ICC International Cannabis Corp (CVE:ICC) CEO Guillermo Delmonte on Cannabis exports from Uruguay
ICC International Cannabis Corp (CVE:ICE) CEO Guillermo Delmonte joins us from Uruguay and talks about his company’s outdoor marijuana growing operations, their lack of pesticide use, exporting to Canada, and the advent of recreational legalization there that is still pending.
James West: Guillermo, thanks for joining us today.
Guillermo Delmonte: Thank you, James.
James West: Guillermo, since we chatted last, you guys have made a bit of progress with International Cannabis Corp. You’ve made some deals with some Canadian ACMPR growers. Why don’t you give us an update on what has developed since we last talked to you late last year?
Guillermo Delmonte: Well, we started without the medicinal cannabis extraction and facilities. What we are doing right now, we have 120 acres that we’re preparing the soil to start sowing next September. It’s going to be an outdoor grow, and by the end of March, we’re going to have our first harvest.
Then what we are doing with for somebody mentioned in Canada with Emblem deal, it’s part of our strategy for the international market. I can see from the first beginning was focused on the international markets and the opportunity; what it is, because we are a low cost producer, and right now we have an unmet demand internationally. So what we are doing right now is building up our facilities, focusing on all the production, executing everything, in order to start exports next year.
Canada, Emblem, is the first. There are going to come more, not only from Canada. The case in Canada is easy, because right now they have more than 30 licensed producers, but there are still some licensed producers that are buying to other LPs because they have the clients, but they don’t have the production. And also, for them it’s much cheaper to buy from us than producing there.
James West: Really. So that’s interesting. So do you think you will have more Canadian customers besides Emblem?
Guillermo Delmonte: Yes. We have interest from other companies, from other LPs, that they also want to have part of our production. Why we are still discussing the is because there are other countries that are going to open and we’re going to focus on those countries that pays more, because it is part of the math, because the margins are everything.
So okay, we love Canada, we are going to work there, but where we are focusing is not only Canada. There are countries such as Germany, Australia and countries all around the world where we are going to move forward soon.
James West: Have you begun to sell any cannabis products domestically in Uruguay yet?
Guillermo Delmonte: Not yet. There, we are still waiting for the government. On our side, what we control is the production. We are doing really well; right now we are sitting on 180 kilograms of dried flowers that are ready to start the distribution, but the government, they are still having some delay on the implementation because, well, they finalized the negotiation with the pharmacies, but now it’s with the Uruguay itself. Working on the last details before opening the registry, doing the marketing campaign to inform people about all these cannabis products, and from that moment, we are going to start selling.
We believe that it’s going to be before June, July of this year.
James West: Okay. So how much do you think you’re going to grow on 120 acres in terms of gross kilogram production per year?
Guillermo Delmonte: At full capacity, we can grow 40 tonnes, or 40,000 kilograms, of dried flowers, and from that point we’re going to be able to extract cannabinoids, especially CBD, for medicinal purposes. But this is important to you, James, is that when we talk about exporting and international markets, we are talking about medicinal. Just…that.
James West: Uh-huh, because most countries aren’t ready to go recreational yet, are they?
Guillermo Delmonte: Exactly. Canada they are still discussing; okay, for us recreationally is our domestic market, there is a full and it is legal at all levels, and what we are focusing on is our upside is all the medicinal.
James West: Sure. I would think Brazil would be a big market for medicinal exports for you?
Guillermo Delmonte: Exactly. Brazil is 200 million people, it’s part of the Mercosur that is a common trade market of South America. They allow six months ago the consumption, but not the production, and that’s where I hope there’s a very good and interesting opportunity.
James West: Okay. So do you see yourself focusing primarily as an exporter of cannabis worldwide, more so than relying on domestic consumption for the bulk of your revenue?
Guillermo Delmonte: A hundred percent. From the first beginning, what we think – our name is International Cannabis Corp, so from the genesis, we were looking for this. The recreational give us the experience, because we have been working one year with all the regulations in Uruguay, but what we are focusing and we see more upside, not only in Uruguay but also the rest of the world, is the medicinal.
James West: Hmm. Okay, that’s interesting. So then in terms of the rest of South America, who’s going to be next for legalizing recreational, or is it going to go that way? Do you think it’s just going to remain medicinal?
Guillermo Delmonte: Well, some countries they have already shown to start having their first approach into the recreational, such as Colombia, but they finally put a hold on there because it’s not so easy to implement. Then they move forward, they approved a decree in 2015 for medicinal, just to produce and sell inside Colombia, but again they hold on; it’s not so easy. But the problem is that you have illegal producers inside; Uruguay doesn’t. So that makes things much easier.
What they are all countries doing is moving forward on the relaxation and medicinal purposes. Why? Because medicinal is good for you, and they are not going to forbid you. They don’t want to get involved with the THC. On CBD, CBT, CBG for medicinal purposes, they are showing some relaxation. Brazil did it last year, Argentina started with some provinces and it’s moving forward to be legal federally. So all of those countries across South America are going to follow in that line, the medicinal one.
James West: Right. Okay, so then in terms of the profitability of International Cannabis Corp from the investor’s perspective, when will ICC become a profitable corporation?
Guillermo Delmonte: As soon as we start with the recreational sales in Uruguay domestic, we are going to achieve the breakeven. And then what we are focusing on doing is spending some money on building up all of the facilities, extraction plants, laboratory and everything in order to ramp up production on the medicinal side in order to expand and look forward to 2018. That will be our year for the medicinal, next year.
James West: Okay. And when do the exports to Emblem in Canada begin?
Guillermo Delmonte: 2018, because there we are going to have our first production, and that moment we are going to sell to them at least 10 percent of our production.
James West: Oh, okay. Wow. So 2018 is a big year for you?
Guillermo Delmonte: Well. For me, it’s 2017, because it’s the execution year: if we don’t execute and work hard this year, next year we are not going to be able to do nothing but…yes, 2018, at least for investors, is going to be a great one.
James West: Okay. So you’ve got 120 acres getting ready to go under cultivation; is that the maximum size of your production footprint, or do you have the opportunity to expand on that if necessary?
Guillermo Delmonte: Well, that’s a very good question, because we have the opportunity to increase. First we started with 100 acres, then we increased 20 more, and for sure next term, next month or…we are going to expand even more.
James West: Wow, that’s exciting. Where do you guys source your genetics, I’m curious, Guillermo. Do you import your genetics and seeds, or do you actually produce those domestically?
Guillermo Delmonte: No, we start importing all of them, because in Uruguay there was no track record or back plan on cannabis because it was illegal. So we start importing some seeds. Well, this agreement with Emblem, we are going to be able to share knowledge, genetics, and we’re going to be able to import more. In the near future we expect to have our own seed banks in order to develop our own strains.
James West: Okay. So the strains you’re growing now, are those strains from Canada?
Guillermo Delmonte: Some of them are from Canada and others from Europe.
James West: Interesting. So then, in terms of the quality of the outdoor marijuana versus indoor marijuana, is there a major qualitative difference or is there not so much because Uruguay is more or less a temperate client?
Guillermo Delmonte: No, the main difference is that we plant on, we’re using soil. Even on green steps or outdoor, we don’t use the hydroponics like they use in indoor, and also the use of pesticides that last week have been a big issue in Canada, but we don’t use pesticides. In Uruguay, (unintelligible) [0:09:21] is an agribusiness country, so our soil, temperature, also our people working, our farmers, they know about crops and how to grow them without the use of pesticides.
James West: So that does mean that ICC cannabis will be certified organic?
Guillermo Delmonte: Not yet, but at least we are not going to be using pesticides. Maybe in the future we’ll certify organic, because for that, you need additional requirements. But in the short term, we are not using pesticides. We can achieve those (unintelligible) requirements that the export markets require.
James West: Right. Okay, Guillermo, that’s a great update. Let’s leave it there for now. We’re going to come back to you in a quarter’s time and see how things are growing. Thank you very much for your time today.
Guillermo Delmonte: Thank you, James, and it’s a pleasure to talk with you again.