LGC Capital Provides Updated Vision with Investors

During a conference call on Wednesday (March 7) with investors, LGC Capital (TSXV:LG) provided a clearer picture of its international efforts, the pressure on its South African deal and the options the company is contemplating when it comes to investing in the cannabis market.

John McMullen, CEO of LGC started the call by stating the company currently has over $16 million in the bank at its disposal with an additional $18.7 million coming by way of the exercise of all outstanding share warrants.

According to McMullen, the company has more than enough cash to fund the current investments in the production of cannabis and pursue new ones.

“Just to be clear, we do not need to or intend to raise another dollar as of today, based on our existing projects and other international projects,” McMullen said during the call.

McMullen credited Cormark Securities for continuing to act as underwriters for LGC’s bought deals and not wavering despite the entire industry facing a market correction.

“We believe our investee companies can reach an annualized net production to LGC Capital of 40,000 to 80,000 kilograms in 2019-2020,” McMullen told shareholders.

South African deal opportunity facing delays

McMullen also provided an update on the delay of its South African partnership with House of Hemp.

Last year LGC signed a letter of intent to acquire 60 percent of House of Hemp a company in South Africa. McMullen said this deal lives on the promise that the South African cannabis company is able to deliver a commercial license in the country.

“While we expected the licensing and legislative process in South Africa would move quite quickly in the context of what was happening in many governments around the world, this has not been the case,” he said.

“The reality is that to date the government of South Africa has not issued such a license to House of Hemp or to any other company in its jurisdiction,” McMullen told investors.

He confirmed LCG will not move forward with the investment deal until their conditions are met by House of Hemp.

As part of the questions and answer period of the call, one investor asked the group which of the partnerships were concrete and fully active.

McMullen answered by saying the AAA Trichomes in Canada and Little Green Pharma in Australia are the only current active partnerships. However, he added LGC will be providing updates in the near future on its proposed partnerships in Jamaica and with other companies.

Investor Takeaway

“We generally invest in private, early stage pre-revenue cannabis companies. We invest in pre-growth companies because the valuations increase exponentially once these companies begin full-scale production,” McMullen said of the company’s vision in the market.

Year-to-date, LGC has decreased 56 percent to close at $0.22 on Wednesday, resulting in a $0.28 loss per share since the start of the year.

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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.