After almost two months in a trading halt Queensland Bauxite Limited (ASX: QBL) has returned to the market with a significant announcement about the transformation of its cannabis industry activities.
The company, which has become a major player in the cannabis sector over the last year, has announced a transformation project, seeing Queensland Bauxite acquire two major cannabis players.
QBL has acquired 100 per cent of both Medcan Australia and Medical Cannabis Limited (MCL) which will certainly see it grow to become one of the largest cannabis player in the country.
Previously QBL was a majority stakeholder in MCL, with MCL comprising the bulk of QBL's activities in the cannabis industry.
Following the integration of Medcan and MCL into QBL, QBL will be comprised of two separate operating divisions, mining and cannabis.
The acquisition of Medcan, a medical cannabis producer, will allow QBL to push into the growing and cultivating of high THC and CBD medicinal cannabis product in Australia.
The Medcan acquisition is a milestone for MCL and QBL as it finally see MCL's medical division completely integrated, making MCL the leader in the Australian and global cannabis industry.
MCL now has access to a cannabis production license now that Medcan is integrated fully into it, enabling the maximisation of MCL's seed bank, cannabis genetics, and distribution divisions.
The QBL held MCL is now the only medicinal cannabis company in Australia with two complete fully vertically integrated businesses Nutritional Hemp and Medicinal Cannabis.
Medcan has also been working on a state of the art production facility to allow the GMP production of medicinal cannabis products. This facility will have the ability to produce medicinal cannabis dried flower, full extract oil, capsules, and the CannTab XR pill.
Medcan was founded by Craig Cochran and Gareth Bell who will continue to act as executive directors of Medcan to drive the company forward.
QBL's acquisition of Medcan will enable the supply of Australian produced medicinal cannabis products in world markets.
Medcan was purchased using 250 million QBL shares, representing approximately 8 per cent of the final merged entity.
Whilst punters expected QBL to float MCL as a separate business on the ASX when it exited its trading halt, the company has instead elected to purchase the remaining 45 per cent of MCL and completely incorporate the company into QBL.
The directors of QBL attribute this decision to it being better value for shareholders considering they will now have a share in all of QBL's bauxite projects as well as its medicinal cannabis projects through MCL.
The acquisition of the remaining 45 per cent of MCL will cost QBL 1.2 billion QBL shares.
To support the acquisitions of MCL and Medcan QBL will conduct a capital raising to raise up to $5 million, at a price of 8 cents per share.
The total acquisition of MCL will see QBL have a large portfolio of MCL subsidiaries fully integrated under its belt, all of which are some of the most innovative cannabis players in Australia.
MCL's subsidiaries include growing and cultivating company Vitaseeds, retail products processing company Hemp Hulling Co, retail products marketing company Vitahemp, and medical research company Vitacann.
Pnina Feldman, the executive chairperson of QBL, recognises the significance of Thursday's announcement.
"The value of MCL and Medcan combined is greater than the sum of the individual businesses," says Feldman.
"Both parties achieve value uplift with clear and deliverable synergies MCL has access to an ODC licence and a DA approval for a state of the art cannabis cultivation and production facility, and the Medcan staff having the ability to improve and fast track its market reach and its grow of Cannabis, given access to MCL's genetics and its unique lawful Australian seed bank."
"MCL, with this acquisition, is now able to fulfil its vision to become a fully vertically integrated cannabis company with the ability to develop its own products and to produce for patients much needed product to the highest standard. This should ensure the generation of further significant short term revenues for the company as we continue to implement our business plan."
QBL's announcement follows news out of Canada on Tuesday that the country has legalised cannabis for recreational use nationwide.
The landmark bill will end 90 years of prohibition and will allow Canadians to buy and consume cannabis legally.
This makes Canada the second country in the world to legalise the recreational use of cannabis.
In Canada, cannabis will be a $8.7 billion industry by 2020. More equity capital has been raised in Canada for cannabis companies than anywhere else in the world with over 50 companies listed on the Canadian exchange.
Business News Australia