Emerald Health Buying 40% of Pure Sunfarms Cannabis Production

With legal adult-use marijuana around the corner in Canada, companies are looking to lock down supply chains while licensed growers work at fever pitch to increase the size and frequency of their harvests. Emerald Health Therapeutics (TSX-V: EMH) (OTC: EMHTF) is working on both, on Monday saying that it has signed a supply agreement to buy nearly half of the marijuana production of Pure Sunfarms this year and again in 2019.

Pure Sunfarms is a 50/50 joint venture between Emerald Health and Village Farms International (TSX: VFF) (OTC: VFFIF).

Based upon current projections, the supply agreement will equate to somewhere between 21,000 and 24,000 kilograms of cannabis for Emerald Health. At the low end, that’s about 23 tons of pot.

Pure Sunfarms is nearly done with the first 250,000 square feet of a 1.1-million square-foot greenhouse conversion in Delta, British Columbia. Dubbed the "Delta 3" greenhouse, the rest of the state-of-the-art conversion is targeted to be completed by year’s end.

In March, Health Canada issued a cultivation license for the Delta 3 greenhouse.

Pure Sunfarms also has options for the adjacent greenhouses that weigh in at 1.1 million and 2.6 million square feet, respectively. If the company exercised the options and turned Delta 3 into one, contiguous, 4.8-million-square-foot greenhouse, it would be the biggest cannabis cultivation complex in the world. 4.8 million square feet is a little more than 110 acres (44.5 hectares) under roof.

As it stands with Delta 3 currently, the company is targeting production of dried cannabis of approximately 7,000 to 8,000 kilograms in 2018, 46,000 to 52,000 kilograms in 2019, and more than 75,000 kilograms in 2020 when the facility reaches full production.

Shares of EMH are up 2.5% at $4.51 in Monday afternoon trading. Shares of Village Farms have galloped ahead 6.6% to $5.03.