In M2Bio’s (OTC: $WUHN) latest press release the company announced that it is going forward with the acquisition of Tsime Pharmaceuticals and the plans to cultivate medicinal-grade cannabis.
The Tsime license grants the ability to cultivate, extract and process medicinal cannabis and sell the commodity for medicinal, scientific and any other legal purpose.
Located in The Kingdom of Lesotho in Southern Africa, Tsime has the license for the cultivation of 3 hectares of medicinal grade cannabis on a farm with a land area covering 32 hectares or 80 acres.
Lesotho is a high altitude mountainous kingdom that boasts over 300 days of sunshine per year and was the first African nation to legalize medical cannabis in 2017.
The Kingdom of Lesotho offers remarkable advantages:
- Climate: Lesotho has ideal climate conditions for cannabis plant cultivation.
- Groundwater availability and soil quality: Excellent economic growing conditions.
- Abundant land: Mountainous hectares allows for large, open-air crops.
- Elevation and protection: Average elevation of Lesotho is 2255 meters or 7,090 feet.
- Labour: Low cost experienced growers and readily available local workforce.
- Government: Pro cannabis with a low regulatory burden.
Most CBD oil producers source their hemp from outside their organization and perform the post-processing (extraction, bottling, shipping) themselves; in most cases, these producers claim that they have a very close relationship to farmers they source from.
Choice of seeds and cultivation conditions are vital, as yield and quality of the final product largely depend on this. Own cultivation operations also allows to ensure fully organic, non-GMO farming methods are utilized.
Having control over the whole value chain allows for continuous research and development of the product portfolio.
The tiny Kingdom in the middle of South Africa isn’t an unfamiliar territory for international cannabis companies.
Canopy Growth (TSX: $WEED) (NYSE: $CGC) ventured into the sunny Kingdom of Lesotho back in 2018 with a resounding $28.8M USD investment. So did Supreme Cannabis Company (TSE: $FIRE) investing $10M USD in Medigrow Lesotho.
Two years later when the Green Rush peaked, cannabis crop became increasingly commoditised, and CBD oil prices axed several players had to reconcile their operations, including Canopy Growth.
In April 2020 Canopy announced among other locations to “exit its operations in South Africa and Lesotho, targeting a transfer of ownership of all of its African operations to a local business.”
Fortunately, every cloud has a silver lining.
Now, after the industry shake out and a proper consolidation smart money can move in and scoop up the same assets for a fraction of the price. M2Bio Sciences (OTC: $WUHN) has eyed the opportunity and matched the timing with their recent acquisition.
In their press release the company projects their operations to produce:
- A net income after tax of $5.73 million per year.
“Based on revenue projections for the first 0.5-hectare facility, the net income before tax is USD 9.82 million. After deducting yearly operating expenses, a projected net profit of USD 6.37 million could be realized. The applicable tax rate in Lesotho is 10% for agriculture.”
The project’s first crop is scheduled for Q2-Q3 2021, with projected annual revenue of USD 9.8 Million.
Cannabis crops are labor-intensive (defined as more than 30% of the total costs of production), with a variety of tasks requiring considerable human labor (soil prep, planting, irrigation, pruning, etc.).
The bulk of total labor costs occur during harvest and/or post-harvest processing.
The strategic location in Lesotho effectively counters this by providing remarkable advantages of affordable and accessible skilled labour, along with an impeccable climate.
That is a return of 1.233% in just five months.
In April 2018 M2Bio announced their involvement in the psilocybin sector, and boy have they followed through. If you missed it, make sure to read their recently published research on Psilocybin and inflammation.
So, don’t expect $WUHN to remain at these levels for long.
Full Disclosure: Jeff Robinson is the CEO, Dr.Anna Morera Leralta the CMO and Luka Marjanovic is the Director of HR & Communications of M2Bio Sciences.
Please feel free to contact Jeff via email at: email@example.com.