On Jun. 8, 2017, Aurora Cannabis Inc. (TSXV: ACB) announced their strategic investment in Hempco Food and Fiber Inc. (TSXV: HEMP), giving Aurora an ownership stake of 19.9% in Hempco with an option to bring their total ownership interest to 50.1% on a fully diluted basis.

As one of the world’s largest industrial producers of hemp and hemp products, Hempco has been experiencing rapid growth- for the 6 month period ending Feb. 28, 2017, Hempco recorded revenues of $4.5 million, which is a 136% increase over the comparable period for the previous year.

In Canada, the maximum limit set for THC in hemp is 0.3%, meaning that Aurora’s deal with Hempco isn’t focused on the psychoactive cannabinoid- it is focused on CBD, a non-psychoactive cannabinoid, as Hempco’s industrial grown hemp contains efficient extractable quantities of it.

Furthermore, Aurora is anticipating the revision of regulations that currently prohibit industrial hemp producers from harvesting the leaves, flowers, and buds for CBD, and with the CBD market expected to show significant growth in the next few years, Aurora sees the proposed transaction with Hempco as a way to gain considerable market dominance in CBD-related products.

Aurora’s partnership with Radient Technologies (TSXV: RTI), which specializes in extraction solutions for natural products, also gives Aurora access to cost-effective and large scale CBD extraction methodologies, which is another considerable competitive advantage for the company once CBD extraction from hemp is permitted.

But even without the proposed legislative changes, Hempco is still an attractive partner due to its position within the hemp-based nutrition space, as the Functional Foods and Natural Health Products segment is rapidly growing, especially when compared to the traditional processed foods market.

In addition, Hempco is currently building a new facility that will double its current production capacity to 250,000 kg per month in Leduc County, Alberta. This is less than 5 km away from Aurora’s $100 million Aurora Sky Project, billed as the world’s largest legal cannabis production facility, currently under construction at Edmonton International Airport. This has lead some people to name Edmonton as the future of the Canadian cannabis industry.

Terry Booth, CEO of Aurora Cannabis Inc., said, “Leveraging our relationship with extraction leaders, the potential to develop a high-volume, low-cost source for CBD-based products creates significant upside potential, making this transaction particularly attractive”.

For more information, please see the following press releases linked here and here.