London-listed natural resources company Highlands (HNR.L) is getting into cannabis after making a surprising discovery.
Highlands exclusively told Yahoo Finance UK that during the summer of 2018, the company discovered a naturally occurring source of nitrogen, which was subsequently found to also include hydrogen. The combination created a natural and organic fertiliser. Highlands then began selling this gas to an organic cannabis grower in Colorado.
It was then discovered that the gas essentially turbocharged the growth of cannabis plants.
“Pleasingly, the gas mixture increased plant size, height, root diameter, and flower count by up to 30%, surpassing expectations,” Highlands told Yahoo Finance UK.
This has led to the group’s decision to move into weed by raising more than £1.27m ($1.69m) to establish an organic, vertically integrated cannabidiol (CBD) operation in Colorado, through a newly established and wholly-owned Highlands subsidiary, Zoetic Organics.
The new operation enables Highlands to grow the cannabis resources, process them, and turn them into end products that Zoetic Organics will sell. Those products, including organic hemp oil, retail bottled tinctures, CBD-infused chewing pouches, and pre-rolled smokables, will be distributed through wholesale and retail channels.
“Zoetic Organics provides us with a compelling opportunity to enter the rapidly growing CBD market at low cost and to secure the value that our large, rare, and valuable gas discovery creates for organic agricultural operations for shareholders,” said Robert Price, executive chairman and CEO of Highlands.
“Our immediate priority is to advance the discussions currently underway with potential retail and wholesale partners, purchase manufacturing equipment, and expand our outdoor growing, ahead of our intended harvest of our first 10,000 hemp plants by mid-2019. Beyond this we will expand our harvest and expand our product range.”
Highlands intends to grow approximately 40,000 hemp plants per annum in a 33,000 square feet greenhouse — with a minimum anticipated harvest of three times per year. The group will also be able to grow hemp outside on this land and plans to plant 20 acres this year, equating to around 50,000 hemp plants. Highlands is set to expand their operations to 100 acres in 2020.
The group reiterated that operating at full capacity in 2020 could see the business harvest approximately 290,000 hemp plants next year.
Market research firm Brightfield Group has estimated that the CBD market will reach $22bn (£16.6bn) by 2022. Price said that Highlands intends to generate revenue and profits during the course of 2019.
“Highlands will target a yield of 12 grams of CBD per indoor plant and 30 grams of CBD per outdoor plant. Estimated wholesale prices are $3 per gram although the Board believes sales made direct to retail channels could be at a premium of over five times this,” the group told Yahoo Finance UK.
Highlands said that it “intends shortly to announce a proposed offer for subscription via PrimaryBid” for new or existing retail investors that may want a slice of the action.
The extra PrimaryBid offer is expected to be announced on Tuesday, 19 March, and remain open until 9pm local time on 19 March, 2019.
Highlands called this investment opportunity a “low-cost entry into a rapidly growing market — growing hemp in Colorado for CBD sales in that state is legal, and certain CBD products are legal both in the USA and the UK — subject to legal and regulatory compliance.”