ASX Cannabis Companies with Canadian Partnerships

Canadian cannabis companies took stakes in the Australian market quickly, but their attention didn't last. What does their involvement look like today?

Canadian cannabis companies were initially quick to secure stakes in the Australian cannabis market, but their enthusiasm has fallen off. Now only a few Canadian players are still trying to make their mark in Australia.

What happened? We take a closer look.


What's the backstory for Canadian cannabis in Australia?

An early rush was on from Canadian businesses wanting to corner the Australian market, which today is thought to be the fourth largest medicinal cannabis market globally after leaders like the US, Canada and Germany.

Canada's relatively small population plus capital from the marijuana stock bubble saw entrepreneurial local producers set their sights on international markets like Australia where future growth surely lay. A new market in Australia exists, but aggressive expansion without a clear progression to profitability has seen global aspirations crumble as huge cost bases abroad are yet to match demand. The cannabis sector's maturity has been slower than many investors initially anticipated.

CEO and corporate advisor at Cannatrek, Brett Schwarz, previously told INN the dynamic between Australian players and Canadian companies has changed significantly.

"I'll call it a big brother kind of relationship," said Schwarz. "They came to Australia because they saw us ramping up, they saw that maybe we were an easier entry point into Europe."

"I think there has been a flip, I think that Canadians came here trying to find partners, but have realized … 'We actually have a lot of our own problems back home, let's close up shop.' A lot of them have actually sold their shareholdings in their Australian partners, because they realize that maybe they have just got to work in (their) own backyard first, before worrying about the big, wide world," Schwarz said.

Why did Canadian companies lose interest in Australia?

The Canadian market itself has been slower to peak, with concerns of oversupply and suppliers being plagued with questions on the quality of products. There has also been the emergence of new growing markets in low-cost developing nations like Colombia and Thailand - which Canada and Australia would find hard to beat on costs.

Stringent regulation also means the cost of locally producing medicinal cannabis in Australia was thought to price out many Canadian partners, although we are seeing changes in this space.

This has ultimately led some Canadian companies to reduce their presence in Australia. In 2019 Canopy Growth Corporation sold its shares in AusCann Group Holdings, and Aphria followed suit selling it's almost 16 per cent stake in Althea Group Holdings during the same year.

The most recent Canadian player to up sticks is Toronto headquartered Flowr Corp who made the decision to exit all non-core jurisdictions in April 2021 - including Spain, Uruguay and Australia. This also includes selling TCann Pty Ltd, the entity holding the medicinal cannabis licenses in Australia. The move signals the end for business in Australia and an estimated annual savings of $1 million.

Which Canadian companies have stuck it out in Australia?

Cronos Australia (ASX:CAU) the Melbourne based entity has been doing well with the sale of its Adaya medicinal cannabis range quarter-on-quarter increasing by more than 200 per cent. They sell medical cannabis products, a personal care product range and run a dedicated medicinal cannabis clinic. The company also has an agreement to sell Tasmanian based ECS Botanics (ASX:ECS) terpene blend range, and has seen recovery in its share price thanks to regulatory changes in Australia.

Valens Groworks (TSX:VLNS) is one of the global leaders in cannabinoid-based products with a focus on partnering with Canadian and international cannabis brands, including subsidiary Valens Australia. In February 2020 they announced their first international shipment of white labelled products to Australia. They have also committed to running Australia's largest secret manufacturing facility in Melbourne, to be run by Cannvalate. The company is hoping to carve out a local market as the majority of medicinal cannabis in Australia is currently imported from Canada or Europe.

MediPharm Labs Australia (TSXV:LABS,OTQQX:MEDIF) after being certified by the Therapeutic Good Administration in May 2020 and securing a Licence to Manufacture the business achieved revenue of $625,000 in its first month. In September 2020 MediPharm Labs secured 100 per cent ownership of the Australian subsidiary. In December 2020, ECS Botanics (ASX: ECS) entered into a three year agreement with Medipharm Labs Australia to supply cannabis materials like flower and crude resin which starts in November 2021.

Some Canadian partners like MediPharm Labs seem to be in it for the long haul.

"Since our founding, MediPharm Labs Australia has been a cornerstone of our strategy to develop a multi-jurisdictional, GMP-certified production capability chain to service worldwide medicinal, wellness and adult-use markets," said Pat McCutcheon, CEO, MediPharm Labs in a statement.

Things are looking up in the sector with a new announcement made in June 2021 that Creso Pharma (ASX:CPH) struck a deal with Canada's Red Light Holland to create the global cannabis and psychedelics company The HighBrid Lab.

Regulatory changes and shifting attitudes are seeing slow gains in the market. Not-for-profit private health insurer HIF recently became the first to support medicinal cannabis offering a $105 rebate back per script to eligible members, alongside a research partnership with Little Green Pharma (ASX:LGP).

Don't forget to follow @INN_Australia for real-time updates!

Securities Disclosure: I, Ronelle Richards, hold no direct investment interest in any company mentioned in this article.

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Asterion Cannabis Chairman and CEO Stephen Van Deventer says that the government’s support for the company’s project has enabled a fast approval process.

Asterion Cannabis Chairman and CEO Stephen Van Deventer says the special project status granted by the Australian government has allowed the company to fast-track its move into the Australian medical cannabis market.

In November 2019, Asterion received its development application approval for 4.3 million square feet of greenhouse cultivation space in Toowoomba, Australia. Van Deventer says that the speedy application process has been possible for the company in part thanks to the major project status, which has been granted to the company by the Australian government. Major project status means that Asterion’s development has been deemed to be of national importance to the people of Australia.

Asterion is the only agricultural cannabis producer to have been granted major project status. Van Deventer says that the Australian government’s support for Asterion’s project is due to the company’s development of pharmaceutical medical cannabis treatments, giving Australian patients a valuable alternative to smoking cannabis.

Below is a transcript of our interview with Asterion Cannabis Chairman and CEO Stephen Van Deventer. It has been edited for clarity and brevity.

Investing News Network: Please provide our investor audience with an overview of Asterion and its upcoming initial public offering (IPO).

Asterion Cannabis Chairman and CEO Stephen Van Deventer: Asterion is targeting to IPO in quarter one of 2020. However, market conditions pending, because we don’t want to IPO into a weak market.

INN: Please give us an overview of Asterion’s recent business operations.

SVD: With Asterion in Australia, we’ve been fortunate to have finished all of our engineering for our facility. It’s going to be 4.3 million square feet in four different greenhouse modules, almost 1.1 million square feet each. That’s the cultivation. Then there’s going to be another 1.2 million square feet of administration and auxiliary buildings for extractions and processing, packaging, etc. So, it’s a total of 5.5 million square feet. We launched the application with the Toowoomba Regional Council and in early November we received our development application approval. That means that the property that we have and what we are going to build has all been approved so we can develop what we said we’re going to develop.

On top of that, we’ve recently filed our Operational Works permit, which means that we can start digging into the earth and laying all the water pipelines and all the infrastructure for power, etc. We’ve been told to expect that we should have an operational work permit by mid-December.

As for our cannabis licenses, we’ve applied for the whole suite of them. We have cultivation, sales, research and development, import and export and extraction processing. We’ve completed all the questions and answers, they were completed two weeks ago. We were told there are no more questions and our cannabis licenses will be imminent. We expect to have our cannabis licenses any day. Once we have those, we’ll start working to begin purchasing cannabis from other licensed producers (LPs) to import into Australia to start servicing the Australian market, so we can start building our medical patient base while we’re under construction. By the time we come online, we’ll have a solid patient base to be able to deliver the product to.

What has helped us fast track getting this all done has been getting major project status. In Australia, only 14 other companies have major project status. We’re the 15th. We’re the only agricultural cannabis company ever to receive major project status. That means that it is of national importance to the country to get this project done. It eliminates all red tape and gets us the full support of the government in every agency. From here, we’re potentially looking to break ground around middle-to-late January of 2020.

INN: Please explain the significance of the development approval permit and what this means for Asterion moving forward.

SVD: Well, the development is key because when you apply for a development permit, there are multiple different ways to get these permits. You have to supply all the engineering, showing the heights of the building, what the buildings are going to look like, the footprint, etc., so, when you talk about 5.5 million square feet you’re not just sending them a generic plan. It’s a very detailed plan, we spent millions of dollars on engineering to get it done.

Because of our relationships with government and businessmen in Australia, especially John Wagner, the chairman of the Wagner Group, we were able to get this application as a core application rather than as a public consultation. A public consultation would have taken up to two years. We will manage to fast-track the process to six months because we did a core application. This eliminates us having to go to public hearings.

INN: Why did Asterion decide to acquire Sol-Gel and its intellectual property?

SVD: Asterion acquired 51 percent of Sol-Gel. The Australian government really likes the Sol-Gel because they would rather see patients take cannabis medicine in pill form, as a gel cap, transdermal or a nasal spray or sublingual tablet rather than smoking cannabis. With Asterion taking the major position of 51 percent ownership, now we can use the major project status to help accelerate that through the process for approvals.

INN: How has Canopy’s divestment from the Australian cannabis market altered the industry landscape?

SVD: It hasn’t altered it at all, actually. Australia is a huge market. There’s a lot of untapped need for product. And Canopy’s divestment wasn’t because of the landscape. Canopy’s divestment was the result of some major losses of hundreds of millions that they’ve taken each quarter. They’re going to start focusing on the operations that they actually have up and running now and get them profitable because they cannot continue to divest money like that.

INN: Which international markets are Asterion targeting and why those markets in particular?

SVD: So, we’re targeting the Australian market primarily in the beginning. Then, we’re looking through the whole Asia gateway from Australia, because the relationship between Australia and the Asia gateway is very important.

We’ve seen the Asian countries start to open up to cannabis. Thailand, which we never thought would ever allow medical cannabis or cannabis period, has allowed it. Asian markets are opening up fast, so for us, it’s good to have a gateway to the Asian countries.

However, we’re also targeting the European countries because of the premiums over there. I’m currently in negotiations with a major European country, one with around 45 to 50 million people in population, to get a joint venture potentially put together where we would distribute our products in that country for the medical cannabis market there.

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MKG:AU

Australia took a stand against Facebook and Google earlier this year, and the move could have long-term implications for tech investors.

It was a ban that sent Australians wild and had the whole world watching.

Back in February, Facebook (NASDAQ:FB) stopped users in Australia from posting news in a week-long blackout, reacting to proposed legislation that would have forced the social media behemoth to pay publishers for content.

What prompted Facebook to "friend" Australia again, and what are the potential long-term implications of the squabble? Read on to learn what tech-focused investors in Australia should know about the situation.


Australia squares off against Facebook

On February 25 of this year, Australia's federal government passed the News Media and Digital Platforms Mandatory Bargaining Code. It was developed after extensive analysis by the Australian Competition and Consumer Commission, and is aimed at ensuring that news media businesses are fairly remunerated for their content.

It stipulates that digital platforms such as Facebook and Google (both named in the documentation) must pay news outlets whose content they feature — for example, if content is shared on Facebook or shows up in Google search results. The idea is that this will help to sustain journalism in Australia.

Unsurprisingly, Facebook and Google didn't react well to the code, which was first introduced in 2020.

Google didn't make any moves after it passed, but Facebook quickly made it impossible for Australian users to share news content, and pages for both local and international news organisations went blank — a major concern given the COVID-19 and wildfire concerns that were circulating at the time.

Australian Prime Minister Scott Morrison was scathing about Facebook's decision — which he ironically shared in a Facebook post — declaring the tech giant's actions "as arrogant as they were disappointing." He added, "These actions will only confirm the concerns that an increasing number of countries are expressing about the behaviour of BigTech companies who think they are bigger than governments and that the rules should not apply to them."

Despite strong feelings from both Australia and Facebook, the dispute was resolved fairly quickly, with the country agreeing to make four amendments to the legislation and Facebook restoring Australian's access to news.

Implications for Big Tech and news organisations

Both Australia and Facebook have claimed victory in the dispute, with a Facebook representative saying the company will be able to decide if news appears on the platform — meaning it won't automatically have to negotiate with any news businesses. Changes were also made to the arbitration process.

Tech experts have pointed out that larger news companies may ultimately benefit from the changes, but smaller ones could be pushed to the side. Major publishers that have struck agreements with tech giants, such as News Corp, Nine Entertainment (ASX:NEC,OTC Pink:NNMTF), Seven West Media (ASX:SWM) and Guardian Australia, may be able to increase their market share while smaller independent players lose out.

A business that is in full support of the laws is Microsoft (NASDAQ:MSFT). During the conflict, President Brad Smith came out loudly in favour of Australia's law, and advised that his company is willing to step up with search engine Bing should Google and/or Facebook pull out of the Australian market.

"In Australia, Prime Minister Scott Morrison has pushed forward with legislation two years in the making to redress the competitive imbalance between the tech sector and an independent press. The ideas are straightforward. Dominant tech properties like Facebook and Google will need to invest in transparency, including by explaining how they display news content," he said in a blog post.

"The United States should not object to a creative Australian proposal that strengthens democracy by requiring tech companies to support a free press. It should copy it instead."

Global reach and tech investor impact

Six months down the road from Australia's landmark legislation, it's tough to say what the long-term impact may be.

That said, market watchers do believe the country is part of a new precedent of forcing Big Tech into paying for journalism — something giants Facebook and Google are not used to.

Countries looking to pursue similar legislation include Canada, where Facebook agreed in May to pay 14 publishers to link to their articles on its COVID-19 and climate science pages, as well as other unspecified use cases. Canada is pursuing other avenues too. Meanwhile, in France, Google said it will pay publishers for news content after the country took up new EU copyright laws that make digital platforms liable for infringements.

For investors, the takeaway is perhaps that while companies like Facebook and Google may seem too big too fail, they too can fall subject to new regulations that can change how they do business. As nations around the world look to take back control from these mega companies, it's important to be aware of possible effects on their bottom lines.

Don't forget to follow @INN_Australia for real-time updates!

Securities Disclosure: I, Ronelle Richards, hold no direct investment interest in any company mentioned in this article.

Queensland is the 16th most attractive jurisdiction in the world, sneaking in above BC and the Yukon in Canada, and just behind New Mexico in the US.

Queensland is one of the top three Australian jurisdictions for copper.

While it's well behind South Australia, a behemoth in the country for resources and production, Queensland hosts some 12 percent of all known Australian copper deposits, level with its southern neighbour New South Wales.

A premier mining jurisdiction globally, Queensland is ranked third out of all Australian jurisdictions for mining investment attractiveness, according to the Fraser Institute. Globally, it's ranked as the 16th most attractive jurisdiction, sneaking in above BC and the Yukon in Canada, and just behind New Mexico in the US.


The state is renowned for its mining prowess in Australia, and is known as one of the resource states, with a large chunk of its economic heft coming from the mining industry and its operations across the vast state.

Overall, mining accounts for 11.7 percent of Queensland's economy, with coal and liquefied natural gas being the primary focus of output. Together, coal, gas and mineral exports account for over 80 percent of Queensland's exports, according to the state government.

Having said that, copper plays a large role, and Queensland is home to the second biggest producer of copper in Australia in the form of Glencore's (LSE:GLEN,OTC Pink:GLCNF) Mount Isa mining complex in the northwest of the state. There, Glencore owns and operates the Enterprise and X41 mines.

Aside from Mount Isa, Glencore owns the nearby Ernest Henry copper mine. Combined, Glencore's Queensland operations produced 138,800 tonnes of copper in 2020 — accounting for a little over 10 percent of the company's global copper production. Glencore isn't listed on the ASX, but can be found on the LSE.

Besides the Mount Isa complex itself, there's also a handful of other operational mines in the northwestern portion of the state, although most of them are privately owned, such as the Capricorn copper project, which is a joint venture between EMR Capital and Lighthouse Minerals; it secured itself "prescribed project" status in 2017.

Other privately owned projects include Round Oak's Barbara project (in care and maintenance), Chinese-backed CuDECO's Rockland copper project (mothballed, CuDECO in liquidation) and Chinova's Osborne mine — which was originally set up by Ivanhoe Mines (TSX:IVN,OTCQX:IVPAF). There's also the Balcooma mine, which Royal Gold (NASDAQ:RGLD) has copper royalties on, and the privately owned Mount Cuthbert mine.

Many of the mentioned projects ran into trouble in 2020, with the COVID-19 pandemic limiting company operations.

All in all, Queensland has 13 operational copper mines, but as can be seen many are in private hands, making investment opportunities somewhat slim. Aside from previously mentioned Glencore operations, there's Red River Resources (ASX:RVR,OTC Pink:RRRDF), which owns the Thalanga operations near Charters Towers. Red River acquired Thalanga in 2014, and has been working to develop the legacy site back into a viable investment.

From the beginning of production in 2017, the operations have a lifespan of some 10 years, according to Red River, with further development and exploration options on the table. In its most recent quarterly report, Thalanga reported output of 3,086 tonnes of copper concentrate.

The remainder of the options on the table for investors are exploration focused, such as Copper Mountain Mining (ASX:C6C,OTC Pink:CPPMF) with interests in the Eva copper project, which is — unsurprisingly — in the northwest of the state, near the town of Cloncurry. Eva is in the development phase, with a feasibility study completed in early 2020 envisaging a 15 year mine life with an annual expected output of 106 million pounds of copper equivalent.

There's also Global Energy Metals (TSXV:GEMC,OTCQB:GBLEF), which like Glencore isn't on the ASX, but has interests in the Millenium cobalt-copper-gold project and others near Mount Isa — all in the exploration stage.

Aside from that, Strategic Energy Resources (ASX:SER) acquired exploration licences from Newcrest Mining (ASX:NCM,OTC Pink:NCMGF) in May 2021 for licences around Mount Isa, and Zenith Minerals (ASX:ZNC) is exploring the Develin Creek copper-zinc project. Zenith recently divested from another copper project, Flannagans, in June 2021 by selling its interests to a private company for $450,000.

Don't forget to follow us @INN_Australia for real-time updates!

Securities Disclosure: I, Scott Tibballs, currently hold no direct investment interest in any company mentioned in this article.

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