CannTrust receives approval for controversial Niagara facility expansion

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Licensed cannabis producer CannTrust Holdings Inc. has obtained municipal approval to proceed with the expansion of its newest cannabis facility in Ontario’s Niagara region, after a months-long delay in getting the right permits from the Town of Pelham — a delay that raised concern amongst analysts and shareholders.

CannTrust will now be able to begin construction of its “Phase III” expansion but only up to 390,000 square feet, compared to the 600,000 square feet of growing space that the company had planned on. Despite the restriction, CannTrust maintains that it will be able to reach a total production capacity of 100,000 kilograms of cannabis per year, according to a statement released by the company Tuesday morning.

“We are pleased with the outcome of the discussions with the Town of Pelham,” said Peter Aceto, CEO of CannTrust. “We believe this decision reflects our view that we are a trusted member of the community and that we are intent on listening to our stakeholders.”

CannTrust is slightly more than six months behind schedule in its infrastructure expansion plans. The company was scheduled to begin construction on Phase III of the Pelham site back in June 2018, but received pushback from the town council due to concern from residents about odour, among other things.

In mid-October, a the town passed a bylaw barring CannTrust from any kind of construction on the site for a year, but it was only on Dec. 19 that the company’s issued its first official update informing shareholders of the hiccup. That raised the ire of some shareholders, who told the Financial Post last month that they were losing faith in the company’s ability to meet its production targets.

The recently obtained municipal permits for construction pushes CannTrust’s production schedule back by six months — the company now says that it will be able to achieve full production capacity from its Phase III expansion in the second half of 2020, as opposed to the end of 2019.  

“We are not overly concerned by the six months’ delay to achieve a production run rate of 100 tonnes. In the meantime, the company can source raw material from third-party suppliers to supplement its near-term needs,” wrote GMP Securities analyst Martin Landry.

CannTrust has two facilities currently in operation: a 60,000-sq.-ft. hydroponic facility in Vaughan, Ont., and a 250,000-sq.-ft. greenhouse facility in the Niagara region. Combined, they can produce up to 35,000 kilograms of cannabis, according to the company.

CannTrust, which recently submitted an application to list its shares on the New York Stock Exchange, saw its stock rise 2.5 per cent after news of the expansion approval broke.

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