Challenges Facing Australia’s Cannabis Industry

Australia is moving forward with its medical cannabis industry. However, patients still face challenges that affect the entire market.

The growth of the international cannabis industry has led countries across the world to invest and contend for a piece of the market, and Australia is no exception.

The country has expressed its intention to become a world leader in marijuana since medical use of the drug was legalized in 2016. In 2018, the export of medical cannabis was legalized as well.

“We’d like to be potentially the world’s number one supplier,” said Minister for Health Greg Hunt on a local radio station in mid-2018. Considering the country’s robust agricultural sector — it’s valued at AU$58 billion — and its proximity to Asia, a burgeoning cannabis market in itself, Australia could become a powerhouse for the global marijuana industry.

There are some hurdles the country is facing, however, that could hinder the growth of its cannabis industry. Here’s a look at some of the challenges the Australian marijuana market is up against.

Patients currently facing cannabis access difficulties

Medical cannabis in Australia is under the purview of the Therapeutic Goods Administration (TGA), a regulatory authority that ensures the quality of products such as cannabis.

Save for one cannabis-based product, medical cannabis products aren’t registered as medicine in the country, so patients must use special pathways to access the drug, which can be a lengthy process.

One state, Victoria, developed aspirations to become the country’s “medical cannabis capital” after Cronos Australia, part of Cronos Group (NASDAQ:CRON,TSX:CRON), picked Victoria to establish its Asia-Pacific headquarters and medical cannabis research and development centre in January.

The state is also home to the medical cannabis operations of Cann Group (ASX:CAN,OTC Pink:CNGGF) as well as Spectrum Cannabis Australia, a subsidiary of Canadian cannabis heavyweight Canopy Growth (NYSE:CGC,TSX:WEED).

“Victoria is well and truly the home of medicinal cannabis cultivation in Australia and we’re thrilled yet another global medicinal cannabis company will call Victoria home,” Minister for Agriculture Jaclyn Symes said in a statement issued in February.

Victoria was Australia’s first state to legalize medical cannabis back in 2016, and last year it released a medical cannabis industry plan to establish itself as a medical marijuana giant in the country.

“Victoria’s industry will aim to supply half of Australia’s market for medicinal cannabis,” the plan reads. “This is an ambitious goal, but would mean that by 2028, Victoria could provide medicinal cannabis products to 83,000 of the 166,000 potential patients across Australia.”

Some experts have noted, though, that a lack of market access for local patients could get in the way of Victoria’s ambitions.

“The crux of the problem is, we can’t produce medical cannabis products for our market unless we enable the market (patients) to access those products,” Victoria Legislative Council member Fiona Patten told Marijuana Business Daily this past January.

“Without broader patient approval, we won’t get a production industry off the ground,” she added.

Taxation could also create issues. In Canada, a tax conflict unfolded in February when Canadians for Fair Access to Medical Marijuana called on the country’s federal government to remove the roughly 10 percent tax on medical cannabis before the 2019 federal budget was finalized.

At the time, medical marijuana users in Canada said they had seen their costs jump significantly, forcing them to look to the black market for product. The group said that the 10 percent tax would add hundreds of dollars a year to their medical costs.

There is also a degree of apprehension around prescribing the drug due to a lack of research, according to some members of parliament.

In 2017, the Australian health authority conducted a review of medical cannabis in order to get a better sense of how the drug could be used to help patients; it found that evidence that marijuana is effective in relieving pain for chronic neuropathic pain conditions is “limited.”

As such, the TGA suggested that medical cannabis should only be considered when registered medicine has proven to be ineffective in managing patient symptoms.

Drug still subject to strict governmental legislation

More broadly, Australia’s cannabis industry is still tightly regulated across the country, and regulations vary between states and territories.

Some regions, like the Australian Capital Territory (ACT) and New South Wales (NSW), have moved forward to take steps and loosen restrictions on medical cannabis access.

In the ACT, a law that would allow the recreational use and possession of cannabis is currently being debated; in NSW, Hunt said that the state government has “taken a machete” to red tape to allow more prompt access to medical cannabis.

But the measure for legalizing cannabis may have a difficult time being enacted, specifically in the ACT.

One concern is the interaction between the proposed laws and existing Commonwealth laws that supersede territory legislation.

Currently, cannabis is categorized as a Schedule 4 drug by the Australian government, which means it can only be legally used as a prescription medication or as a prescription animal remedy.

The law being considered would allow people to carry, use and grow small amounts of cannabis, but would still ban selling the drug. Other worries for the policy include definition of ownership as well as deciding where plants can be stored and how to keep cannabis away from those under the age of 18.

Loosening cannabis laws could benefit medical cannabis patients in the country. As it is, almost all of the cannabis in Australia is imported, making it an expensive commodity.

Currently, there’s only one approved medical cannabis product in Australia: Sativex, generically known as Nabiximols, which is used to treat patients with multiple sclerosis.

Investor takeaway

Despite these and other challenges, Australia’s cannabis market is projected to grow quickly.

A 2018 report from cannabis research firm Prohibition Partners states that by 2028 the country’s medical cannabis market could be valued at AU$3.1 billion, while its adult-use sector could reach AU$8.2 billion.

Australia is also well positioned geographically to access the nascent marijuana market in Asian countries such as South Korea and Thailand, which have both made medical cannabis legal recently.

The Australian cannabis market will continue to be an interesting investing space as grows to maturity.

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

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

Graphite Metallurgical Test Work Update

Highlights:

  • Bulk sample of Springdale graphite concentrate estimated to be completed in Q2 2021.
  • Concentrate material will then be sent to Germany to test its amenability for the production of battery anode material suitable for use in EVs.
  • Final test results expected in Q3 2021.

Comet Resources Ltd (ASX:CRL) is pleased provide an update on ongoing test work on natural flake graphite from its Springdale Graphite Project (Springdale) located in Western Australia. Both excellent grade and recoveries were achieved on initial tests, leading to commencement of work to produce a bulk sample for further testing. Importantly, the graphite concentrates previously produced demonstrated a unique and potentially very valuable characteristic in its small size distribution, with two-thirds of the product passing the 38 µm size fraction screen. Generally, this small size fraction of graphite is a by-product of processing of larger flake fractions, which produces smaller size graphite, but in doing so also damages the smaller flake material in the process, reducing their performance and value. Deposits that contain high quality ultra-fine graphite are uncommon and are potentially suitable for supplying the expanding battery anode market, which continues to grow as the sales of electric vehicles (EVs) increase. Graphite suitable for battery anode production also achieves premium pricing in graphite markets, making it a highly sought-after product.

Keep reading... Show less

Medallion Completes Diagnostic Testing with Australian Nuclear Science and Technology Organization

Medallion Resources Ltd. (TSX-V: MDL; OTCQB: MLLOF; Frankfurt: MRDN) “Medallion” or the “Company”) announces completion of a suite of diagnostic test work at the Australian Nuclear Science and Technology Organization (ANSTO) in Sydney, to extract rare earth elements (REE) from mineral sand monazite. The monazite was sourced from an Australian mineral sand mine. Discussion is ongoing with additional prospective suppliers.

Mineral sand monazite is an abundant REE-rich feedstock, that can be accessed as a by-product from global mineral-sand mines that target zirconium and titanium, without the need for additional mining. Medallion’s business model is centered on the Medallion Monazite Process , a transferable and scalable technology designed to accept multiple mineral-sand monazite feedstocks and extract high-value REEs with high efficiency, high recovery and zero liquid waste.

Keep reading... Show less

Galaxy Resources Limited Announcement

Galaxy Resources Limited (ASX: GXY) ( Company ) advises that the following announcements have been made to the Australian Securities Exchange which appears on the Company’s platform (ASX):

  • Corporate Presentation – Sal de Vida Development Plan
  • Sal de Vida development Plan
  • Sal de Vida Resource & Reserve Update
  • March 2021 Quarterly Results Conference Call
  • Notice of Annual General Meeting/ Proxy Form
  • 2020 Annual Report
  • 2020 Sustainability Report
  • 2020 Corporate Governance Statement
  • Appendix 4G

The announcement can be viewed at:

Keep reading... Show less

Torian Resources Limited Significant Gold Results from Surface at Mt Stirling

Perth, Australia (ABN Newswire) – Torian Resources Ltd (ASX:TNR) is pleased to advise that recent drilling results continue to extend the Mt Stirling Gold System over ~1.1km of Strike, ~300m at depth, and it remains open in multiple directions.

Highlights:

– The interpreted strike of the Mt Stirling gold system exceeds 1.160km with Mt Stirling Main Zone; Hanging Wall and Viserion lodes all remaining open along strike and down-dip.

Keep reading... Show less

eMetals Limited Updates Shareholders On Exploration – April 12, 2021

eMetals Limited (ASX:EMT) (eMetals or Company) is pleased to update shareholders on exploration activities which have commenced across the Company’s projects.

HIGHLIGHTS

Keep reading... Show less

Top News

Related News