The Australian Newspaper March 5 2019 Article by Tim Boreham “In hazy world of pot, you must weed out wannabes from winners”

In hazy world of pot, you must weed out wannabes from winners

Written by Tim Boreham. Published in The Australian Newspaper March 5 2019.

Amid the rush by the ASX-listed “pot stocks” to grow medical cannabis, the market has overlooked a key question: where will all the therapeutic hooch be processed?

It’s one thing to cultivate the stuff in view of supplying the medical market which, locally, is in its infancy. But refining the healing herb is not exactly like canning baked beans: specialist facilities are required and, unsurprisingly, they will be heavily regulated.

For THC Global (THC, 50c), the solution fell into its lap after Danish drug giant LEO Pharma decided to a manufacturing facility at Southport on the Gold Coast was surplus to needs.

THC paid a knockdown $2.5 million for the land and the plant — an asset on THC’s books at $16m but with a replacement value north of $35m.

The facility was used to extract material from a different plant — euphorbia peplus, or radium weed — to make a cancer drug. But a plant is a plant, which meant the facility was virtually purpose built for cannabis.

“You won’t get another one like this in Australia, no chance,’’ says THC chief executive Ken Charteris.

Grown at a separate THC facility in Bundaberg, the cannabis will be fed into 400kg vats, in which the cannabinoids and terpenes will be extracted with an ethanol-based process.

The only catch is that because THC is yet to receive a manufacturing permit, there’s not an ounce of the stuff in the factory at present. Charteris describes the permit as “forthcoming” and says that as the facility was a drug factory in the first place it should meet all the quality standards.

While THC awaits the paperwork, the Office of Drug Control has been swamped with applications from parties wanting to grow and research medical cannabis, or import the material (the law was changed last year to allow this).

But many of the happy holders have discovered they’re no Willy Wonka ticket to prosperity. That’s because obtaining a licence is much easier than obtaining the specific permit to grow and handle the dope at a specific facility.

Without a permitted site to send the harvested plants, the growers are legally obliged to destroy the crop.

“They all have aspirations of building an extraction plant and making little Aussie bottles of cannabis … but it’s far more sophisticated than that,” Charteris says.

“There’s a big myth that if you are a (licensed) cannabis farmer you are worth a stack of money. But you have to build up expensive infrastructure and a lot of these holders are small companies.”

The gist, of course, is that with a generous capacity of 12,000kg of cannabinoid mat­erial a year, the unique Southport factory could become the contract refiner for other people’s ganga.

“We are all friends,” Charteris says, implying that talks about offtake deals have already taken place. The dearth of refining capacity aside, the sector faces the dilemma of reconciling the boundless potential of the local medical cannabis with the reality.

At present, there are few approved cannabis drugs and experimental versions are only available to patients under the Therapeutic Goods Administration’s special access scheme (doctor awareness is also low).

As with most of the pot stocks, THC has a Canadian link via its subsidiary Vertical Canna, which has a cultivation project in Nova Scotia. Canada legalised medical dope way back in 2001 and then allowed recreational usage last year — a reform that has created a pot shortage in the country.

Charteris expects THC initially will export most of its product from the facility, on the proviso Australian needs are met first.

“This is a large-scale production pharma plant that now is really the next generation,” he says. “We are probably five years ahead of anyone else.”

Tim Boreham edits The New Criterion
(permission expressly supplied to THC Global Group Limited to post a reprint of the article on THC Global’s website)

tim@independentresearch.com.au