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LGC Capital Ltd. announces that it has terminated its options with South Africa-based House of Hemp (Pty) Ltd.

LGC to Focus on Investments in Near-Term Medical Cannabis Production.

It was just under a year ago that we announced the deal by LGC to acquire 60% of House of Hemp together with AfriAg. You can read more about that post by clicking here.

Well it would appear the love affair is officially over, and the truth has come to light, as many South African Cannabis activists predicted.

Whilst we knew this was a definite possibility, it’s never a good thing to lose foreign investment and this is a huge loss for the South African cannabis industry as it may deter future potential investors from investing in the medical cannabis industry in South Africa.

Below is the official press release.

MONTREAL, March 23, 2018 /CNW Telbec/ – LGC Capital Ltd. (TSXV: LG) (“LGC”) announces that it has formally terminated its option to acquire a 30% interest in South Africa-based House of Hemp (Pty) Ltd, in favour of focusing LGC’s resources and cash-strong balance sheet on developing its fast-growing investments in Australia, Montreal/Canada, Jamaica and Europe. LGC also announces that it is examining new near-term cash-flowing investment opportunities in Europe and southern Africa. As previously announced, LGC’s 50/50 joint venture with AfriAg (Pty) Ltd had the exclusive right to acquire a 60% interest in House of Hemp.

The South African Government has not put in place the legislative framework for the legalization of medical cannabis in that country. Although House of Hemp is still actively seeking a full set of commercial licenses, its lack of licenses at present means that it does not meet LGC’s strict criteria for near-term production and cash-flow.

As a result, House of Hemp no longer fits with LGC’s investment objectives. LGC has a number of other investment opportunities that it believes will offer better short-term returns for its shareholders. The amounts invested by LGC in its due diligence review of House of Hemp were not material.

John McMullen, LGC’s CEO, commented; “LGC has a number of very exciting projects that are now moving rapidly towards commercial medical cannabis production. These businesses are LGC’s prime focus. We are looking forward to Little Green Pharma harvesting its first commercial crop in Australia in the next few weeks, and AAA Trichomes breaking ground at its new facility in Montreal over the coming weeks. In addition, LGC is working hard with the Global Canna Labs team in Jamaica to complete our detailed due diligence and assist its management team with its first commercial planting expected to commence next month. Italy’s Evolution Bnk, which already has a cash flow, is on track to begin planting its first cannabis crops this summer. Our investments in Little Green Pharma and AAA Trichomes and our pending investments in Global Canna Labs and Evolution Bnk, in Australia, Canada, Jamaica and Italy, all have the potential for significant production of medical cannabis as each operation grows. Our CLV Frontier Brands joint venture with Creso Pharma Limited and Baltic Beer Company Ltd is on track to be in full commercial production and distribution this summer.

Mr. McMullen continued, “With respect to terminating the House of Hemp transaction, the absence of medical cannabis legislation in South Africa unfortunately means that House of Hemp’s business is no longer one that suits LGC’s business objectives of investing in near-term cash-flowing businesses. Not every investment LGC investigates will be concluded, and if businesses do not 100% stack-up for any reason whatsoever with respect to due diligence, budgets, timing or production potential, LGC will walk away from these opportunities to focus on better suited investment opportunities around the globe that meet our strict investment criteria.”

 

One thought on “LGC Capital Ltd. announces that it has terminated its options with South Africa-based House of Hemp (Pty) Ltd.

  1. Dear author of this article.

    Yes its true LGC and its South African partner AfriAg by free choice decided to terminate their option with South Africa based House of Hemp Pty Ltd.

    As accurately reflected in your article their main reason cited was ” investor fatigue based on the governments slow process of setting the enabling legal framework and the terrible delays in issuing of legal permits and commercial cannabis licences”.

    As correctly stated by LGC, House of Hemp continues to push Department of Health for cannabis commercial licence. 6th April 2018 marks 6 months since South African government released the medical cannabis guidelines BUT commercial cannabis licenses are yet to be issued. Maybe MCC criterion is too stringent? Maybe MCC criterion leans too much towards Big Pharma and alienates IKS cannabis entrepreneurs?

    Whatever the challenges; at House of Hemp, we are more than determined to overcome all barriers and meet all requirements.

    We are confident that House of Hemp will get the commercial cannabis license through merit as we did the cannabis research permits since 1999. Tedious but doable.

    We have also promised our IKS communities that once House of Hemp gets this cannabis license we will find legal ways to subcontract indigenous farmers as we did with the 15 INDALO farmers who cultivated industrial cannabis in poorest rural areas of Eastern Cape and KwaZuluNatal from 1999 to 2015. It is doable.

    Yes Sir it was a blow to lose foreign direct investment but in retrospect LGC/AfriAg freely choosing to walk away can only be considered as a blessing in disguise as it gives us (the House of Hemp founders) a chance to reconsider a strategic mistake of selling a controlling stake of House of Hemp (albeit 21% of that 60% option was to AfriAg’s Black partners).

    I must commend this article for its accuracy. I will subscribe for accurate cannabis news void of emotions.

    Thanks for the advise we will change our website accordingly.

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