High Barriers, High Opportunities: Australia’s Cannabis Extract Market

Australia’s cannabis extract market is growing its presence in the country’s medicinal cannabis industry.

The high-barrier to entry in Australia’s cannabis extract market is developing a foothold in the country’s medicinal cannabis sector and is a growing opportunity for investment.

Australia’s cannabis market is still in the early stages of growth, having just legalized cannabis for medical use in February 2016. Similar to Canada’s early-stage medical cannabis landscape, Australian lawmakers are still working through the best approach for implementing and improving the regulatory framework and licensing system.

The resulting short-term high barriers to entry in Australia’s medicinal cannabis sector are an opportunity for early-entry cannabis companies to establish a foothold into an industry that is on track to become the world’s fifth-largest legal cannabis market.

“While the valuations seem rather high in Australia, the country is in the early stages of its federally legal medical cannabis program — and it’s moving in the right direction,” said Alan Brochstein, the Cannabis Capitalist.

Australia’s cannabis extract market

In a country of 24 million, forecasts for growth in Australia’s legal cannabis industry show its value increasing from $52 million in 2018 to $1.2 billion by 2027. The significant size of this opportunity is also attracting Canadian cannabis companies looking to expand their global reach, especially in the cannabis extracts sector which is overtaking dried flower in the medical cannabis market.

In February 2018, Cronos Group (NASDAQ:CRON,TSX:CRON) launched Cronos Australia, a joint venture with New Southern Capital, which in June obtained a manufacturing license from the Australian Office of Drug Control. The license grants Cronos Australia the ability to manufacture value-added cannabinoid-based products, including those for Australia’s cannabis extract market. Tilray (NASDAQ:TLRY), through a distribution agreement obtained by its subsidiary Tilray Australia New Zealand Pty. Ltd., is exporting CBD extracts to three hospitals in the Australian state of Victoria for use by children with intractable epilepsy. MediPharm Labs Corp. (TSXV:LABS) has also completed the application process for a license to extract and import medical cannabis products in Australia which the company anticipates receiving in Fall 2018. These cannabis oil products will be used for research studies with healthcare and educational partners.

Cannabis oil extracts outdo dried flower

In a medical cannabis market like Australia, cannabis extracts have the potential to become a bigger market than cannabis dried flower. Medical cannabis consumers who are looking to ease pain, anxiety or inflammation to improve their health and wellbeing most likely want to avoid the negative health impacts of smoking cannabis, and prefer a more discreet treatment option. Cannabis extracts also allow medical practitioners to better control proper dosing for patients, and the extraction process allows manufacturers the ability to isolate specific cannabinoids meaning patients can get the medical benefits of cannabis without the high.

While stats are limited in Australia’s emerging market, we can look to Canada’s maturing medical cannabis market as an example of the medical cannabis consumer’s preference for cannabis extracts.

Health Canada’s most recent statistics show that sales of cannabis oil in the first three months of 2018 bested those of dried flower by 56 percent. In terms of year-over-year (YOY) growth, extracts surpassed dried flower with a substantial increase of 82 percent over the same period in 2017 compared to a scant 13 percent in YOY performance for dried flower.

What is attractive about Australia for a cannabis extract company?

While Canada’s cannabis climate has warmed to the point of legalizing recreational use nationwide this year, Australia is a country where cannabis is just beginning to emerge from the realm of the taboo. Not surprisingly, Australia initially took a conservative approach to cultivation, manufacturing and distribution licenses as well as stock exchange listing conditions. As of July 2018, the Australia’s Office of Drug Control (ODC) has only issued 18 cultivation licenses, 10 research licenses and 13 manufacturing licenses. At the same time, however, the ODC received 171 applications, most of which were new entrant cultivators. As most early-entrants are vertically integrated, this presents a significant opportunity for cannabis extracts manufacturers, as cultivators must now align to a manufacturing partner in order to obtain a license.

In January 2018, looking to reflect the country’s agricultural prowess, Australia joined the handful of nations that permit cannabis exports internationally, including Canada, Uruguay and the Netherlands. Australia’s medical products are quality controlled by the nation’s Therapeutics Goods Association (TGA), which is seen as the gold standard of GMP. As such, Australia is on its way to becoming one of the largest exporters of medicinal products globally.

For those cannabis companies that have been able to secure footing in the tight Australian market, the ability to export cannabis products into the Asia-Pacific region and other markets on the global stage offers further expansion opportunities. An export license also lowers the risk of a slow in the build of a domestic market for companies with Australian based operations.

Overcoming challenges and growing Australia’s medicinal cannabis sector

Long wait times for access being addressed

The absence of recognized qualifying medical conditions for cannabis treatment in Australia is one of the challenges holding back growth in this market. However government funded research is allowing Australia’s Therapeutic Goods Administration (TGA) — which oversees the country’s medical cannabis access framework — to better understand how cannabis can be used in palliative care as well as to treat epilepsy, multiple sclerosis and pain.

In March 2018, the New South Wales government reduced the approval process for medical cannabis access to a single clinical assessment by the TGA, drastically cutting the wait time for patients; additional Australian states are following suit.

Securing a domestic supply chain

While imports (such as those delivered by Tilray) are important to the nation’s nascent medical cannabis supply chain, medical cannabis supporters and industry leaders say it’s crucial that Australia further develop its domestic production. Doing so will bring about the reduced costs and improved access necessary to bring more patients out of the black market, away from dangerous opioids and into the Australian medical cannabis market.

Australian-produced medical cannabis would also improve access for the research studies needed to fully convince medical practitioners and policymakers about the safety, efficacy, and benefits of medical cannabis extracts for a wide range of indications.

“(When importing) you have to consider the laws of each state and countries and there’s so much extra paperwork and red tape,” said Australian Medical Association (AMA) Council of General Practice chair Dr. Richard Kidd. “If it was produced locally and rigorously and legally and was a great quality product then it might lead to good studies to help people in the future.”

Victoria, the Australia’s most populated state and the first to legalize access to medical cannabis patients, is becoming the major hub for medical cannabis in the country. An example of the state’s proactive stance toward improving access for medical cannabis, government leaders recently signed a MOU with Canopy Growth (TSX:WEED) “to further develop research and technical capabilities in the production of medical cannabis in Australia.”

MediPharm Labs Australia Pty Ltd is constructing a 10,000-square-feet state-of-the-art extraction facility near Melbourne, Victoria. The company is a subsidiary of MediPharm, the first cannabis company in Canada to become a Health Canada-approved licensed producer of cannabis oil without first receiving a cannabis cultivation license. MMJ PhytoTech Ltd. (ASX:MMJ), an Australian company with a diversified portfolio in Australia’s emerging cannabis market, is a strategic shareholder in MediPharm Labs.

MediPharm Labs’ Ontario, Canada based operation consists of a 70,000-square-foot facility designed and built to European GMP standards with ISO rated critical environment clean rooms. The Victoria, Australia based facility is designed to the same standards. MediPharm Australia anticipates receiving its cannabis oil manufacturing license from the Office of Drug Control in the fall of 2018 and the facility is slated to begin commercially producing pharma-grade cannabis oil extracts by spring 2019.

“There are different parts of this industry, whether it’s cultivating or growing these particular plants or turning them into the oils and other products that can be lifesaving,” said Victoria Premier Daniel Andrews. “We’ve seen very exciting announcements from some very big multinational companies who are making Victoria their base for medicinal cannabis production and medicinal cannabis growing.”

Looking forward

Australia’s leaders are serious about further decriminalizing cannabis use, as evidenced by a recent bill proposal aimed at legalizing cannabis for personal use. Australians themselves are becoming more open to cannabis as both a medicine and an adult-use product. A recent national survey, nearly 85 percent of Australians support legal medical cannabis, while support for recreational cannabis has increased from 26 percent in 2013 to 35 percent in 2016.

Australia’s legal medical cannabis market is in its early stages and the challenges its facing is par-for-the-course. Industry analysts expect regulators to slowly but surely open the pathway to further legalization of cannabis much in the same way as we’ve seen in Canada, the US and Germany. There are increased growth opportunities ahead, especially for domestic cannabis product producers and those interested in investing in cannabis extraction.

This article was written according to INN editorial standards to educate investors.

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Winsome Resources CEO Chris Evans

Winsome Resources CEO Chris Evans said, “Canada and the US are working feverishly to develop an internal battery materials supply chain and we think we're going to play a critical role in that.”

Winsome Resources CEO Chris Evans: Sustainable Hardrock Lithium Opportunities in Quebec youtu.be


Winsome Resources (ASX:WR1) CEO Chris Evans joined the Investing News Network to discuss the company and its Cancet lithium project in Quebec, Canada.

"We listed on the ASX on November 30, 2021," he explained. "We're lithium focused but based in Canada, and we've been pretty successful in the last six months — our share price has done well. I think I've been putting this down to the success factors which we possess as a company, including the fact that we're into lithium at a moment with high demand. Any mining company that's associated with lithium has tended to do well.

“Our assets are in Quebec, a fantastic mining jurisdiction for all sorts of reasons. Also, being listed on the ASX — Australian investors tend to like early stage plays a bit better. They've certainly woken up to the electric vehicle and lithium revolution that's occurring in the world. And it's a pleasure having the assets in Canada.”


Next, Evans got into specifics about the company's flagship project. “The Cancet project is our flagship, in the James Bay region of Quebec. All our projects are hard-rock lithium; that's digging the rocks out of the ground and concentrating the lithium in them. Then it gets converted into the final product, which is lithium carbonate or hydroxide, that then goes into electric vehicle batteries,” he explained.

“Cancet’s had about 5,500 metres of drilling done on it historically, so we know that there's a great deposit of lithium at fantastic grades. It outcrops on the surface, the lithium-containing spodumene from the pegmatite rock, where we have 3.7 percent lithium oxide over a 17 metre interval from the surface at our most successful drill hole. We just completed 2,000 metres of drilling ourselves, increasing our knowledge of the orebody that's there, and also looking for extensions to the orebody. We've got 395 claims, and our drilling and exploration is only over about 15 of the claims. So we've got a lot further to look here and a lot more to develop.”

As for supply location, and the company's relationship with the international market, Evans said, “We think it's fantastic for us, and our shareholders, that we have assets in Quebec. Roughly 50 percent of the world's hard-rock lithium comes from Australia, where it’s mined and concentrated. The problem is that final conversion into lithium carbonate or hydroxide all occurs at the moment in China ... lithium is on the critical minerals list in Canada, the US and Australia, and Canada and the US are working feverishly to develop an internal battery materials supply chain. We think we're going to play a critical role in that.”

Elaborating on the sustainability industry that drives the battery revolution, he said, “(Nearly) all power in Quebec is generated by hydroelectricity and renewable forms of electricity. That’s very important, because the mining and concentration process for lithium products traditionally produces a large carbon footprint, because it's energy intensive. The EU, from 2024, has mandated that all batteries are labeled with the carbon footprint of all the materials that are contained within them. Then, by about 2026, there's specific targets that batteries have to meet in order to be sold in the EU. If you don't have a renewable source of energy to produce your lithium products that go into those batteries, it's going to severely restrict your markets — and that's another bonus for us being in Quebec.”

Evans said that Winsome Resources’ approach is to develop a mine itself, rather than selling or partnering. “We will approach this as if we are going to be developing the Cancet project, and producing lithium ourselves, in four or so years. And I think that'll best serve our shareholders.” With regards to other ways the company could benefit investors, Evans said, “Being listed on the ASX, and having access to a lot of capital, I think there's a great opportunity for us to acquire other projects in Canada. We're about to start our summer exploration. And we're on the lookout for a new project. So I think the good news is really to come.”

Watch the full interview of Winsome Resources CEO Chris Evans above.

Disclaimer: This interview is sponsored by Winsome Resources (ASX:WR1). This interview provides information that was sourced by the Investing News Network (INN) and approved by Winsome Resources in order to help investors learn more about the company. Winsome Resources is a client of INN. The company’s campaign fees pay for INN to create and update this interview.

INN does not provide investment advice and the information on this profile should not be considered a recommendation to buy or sell any security. INN does not endorse or recommend the business, products, services or securities of any company profiled.

The information contained here is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Readers should conduct their own research for all information publicly available concerning the company. Prior to making any investment decision, it is recommended that readers consult directly with Winsome Resources and seek advice from a qualified investment advisor.

This interview may contain forward-looking statements including but not limited to comments regarding the timing and content of upcoming work programs, receipt of property titles, etc. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. The issuer relies upon litigation protection for forward-looking statements. Investing in companies comes with uncertainties as market values can fluctuate.

WR1:AU

Where are the silver mines in Australia? You might be surprised to learn that the country is home to one of the world’s top primary silver producers.

Mining is a big part of Australia’s history, and it continues to shape the country’s economy and position in the world today. The nation is one of the world’s top producers and exporters of resources, with coal, uranium, copper and gold being some of its best-known commodities.

Australia is also a key producer of silver — it was the world’s fifth-largest producer of the metal in 2021, tied with Russia, putting out 1,300 MT. Interestingly, most of Australia's silver is produced from silver-bearing galena, but some is also produced from copper and gold mining.

Refined silver comes mainly from the Port Pirie lead smelter and refinery in South Australia, though silver is also refined at gold refineries in Perth, Kalgoorlie and Melbourne.


But where are the silver mines in Australia, exactly? While it’s interesting to know what types of deposits the precious metal is found in, many investors want to know what companies are producing silver and where their mines are located geographically. Read on to find the answers to those questions.

Where are the silver mines in Australia?

Silver has played a role in Australia since the mid-1800s — Wheal Gawler, Australia’s first metal mine, was a silver-lead mine developed in South Australia in the 1840s. And that’s not Australia’s only early silver-mining operation — the Broken Hill deposit in New South Wales and the Mount Isa deposit in Queensland are two other early Australian silver discoveries.

Broken Hill, a lead-zinc-silver deposit, was discovered in 1883 by German immigrant Charles Rasp, and the Broken Hill Proprietary Company was born in 1885; it ultimately merged in 2001 with another mining giant, Billiton, to form BHP Billiton (ASX:BHP,NYSE:BHP,LSE:BLT). BHP Billiton is no longer involved with Broken Hill, but ore is still being extracted there today. Perilya now runs the southern and northern operations.

For its part, Mount Isa was discovered in 1923 by John Campbell Miles, and like Broken Hill is still producing today. It was acquired by Glencore (LSE:GLEN) in 2013 and in addition to silver is also a producer of zinc.

These major early Australian silver discoveries are not the country’s only sources of silver. Other silver mines in Australia include Cannington, one of the world’s top primary silver producers. It’s a fly-in, fly-out mining and processing operation that is owned by South32 (ASX:S32,LSE:S32), a diversified resource company spun out from BHP Billiton in 2015. Cannington also produces lead and zinc.

Australia holds the McArthur River mine as well, which opened in 1995 and is owned by Glencore subsidiary McArthur River Mining. The mine is one of the world’s largest zinc-lead-silver mines, and is located in Australia’s Northern Territory.

Glencore’s 2021 annual report claims total silver production reached 31.519 million ounces for the year, representing a 4 percent drop from 2020. That includes 625,000 ounces from McArthur River.

The Century mine, which previously belonged to MMG (HKEX:1208), shut its doors at the end of 2015, but was a major producer of zinc (and silver) until that time. It was reopened in mid-2018 by New Century Resources (ASX:NCZ) and the company says it now has an estimated annual production capacity of 264,000 tonnes of zinc and 3 million ounces of silver.

Independence Group (ASX:IGO) also produces silver, along with copper and zinc, at its Jaguar operation in Western Australia. Gold producer Silver Lake Resources (ASX:SLR) owns some projects with silver reserves as well. As you can see, there are and have been many silver mines in Australia.

Future silver mines in Australia?

In addition to being home to a slew of large silver mines, Australia also plays host to many companies that are exploring and developing silver projects. Below are a few that have made recent progress.

Please let us know in the comments if we’ve forgotten to mention any Australia-focused silver companies. All companies listed had market caps of at least AU$5 million on May 19, 2022.

Argent Minerals (ASX:ARD) — Argent Minerals’ main asset is its 100-percent-owned Kempfield polymetallic project in New South Wales. In May 2018, the company announced an updated resource estimate for the asset — its silver equivalent contained metal now stands at an estimated 100 million silver equivalent ounces at 120 g/t silver equivalent; that’s approximately double the previous estimate.

In total the company has three projects, with all of them being in New South Wales.

Investigator Resources (ASX:IVR) — Investigator Resources is advancing silver, copper and gold deposits in South Australia. Currently its properties include the Peterlumbo/Paris silver project, the Eyre Peninsula and Stuart Shelf projects and the Northern Yorke Peninsula projects.

The total resource for Paris stands at an estimated 18.8 million tonnes at 88 g/t silver and 0.52 percent lead for 53.1 million ounces of contained silver and 97,600 tonnes of contained lead (at a cut off of 30 g/t silver). The indicated component is 12.7 million tonnes of silver (95 g/t) and represents 73 percent of the total estimated resource ounces.

Horizon Minerals (ASX:HRZ) — Horizon Minerals owns the Nimbus silver-zinc project in Western Australia. Nimbus has a high-grade silver-zinc resource estimate of 255,898 tonnes at 773 g/t silver and 13 percent zinc; the total Nimbus resource stands at 1.21 million tonnes at 52 g/t silver, 0.9 percent zinc and 0.2 g/t gold.

Silver Mines (ASX:SVL) bills itself as a leading Australian silver exploration company, and has spent a considerable amount of time acquiring Australian silver projects. Those include Malachite Resources’ (ASX:MAR) Conrad project and Kingsgate Consolidated’s (ASX:KCN) Bowdens silver project.

While the company’s main focus has been on the Webbs silver project in New South Wales, the Bowdens project represents the largest undeveloped silver project in Australia, and Silver Mines is working to get the project through the feasibility, environmental impact statement and permitting stages.

In a 2018 report, the feasibility study demonstrated an average silver production of 3.4 million tonnes per annum for the project, with 5.4 million during the first three years of operation. Estimations also included 6,900 tonnes of zinc and 5,100 tonnes of lead.

This is an updated version of an article first published by the Investing News Network in 2018.

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

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

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