Canada’s Cannabis Market Could Soon Explode

May 14, 2018 - OilPrice.com


With Canada set to legalize marijuana in July of 2018, the world is about to have a pot problem...

Quite Simply: There isn't enough of it, legal and accessible, to meet the tidal wave of demand that is expected to sweep across Canada.

After the campaign promises of Prime Minister Justin Trudeau, the Canadian government is poised to fully legalize and regulate cannabis in the coming months, permitting adult recreational use.

With this development, the global pot market could be as big as $31.4 billion by 2021.

With full legalization in place, Deloitte estimates the total economic impact within Canada could be $22.6 billion annually, more than the combined sales of beer, wine and spirits.

Institutional demand is just starting to pick up. Pretty soon, big hedge funds, investment banks and major investors should catch on and start pumping serious capital into the cannabis sector.

One company that is well positioned to take advantage of those opportunities is Cannabis Wheaton Income Corp. (TSX-V:CBW; OTC: CBWTF) the world's first "streaming cannabis company."

Cannabis Wheaton is teaming up with producers and distributors, and is even getting in on the action itself by acquiring its own licensed producer.

The company is prepared to do it all, providing capital to licensed producers of cannabis for their facility buildouts and facility expansions in exchange for a royalty stream of cannabis production and a minority equity interest.

Canada may be on the cusp of a cannabis revolution. Here are five reasons why investors should be watching Cannabis Wheaton (TSX-V:CBW; OTC: CBWTF) very closely.

#1 Unique Streaming Approach and Vertical Integration

Cannabis Wheaton is driven by a unique business model. It's one of the world's first and one of the largest "vertically-integrated" cannabis companies, with investments in upstream, midstream and downstream.

Using the same strategy that allowed Netflix to conquer the online entertainment sector, it is the first company to propose "cannabis streaming", bank-rolling the growth plans of licensed producers to produce low risk profit.

Here's how it works. Cannabis Wheaton partners with licensed producers or licensed producer applicants looking to construct their facilities and/or expand their facilities in order to scale up quickly to meet increased demand.

In exchange for its services, Cannabis Wheaton receives a small portion of equity in the producer and a percentage of the producer's cannabis cultivation yield for a defined period of time ranging from 10-99 years. Cannabis Wheaton has the right to allow the producer to sell the cannabis through their own distribution channels (in which case Cannabis Wheaton receives royalty payments for the cannabis sold) or transfer the product to another legally permitted purchaser.

The company already has partnerships with 39 clinics, with access to over 30,000 registered medical marijuana patients.

Partnership agreements have been signed with 16 facilities across six Canadian provinces for cannabis production, with a combined 1.4 million effective square feet of growing space by 2019.

Cannabis Wheaton's (TSX-V:CBW; OTC: CBWTF) diversified position means it hasn't placed all its eggs in one basket: if one crop fails, Cannabis Wheaton can turn to another producer without breaking a sweat.

To improve "midstream" and get value-added cannabis products to consumers, Cannabis Wheaton announced the acquisition of Dosecann Inc., a late-stage licensed dealer with a 42,000 square ft. facility in Charlottetown, Prince Edward Island.

With legalization looming, Cannabis Wheaton's "Wheaton Licensing Program" will be vital in assisting applicants that are aspiring to become licensed producers.

Think of it as an "incubator" or "accelerator" for potential cannabis producers and distributors, a program that will help Cannabis Wheaton grow its profile and curate future streaming partners.

#2 Rapid Scaling Upwards

The rapidly improving environment for cannabis companies in Canada, along with the fact that no other major industrial nation has come so far in legalizing and regulating cannabis, means that Canadian companies like Cannabis Wheaton are poised to become the new cannabis "multi-nationals."

Investment from the United States, where cannabis remains federally illegal, may soon pour in to meet the growing demand from Canada's 36 million people. The domestic market, according to one Toronto-based investor, "is simply way bigger than a lot of people believe."

If markets open up in other industrialized countries, the global cannabis market could expand exponentially.

Only a few companies have access to enough funding... and an early-mover advantage... to meet such demand.

Cannabis Wheaton (TSX-V:CBW; OTC: CBWTF), thanks to its innovative streaming structure, can raise the capital and, via its streaming partners, produce the product necessary to meet surging demand, in Canada and elsewhere.

It's assets in Uruguay are a good example of this, with the ability to produce at marginal costs far below those facing growers in Canada. The tiny South American country charges a mere $1.30 per gram.

In early 2018, the company completed a private placement of convertible debenture units for gross proceeds of $100million, additional capital that it can pump into existing and new streaming agreements.


With domestic demand sure to rise, Cannabis Wheaton is increasing upstream investments. Last year, Cannabis Wheaton secured a landmark acquisition: a licensed producer, The KoLab Project (formerly RockGarden Medicinals). The acquisition gave Cannabis Wheaton the ability to legally possess cannabis obtained from its streaming partners and sell it directly through its own downstream distribution channels.

Along with its deal to acquire Dosecann and RockGarden, Cannabis Wheaton announced the acquisition of Robinson's Cannabis Incorporated, a licensed producer that is completing construction of a 27,000 square ft. cultivation facility in Annapolis Valley, Nova Scotia.

With all that pot, Cannabis Wheaton will need a way to distribute it through its downstream partners.

The company has entered into a distribution alliance with a national independent pharmacy chain. The agreement is the first of its kind in Canada and will give Wheaton a 10-year exclusive relationship with multiple independent pharmacy locations for medical cannabis distribution.

The company also has an exclusive supply agreement with Spirit Leaf, who have signed up over 100 franchisees to operate retail cannabis stores in Western Canada, to supply up to 50 percent of their product needs as well as a profit sharing arrangement to recoup any margin lost to the provincial distributor.

#3 Management Expertise

Cannabis Wheaton (TSX-V:CBW; OTC: CBWTF) has a strong team at the helm, an experienced group of cannabis experts with enough market savvy to take full advantage of Canada's changing regulations.

CEO Chuck Rifici is a well-known figure in the cannabis industry, the co-founder of the world's largest government-sanctioned marijuana producer, Canopy Growth Corp., and the man who took it public in April 2014. Canopy has a $6.4 billion market cap and is the largest publicly-traded cannabis company in the world.

A pioneer of the legal pot trade, Rifici has also sat on the board of a number of industry standouts, including Supreme Pharmaceuticals Inc. (FIRE), CannaRoyalty Corp. (CRZ) and Aurora Cannabis Inc. (ACB).

Rifici has the political connections to make it in the world of pot, still an industry in need of strong government support as he is the former chief financial officer of the Liberal party.

Cannabis Wheaton is well positioned to navigate the regulatory environment. Rifici can count on legal support from industry expert Hugo Alves, a former partner at Bennett Jones LLP, founder of the Bennett Jones Cannabis Group and another industry pioneer and now President and Director of Cannabis Wheaton.

In his former role as head of the Cannabis Group at Bennett Jones LLP, Alves advised the majority of the leading licensed producers, as well as over 50 ancillary cannabis businesses across the globe. Possibly no one in Canada knows more about the regulatory environment than him, and possibly no one could give better advice as to how to navigate the changing waters of the legal cannabis industry than him.

With this management team in place and its unique business model to back it up, Cannabis Wheaton is better positioned than any other firm to take full advantage of the coming cannabis boom.

#4 Upcoming Legislation

Crucial to Cannabis Wheaton's (TSX-V:CBW; OTC: CBWTF) rise is the changing legal environment in Canada, particularly the expected legislation that will effectively legalize recreational pot use throughout the country.

The Liberal government of Prime Minister Justin Trudeau has made legalizing pot a major part of its election platform.

Announcing the legislation in March 2017, Trudeau's government plans to pass the law by July 2018.

Last November, the proposed Cannabis Act was passed by the lower house of the Canadian Parliament and is now with the Senate with a third reading in the Senate scheduled for June 7, 2018.

It is expected that the law will be in effect by late Summer 2018, opening up all of Canada to legalized cannabis. That means demand is expected to spike, big time.

And right now, cannabis producers are in a tight spot. Canada right now has 104 licensed producers with a small number of producers also authorized to sell cannabis, who grow about 50,000 kg of pot, a mere 7 percent of potential demand once pot is legalized.

The most recent data by Marijuana Policy Group asserts that demand for recreational cannabis in Canada will be much stronger than expected and that Canadian demand could exceed 900,000 kgs next year.

Production, distribution, marketing: it's all in need of rapid expansion.

And Cannabis Wheaton, thanks to its streaming model, access to capital and market expertise, is well positioned to exploit the need for future expansion.

According to Alves, "There is a segment of the marketplace where people are trying to get their facilities built and they don't have access to capital at all." Cannabis Wheaton can meet that need by quickly funneling capital to firms that need it.

Plus, its partnerships with both distributors and producers make it a well-positioned platform to connect firms, form more lucrative relationships and facilitate the growth of supply where it's most needed.

By 2024, Canada's domestic market alone could be massive: more than $30 billion in medical, recreational and ancillary markets.


Thanks to their vertically integrated structure and streaming agreements, Cannabis Wheaton plans to enjoy higher EBITDA margins of up to 50 percent once upstream investments start paying off.

#5 Massive Opportunity in Recreational Use

Up until now, the story in cannabis has been based around the medical marijuana market: with pot still criminalized in most industrial countries, players and investors have had to pick their battles, finding openings in the regulatory spider-web in order to squeeze out revenue.

That could all be about to change.

The expected legalization and regulations of recreational pot use in Canada is the first major step. Next year, it could become possible for licensed producers to reach millions of new customers.

There are more than 100 licensed producers in Canada. Cannabis Wheaton has signed deals with 15 companies and is poised to make new investments to increase upstream operations.


When the Trudeau government first showed serious signs that it intended to pass legislation in 2017, investment in cannabis surged.

Now there's a second surge coming, one that investors should be ready for.

Cannabis Wheaton (TSX-V:CBW; OTC: CBWTF) has taken advantage of the excitement to scale up its activities.

Cannabis Wheaton won Start-Up of the Year Award at the 2017 Canadian Cannabis Awards, while CEO Chuck Rifici also won Innovator of the Year award at the same gala.

The company's profile is rising, fast.

The possibilities are huge. The market for recreational cannabis could be $8 billion, and that's just Canada. Cannabis Wheaton could become a future cannabis "multi-national," serving firms throughout the world.

The state of California, one of the largest cannabis markets in the world, started selling recreational pot early this year. By some estimates, the legal cannabis market in North America could be $24.5 billion by 2021.

While federal law in the United States may take some time to change, you can be sure that Germany, Ireland, France, the United Kingdom, Brazil, and a host of other countries will take notice and may also join the cannabis craze.

Where there's smoke, there's fire. And Cannabis Wheaton (TSX-V:CBW; OTC: CBWTF) is a company which could become red hot in the months to come.

For potential investors, the next big move in this industry is coming this summer.

Other companies to watch closely in the space:

Supreme Pharmaceuticals Inc (TSX.V:FIRE): Supreme Pharmaceuticals Inc is engaged in production and sale of medical marijuana. The company is a cultivator and distributor of sun-grown cannabis through its wholly-owned subsidiary 7ACRES. The Company is focused on the wholesale sector of the medical cannabis market in Canada and operates an approximately 342,000 square foot greenhouse facility located in Kincardine, Ontario.

Supreme had its license term extended for an additional two years and license now permits the company to store up to $150 million of cannabis products at any given time. The company is expected to produce 10,000 grams of cannabis in 2017 with an estimated value of $35 million.

MedReleaf Corp (TSX:LEAF): As a licensed producer of cannabis-based pharmaceutical products, MedReleaf Corp has a head start on the coming boom in Canada. Early July has seen a bounce in the stock price, and investors may look to ride it upward from here. Med Releaf could become Canada's second biggest medical marijuana company after Canopy Growth Cooperation as many analysts expect the 'legal weed' industry to grow 25% on an annual basis over the next 10 years.

MedReleaf has seen its share price fall since June, but has steadied out in recent months and could be poised for gains as the expected legalization of recreational marijuana materializes.

Aphria Inc (TSX:APH): Aphria Inc is engaged in the production and selling of medicinal marijuana, and while the stock has trended downward since April, the constant profits here suggest there is a lot of upside. The recent pro-marijuana legislation from the Canadian government is sure to boost companies with the reputation of Aphria Inc.

Aphria's $137 million expansion project is well underway to ramp up output to 70,000 kg. If Aphria successfully ramps up production, we believe its share price could go much higher.

Oncolytics Biotech (TSX:ONC): Oncolytics has been testing the potential of its lead product reolysin through various stages of trials battling many types of cancer. Reolysin is the company's cancer therapeutics that has been used alone and in combination with biologics, chemotherapy, and radiotherapy for various cancers. On that note, Oncolytics' currently testing Reolysin treating cancers like pancreatic, breast and lung.

The company saw its share price jump significantly in May and while the share price came down in June, we see upside for this promising biotech firm.

Microbix Biosystems Inc (TSX:MBX) is a Canadian company which is ahead of the game. Producing biological products and technologies, Microbix primarily focuses on the manufacturing of viral and bacterial antigens and reagents for the diagnostics sector. The company's core values reflect their goals. Microbix is committed to people, including its shareholders, patients, and business partners. Additionally, the company thrives on innovation, embracing its unique and ambitious approach in order to set itself apart from the competition.

This company is sure to do well in the long term, as it is truly an investment which people can believe in. With a market cap of $33M and a $0.33 buy in, Microbix is an excellent choice for those looking to get in to the biotech world.

**IMPORTANT! BY READING OUR CONTENT YOU EXPLICITLY AGREE TO THE FOLLOWING. PLEASE READ CAREFULLY**

FORWARD-LOOKING STATEMENT. Statements in this communication which are not purely historical are forward-looking statements and include statements regarding beliefs, plans, intent, predictions or other statements of future tense. Forward looking statements in this article include: that the Canadian government will fully legalize and regulate cannabis this year; that the Canadian medical and recreational markets combined will be worth $8 billion in gross sales in the year after legalization; that Cannabis Wheaton Income Corp. ("Cannabis Wheaton") can raise funds and partner quickly with new firms looking to get into the Cannabis industry and access the expertise of Cannabis Wheaton's management team and non-dilutive capital; that there will likely be a supply shortage; that, if cannabis markets open up in other industrialized countries, the global cannabis market could expand exponentially; that Cannabis Wheaton may be able to help supply cannabis to markets outside Canada; that producers will need to obtain additional financing from companies like Cannabis Wheaton; that Canadian users of cannabis will consume 900,000 kg next year; that Cannabis Wheaton could become a future cannabis "multi-national"; that Cannabis Wheaton can reach EBITDA margins of 50%; and that the cannabis market in Canada could reach $30 billion by 2024 and in North America reach $24.5 billion by 2021. Forward-looking information is based on the opinions and estimates of Cannabis Wheaton at the date the information is made, and is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information. Forward looking statements involve known and unknown risks and uncertainties which may not prove to be accurate. Actual results and outcomes may differ materially from what is expressed or forecasted in these forward-looking statements. Matters that may affect the outcome of these forward looking statements include: that Cannabis may not be legalized on the timeline as expected or at all; that markets may not materialize as expected; that cannabis may not turn out to have as large a market as thought or be as lucrative as thought as a result of competition or other factors; that Cannabis Wheaton may not be as able to diversify or scale up as thought because of potential lack of capital, lack of facilities, regulatory compliance requirements in Canada or outside of Canada or lack of suitable employees, partners or suppliers; that Cannabis Wheaton may not be able to raise funds and offer better conditions to potential partners than competitors in the cannabis industry; that partners of Cannabis Wheaton may not be granted licenses or additional capacity under existing or newly applied for licenses for them to grow for the cannabis market; that foreign governments may not allow Cannabis Wheaton to operate in their countries; that actual operating performance of the facilities affiliated with Cannabis Wheaton do not meet expectations; that competition quickly develops; that Cannabis Wheaton may not be able to retain key employees, partners and suppliers; costs may be higher than expected and profits therefore lower; competitors may capture most or all of the increased market demand; and other risks affecting the Company in particular and the cannabis industry generally, including without limitation risks related to most agricultural crops, including crop failure. The forward-looking statements in this document are made as of the date hereof and the Company disclaims any intent or obligation to update such forward-looking statements except as required by applicable securities laws.

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