Thelon Capital to Provide Infrastructure, Products, Expertise to Medical Marijuana Market
VANCOUVER, B.C. / April 28, 2014 / If you were sitting in a bar 25 years ago and someone told you that after the year 2000 we would tackle something called climate change, legalize same sex marriage and use marijuana as medicine, you would have likely laughed, ordered another dirty martini-probably a double-lit up a Camel and adjusted your polyester suit.
Cue Bob Dylan.
In Canada, regulation changes on April 1st 2014 allow licensed producers to grow Medical Marijuana on a commercial scale. Health Canada conservatively estimates the market could be worth $1.3 billion by 2024. Industry analysts see that number doubling that forecast by 2016 to $2.6 billion. Added to the US forecasts, the North American market should top $5 billion-plus by 2016.
"The components to this new marketplace have a such number of facets," states Scott Walters, CEO of Thelon Capital (TSXV:THC) (Frankfurt:TFHC) "Our focus is to provide support for artisan growers and provide financing, particularly royalty deals, as well as technologies and expertise. The market is likely well beyond the experience of many recent entrants who appear to be struggling with this complex opportunity."
Medical Marijuana is currently legal in 20 US states, with Colorado and Washington State recently decriminalizing recreational use. Undoubtedly, the trend is moving in one direction: And quickly. Recent analysis on the American marijuana marketplace by ArcView Angel Investors forecast a 64-per-cent surge in the legal U.S. cannabis market to $2.34-billion in 2014. It also estimates that the five-year national market could grow to $10.2-billion amid rising demand and potentially new state markets.
This burgeoning market requires the expertise of seasoned business people to provide venture capital, management expertise, education and to act as facilitator for this explosive new industry.
Unlike some peers jumping into the space, some run by grizzled old miners looking for a stock bump, Walters brings an exceptional provenance to the business, both on the capital markets side and as a leading voice in agri-business.
Currently, and prior to taking the helm at Thelon, Walters was a senior management consultant to private and public companies in the agri-mining and agri-pharmaceutical space. He provides leadership advisory and due diligence for issuers as well as institutional clients investing in the agricultural, Marihuana for Medical Purposes Regulations (MMPR) and agri-pharmaceutical space.
Mr. Walters has twenty years of securities industry experience, the majority of which has been spent investing in and financing the natural resource space. His execution and senior management experience on the buy and sell side encompasses all types of investment banking transactions including a focus on public and private equity and debt offerings; exclusive sale assignments, joint ventures, business creation and development.
Walters also refers to Thelon’s stock symbol ‘THC’, the acronym for Tetrahydrocannabinol, the principal psychoactive constituent or cannabinoid of the cannabis plant as a ‘market weaponised symbol’. Aficionados will recognize the symbol; the rest of us soon will.
Cannabidiol, or CBD, can be a prominent cannabinoid present in medical strains and has shown significant medical effects, but does not make people feel "stoned" and can actually counter the psychoactivity of THC. The reduced psychoactivity of CBD may make it an appealing treatment option for patients seeking anti-inflammatory, anti-pain, anti-anxiety, anti-psychotic, and/or anti-spasm effects without disconcerting lethargy or dysphoria.
Walter’s vision is to provide a virtual ‘circle’ around the plant, which encompasses grower support, consultation and safe consumption through products such as high quality vaporizers. Safe consumption is key and will provide yet another significant revenue stream to Thelon as it develops and markets medical grade delivery products to enhance both the patient experience and therapeutic efficacy.
In case one feels this will all blow over or out, HuffPo recently published a poll evidencing that: "Seventy percent of respondents favored legalizing medical marijuana, compared to the 17 percent who wanted it to be illegal. Overall, 51 percent of respondents said they think that general marijuana use should be legal, while only 34 percent said that it should not be."
When speaking with Scott Walters, he frequently brings up the patient side of Medical Marijuana versus the more prevalent business opportunities sighted by–and I use the term illustratively as opposed to actually–his peers in the space. Walters has no interest in being a grower, but to employ his and his teams expertise to ‘support growers whose plants benefits specific needs of patients.’
Thelon recently announced it had entered into an arrangement with Net Gram Royalty (NGR) to further explore and to help negotiate Net Gram Royalty agreements with various licensed producers.
NGR provides non-equity funding to licensed producers (“LPs”) of medical marijuana. Its goal is to provide diversified risk mitigated exposure to the medical marijuana market for investors, and a robust supply of medical marijuana for patients. NGR will meet this rapidly growing demand for funding in the medical marijuana production sector using a commodity-streaming model, rather than a direct equity investment. Thus NGR mitigates early stage venture risks.
NGR is in the process of due diligence with several producers to fund dried marijuana royalty agreements in its first twelve months of operation. NGR’s business model is highly scalable, and will efficiently serve the needs of medical marijuana patients, LPs, and investors within the parameters of a rapidly expanding market.
Net Gram Return royalties are based on the value of production or net proceeds received from the legal sale of medical marijuana by a Licensed Producer (LP) from an indoor growing operation under Canada’s Federal "Marijuana for Medical Purposes Regulations." These sales are made direct to registered patients from the LP.
This type of marijuana royalty potentially provides for significant and tax advantaged cash flow that is free of any operating or capital costs and environmental liabilities and allows for capital risk reduction in gaining exposure to a developing marketplace.
In other words, it’s smart business.
Also smart is Thelon’s commitment to developing the mineral Zeolite, which is particularly valuable in holding and slowly releasing valuable nutrients to plants. As a result, it promotes more efficient use of fertilizers, yielding faster growth and increased yields. The relationship is with Vancouver-based Canadian Mining Company and includes an option for Thelon to earn up to a 50 percent interest in the Company’s Sun Group Zeolite Project in Princeton BC.
Canadian mined Zeolite is extremely low in impurities as opposed to some supply that comes from China. Zeolite’s properties mean more efficient use of fertilizers and water. Less water use means less leaching; always a good and environmentally responsible byproduct.
To use an analogy, if Thelon were in the oil services business, it would provide infrastructure, equipment and consulting to oil producers, be they small or Encana-sized. In the New Normal, the medical marijuana is a complicated, highly regulated business and only the strong will survive. Having the right infrastructure, delivery mechanisms and cost-effective growing and producing will be the path to growth and consistent shareholder value.
Walters notes: "Prices for common strains of marijuana will likely weaken as the market matures, while specialty medical strains will likely command strong and sustainable prices as they will be tightly protected by growers and in high demand for individual maladies. Consistent profitability for focused growers will be in the production of specialty strains, as it is with other crops."
Truly fine craft beers aren’t affected by price wars among the giants.
Under Walter’s vision, Thelon will likely represent the poster stock for successful enterprises in the Medical Marijuana space. While there are many companies that want in for a variety of reasons-some good, many opportunistic-there are only a handful to watch and follow, including Thelon Capital (TSXV:THC), GW Pharmaceuticals(NASDAQ: GWPH) and Naturally Splendid (TSXV.NSP).
What sets THC apart is Walters desire of building a great company that is responsive not only to supporting growers and ultimately shareholders, but his unwavering commitment to delivering the best possible product to patients. In the final analysis, that sentiment should be embraced by all those who venture into the space. And investors.
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SOURCE: Financial Press