BOGOTÁ, Colombia – May 5, 2020 – Medcolcanna Organics Inc. (TSX-V: MCCN) (“Medcolcanna”, “MCCN” or the “Company”), a Canadian medical cannabis company with operations in Colombia, is pleased to announce that, further to its press release dated April 7, 2020, Dona Blanca Limited (“Dona Blanca”), has elected to enter stage 2 of the previously announced joint venture arrangement with Medcolcanna (the “JV”) and will invest an additional $483,000 USD which will complete Dona Blanca’s total investment of $1,000,000 USD on two hectares of greenhouse space on Medcolcanna’s fully licensed cultivation property, which will earn Dona Blanca a 70% working interest (“WI”) in those two hectares.
Pursuant to the definitive agreement with respect to the JV, Dona Blanca had agreed to invest up to $1,000,000 USD ($1,408,000 CAD), to build up to an additional two (2) hectares of greenhouses on Medcolcanna’s fully licensed cultivation property, which would earn Dona Blanca a 70% working interest (“WI”) in the economic rights to the output from such greenhouses. Dona Blanca previously earned into stage one of the project, which has now been fully funded. Dona Blanca has now elected to enter into stage two of the project whereby Dona Blanca will invest an additional $290,000 USD ($408,000 CAD) by May, 15, 2020 to earn an additional 20% WI or an aggregated 55% WI, or 1.1 net hectares in the aggregate; and stage 3 whereby Dona Blanca will invest an additional $193,000 USD ($272,000 CAD) to earn an additional 15% WI or net 1.4 hectares in the aggregate.
“We are pleased to announce that Dona Blanca has elected to enter into stage two of the project and reconfirm their investment of $483,000 USD ($380,000 CAD), of which $290,000 USD ($408,000 CAD) will be funded within the next 10 business days” commented Felipe de la Vega, CEO of Medcolcanna. “Dona Blanca’s entrance into stage two of this project further demonstrates MCCN’s commitment to professionalism of our people and operations, as well as our commitment to monitoring and tightly controlling our capital and operational expenditures, as well as G&A, in order to produce a high quality product at a low cost. The climate and highly skilled, low cost labor available to MCCN in Colombia provides many cultivation advantages. We have effectively leveraged these advantages and continue our efforts to further reduce costs”.
Mr. de la Vega further added “We are pleased that Dona Blanca has entered into the second phase as by increasing our area of cultivation, both MCCN and Dona Blanca will benefit from fixed costs that will be reduced on a per hectare or per plant basis as well as synergies and economies of scale.”
“We are pleased that Dona Blanca elected to deepen their commitment to the project by entering into stage 2, as the additional benefit that MCCN and its shareholders will receive is the non-dilutive financing of a 30% working interest that requires no capital investment from MCCN, but is awarded to MCCN to operate the project. We are very pleased that Dona Blanca is continuing to fund the project during this COVID-19 period. Medcolcanna continues to operate and execute during this period however MCCN’s priority continues to be the health and safety of its employees, partners, and the communities in which it operates” commented Chris Reid, CFO of MCCN.
“MCCN is pleased that Dona Blanca has entered into this second phase. Our partners at Dona Blanca are not only investing 100% of the projected costs for the two hectares under greenhouse, but they are also bringing an experienced and knowledgeable management team into partnership with MCCN through this JV. MCCN believes that this relationship will bring additional strategic benefit to both parties within the growing cannabis industry” commented Medcolcanna Chief Corporate Development Officer, Daniel Herrera.
“Dona Blanca’s commitment to entering stage 2 of the project, is another great milestone for our company. We are committed to the JV with MCCN. The partnership is a prudent investment for Dona Blanca. MCCN has all licenses and permits in place, so once the quick construction period of greenhouses is completed, MCCN will begin cultivation, which gives us a fast path to cash flow generation. Dona Blanca is confident that this will represent a great return on investment for our shareholders” added Rob Dzisiak, Managing Director of Dona Blanca.
HIGHLIGHTS OF THE AGREEMENTS
JOINT VENTURE AGREEMENT WITH DONA BLANCA
- Medcolcanna is to construct an additional 2.0 hectares (215,278 square feet) of greenhouse space at its El Candil farm located in Cota, Colombia
- Medcolcanna to provide 2.0 hectares of fully licensed farmland, next to its current three (3) hectare farm at its El Candil location, which will allow Medcolcanna the ability to provide seamless operations and synergies with current operations. This land space is already fully licensed for cultivation and manufacturing, streamlining the path to commercialization.
- Dona Blanca will fund 100% of capital expenditures, start-up operational costs and administration costs in three phases which if all completed will earn it an aggregate 70% working interest in the newly constructed 2.0 hectares of commercial greenhouse space. Medcolcanna will retain a 30% working interest in the associated economic rights.
- The first cultivation is expected to begin in two months, with the first harvest in six months and revenue on the additional 2.0 hectares beginning in approximately seven months.
- These new facilities are conservatively estimated to be capable of producing approximately 1,300,000 grams of CBD/THC oil per year.
- Dona Blanca has advanced to Medcolcanna a total of $517,000 USD ($734,000) for the full funding of stage 1 of the project and will now advance $290,000 USD ($408,000)
In connection with the funding of the JV by Dona Blanca, the Company is paying a finders’ fee to an arm’s length party called Seacap Consulting SRL consisting of common shares in the capital of the Company equal to 3% of the cash value of the investment by Dona Blanca (being USD$15,000) upon the receipt by the Company of those funds and based on the closing price of the shares on the date funds are advanced. The issuance of this finder’s fee is subject to acceptance and approval by the TSX Venture Exchange.
ABOUT DONA BLANCA LIMITED
Dona Blanca is a private Australian company that operates in Colombia through its wholly owned subsidiary, Extractos Doña Blanca S.A.S. The company has the cultivation licenses and extraction licenses on 5.1 hectares of land near Santa Rosa de Cabal. Dona Blanca completed its first capital raise in October of 2019.
Medcolcanna is a Canadian integrated medical cannabis company, whose fully licensed operations are based in Colombia. Led by a proven and successful management team, Medcolcanna has facilities in optimal growing locations which positions the Company to become a global leader in the medical cannabis market.
Medcolcanna employs state of the art organic agricultural technology and innovative pharmaceutical processes to produce high-quality products. The Company’s scalable production model and network of pharmaceutical partnerships globally ensures that they remain at the forefront of the medical cannabis industry.
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Additional information about Medcolcanna can be found on its web site at www. medcolcanna.com
Neither the TSX Venture Exchange Inc. nor its regulation services provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Investor Relations Contact:
Chris Reid, CFO
Carrera 49b # 93-62
Felipe de la Vega, CEO
Carrera 49b # 93-62
This news release contains “forward-looking information” and “forward-looking statements” (collectively, “forward-looking statements”) within the meaning of the applicable Canadian securities legislation. All statements, other than statements of historical fact, are forward-looking statements and are based on expectations, estimates and projections as at the date of this news release. Any statement that involves discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, future events or performance (often but not always using phrases such as “expects”, or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “budget”, “scheduled”, “forecasts”, “estimates”, “believes” or “intends” or variations of such words and phrases or stating that certain actions, events or results “may” or “could”, “would”, “might” or “will” be taken to occur or be achieved) are not statements of historical fact and may be forward-looking statements. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties, and other factors which may cause the actual results and future events to differ materially from those expressed or implied by such forward-looking statements. Such factors include, but are not limited to general business, economic, competitive, political and social uncertainties; and the delay or failure to receive board, shareholder or regulatory approvals. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on the forward-looking statements and information contained in this news release.
Medcolcanna assumes no obligation to update the forward-looking statements of beliefs, opinions, projections, or other factors, should they change, except as required by law.