Australian cannabis investor MMJ Group (ASX:MMJ) has put another $C2.5m ($2.8m) into cannabidiol (CBD) extraction company Sequoya Cannabis.
The investment was via a secured convertible note which may be drawn down in tranches. MMJ advanced an initial $C350,000 in April under this facility.
MMJ secured this additional investment opportunity by exercising a right, secured in July 2019, to invest up to a further $C2.5m in Sequoya to finance the company’s business plan.
Once the first payment is made Sequoya’s Polish subsidiary, Sequoya Europe, is expected to start production of CBD extracts and isolate this month at its European Union GMP certified production facility.
MMJ is moving its portfolio more heavily in extraction in the expectation that this will be the link between the huge investment already sunk into cultivation and buyers looking for higher value products.
MMJ says the Sequoya facility is built from the ground up with the strictest production, quality and safety standards, which allows quick and smooth certification of the entire facility. It marks the only completely end-to-end EU GMP certified hemp extraction facility in Europe.
As an end-to-end EU GMP Certified facility, it includes a fully equipped analysis and quality control area, staffed with senior R&D and quality specialists who maintain tight quality control over production.
With few regulatory hurdles around CBD in Europe, MMJ says Sequoya is receiving tremendous interest from consumer goods manufacturers namely from cosmetics, food, beverage and nutraceutical companies.
With the financial backing of MMJ, the company says Sequoya is now able to move to the next step to become a significant GMP-certified hemp CBD supplier, with longer term plans to expand into the legal medicinal marijuana market across Europe.
“Sequoya is focusing on extraction, which is the highest value opportunity within the cannabis ecosystem and has built a large-scale production plant in a low-cost jurisdiction which has easy no-tariff access to high value markets,” the company said in a statement.
“As the industry evolves, the ability to produce GMP certified product at a lower cost in Europe will be a strategic advantage for Sequoya.
“Poland also provides access to world class technicians and engineers at a substantially lower cost than available elsewhere, some of whom are already working with Sequoya.”
MMJ’s investment in Sequoya has a current book value of $C3.3m which comprises a $C2.5m convertible note from July last year, convertible into Sequoya ordinary shares at 5 Canadian cents each, the current $C2.5m convertible note facility of which only a small portion has so far been drawn, and 19 million ordinary shares or 27 per cent of the company.
The cannabis investor itself is trading at a 35 per cent discount to NAV (net asset value).