Erin Resources Ltd (ASX:ERI) provided an update this morning on the progress of MGC Pharmaceuticals’ operations and business strategy. MCG has secured the option to acquire a licence to grow its proprietary Sativa L Cannabis (Hemp) strain in Namibia.
MGC Pharmaceuticals Ltd was acquired by Erin Resources in May this year. MGC is an Israeli medical and cosmetic cannabis company. Its core focus and strategy is to develop and supply high quality non-psychoactive Cannabinoid resin extract to the growing European cosmetics market. MGC holds unique genetics consisting of an elusive strain of “Cannabis Sativa” which comprises of only 0.3 per cent THC and over 13 per cent Cannabidoil (CBD).
In June this year MGC was granted key commercial licences to grow, process, import and export Cannabis Sativa L (HEMP) and its products, including Cannabidoil resin in Slovenia, Europe. The European licence enables the company to grow for up to eight months of the year in the Northern Hemisphere outdoor operations.
The recent licence in the Namibia in the Southern Hemisphere is the second stage of MGC’s business strategy, taking advantage of the ability to continually grow the CBD source plant all year round, significantly increasing cash flow potential of the MGC business model. MGC will focus on outdoor growing operations, requiring significantly less capital costs when compared to indoor growing operations. The Namibian licence will allow MGC to grow unlimited amounts of product and has seen significant support from the Namibian Government who welcome the potential investment into the country.
Founding Partner and CEO, Nativ Segev, commented: “Securing the option to establish a growing operation in the Southern Hemisphere provides MGC with the ability to become a supplier of CBD extract all year round. By diversifying our operation geographically we will be able to generate cash flow to the business all year round. We also expect to be able to fill orders for the CBD in countries where the supply dwindles out of season, making MGC a preferred supplier to many cosmetics and pharmaceuticals companies who require a constant supply of CBD."
Erin Resources has experienced healthy growth in their share price since February this year. The acquisition of MGC and the subsequent licences acquired by MGC have boosted the company’s share price as investors remain optimistic about the company’s future. Following this morning’s announcement, its share price has gained 5.2 per cent as of 11.30 AEST.
Author: Ben Visser
Jul 22, 2015
Ben is a Wise-owl equity analyst focusing on ASX blue-chips stocks. Ben has a Bachelor of Business in Finance majoring in property valuations and management. In his role at Wise-owl Ben conducts in-depth fundamental and technical analysis which helps him to find profitable investment opportunities on the ASX and abroad.