July 31, 2017 and is still subject to customary closing conditions.
Newstrike is moving hard to establish a solid recognizable brand, most notably illustrated by the company’s June 1, 2017 partnership with Canadian rock sensation, The Tragically Hip. Band members, through controlled companies, are significant stake holders in Newstrike.
Company Chairman, Scott Kelly, concluded, “With prohibition ending after 93 years we believe that Canadian adult consumers will look toward brands that speak to quality, best in class production and trust. No one knows Canada and Canadians like the members of The Tragically Hip. With their involvement and support Newstrike firmly believes we are developing the brand that adult consumers who choose to use cannabis will turn to.”
The inevitable brand war will winnow down the legal cannabis field to the strongest players and Newstrike is adding the necessary muscle with strategic partnerships, such as the one with the Tragically Hip, a strong digital strategy to maintain market awareness and top-quality merchandise.
The next 12 months will paramount for Newstrike and UP Cannabis.
FULL DISCLOSURE: Newstrike Resources is NOT an EQUITY.GURU client.