Zenabis Provides Operations Update for August 2019
Vancouver, British Columbia – September 18, 2019 – Zenabis Global Inc. (TSX:ZENA) (“Zenabis” or the “Company”) is pleased to provide an update on its recent facility construction and licensing activities and its recent cannabis production results.
- With respect to production results:
- Cultivation output in August 2019 was 1,996 kg of dried cannabis, production at Zenabis Atholville outperformed the revised design capacity by 40.9% (the Performance Ratio1).
- Cultivation output of 1,996 kg of dried cannabis was 26.4% greater than Zenabis’ revised forecast output (as updated on August 6, 2019) of 1,579 kg of dried cannabis.
- With construction and licensing at Zenabis Atholville largely complete, Zenabis is now focusing on construction and licensing at Zenabis Langley. Zenabis Langley construction continues, with Zenabis’ total annual cultivation capacity expected to increase to 143,200 kg of dried cannabis on completion of licensing at Zenabis Langley.
- Zenabis intends to submit a license amendment application for Zenabis Langley’s existing cultivation license by the end of September (to include additional growing and processing areas for Zenabis Langley Site A – Part 2A). Once approved, Zenabis’ total licensed annual production capacity will increase by 39,400 kg to 96,400 kg (assuming receipt of the Zenabis Atholville Phase 2C – Part 2 license amendment).
- Zenabis has launched Re-Up, Zenabis’ high value, low cost cannabis brand. Under the Re-Up brand, Zenabis expects to provide various cannabis products to consumers at a competitive price.
Andrew Grieve, Chief Executive Officer of Zenabis, stated, “August output was more than 60% greater than any prior month. Through to the end of October we expect the variety of cultivation approaches and rapid scale-up of the facility to result in significant room by room variance, after which we expect to achieve steady-state yields for each cultivar at Zenabis Atholville. We expect general steady-state operations in Atholville by December of 2019.”
Cannabis Production Summary
In August 2019, Zenabis realized a total harvest weight of 1,996 kg of dried cannabis.
The amount harvested at Zenabis Atholville for the three months ending August 31, 2019 exceeded the revised design capacity of the flower rooms by an average of 23.2%, compared to 7.2% in three-month period from May 2019 through July 2019. A month-to-month comparison of actual harvests compared with harvest forecast based on revised design capacity between January 2019 and August 2019 for Zenabis Atholville is provided in the table below.
|Revised Design Capacity Performance at Zenabis Atholville||Jan |
|Feb 2019||Mar 2019||Apr|
|Actual Harvest Weight||474 kg||480 kg||518 kg||809 kg||908 kg||756 kg||1,238 kg||1,912 kg||7,095kg|
|Revised Design Capacity Harvest Weight2||467 kg||643 kg||539 kg||796 kg||895 kg||716 kg||1,097 kg||1,357 kg||6,510 kg|
|Difference (kg)||7 kg||(163 kg)||(21 kg)||13 kg||13 kg||40 kg||141 kg||555 kg||585kg|
|Difference (%) – Revised “Performance Ratio”||1.5%||(25.3%)||(3.9%)||1.6%||1.5%||5.6%||12.9%||40.9%||9.0%|
2 The Design Capacity Harvest Weight is based on the “design capacity” yield that Zenabis has disclosed to date. This figure was derived by converting the actual square footage of flower room space and the forecast canopy for each specific flower room into a kilograms per room per day figure based on Zenabis’ historical yield data at the Zenabis Atholville facility based on the yield performance in the three months ending June 2019 for revised design capacity. The Design Capacity Harvest Weight in the table above is the harvest weight that would have resulted if the Design Capacity Yield Per Day for a room was multiplied by the Effective Flower Room Equivalent Days, as defined under “Performance Ratio”. Zenabis has revised its design capacity at Zenabis Atholville upwards by 35% (equal to Zenabis Atholville’s Performance Ratio for the three months ended June 30, 2019) from 34,300 kg per annum to 46,300 kg per annum. Zenabis no longer reports outperformance relative to original design capacity (the kg/day figure utilized to derive the 34,300 kg original design capacity for Zenabis Atholville).
In August 2019, Zenabis completed eight harvests at Zenabis Atholville. The average Performance Ratio for these harvests was 40.9% relative to the revised design capacity. In August 2019, Zenabis also completed its first harvest at Zenabis Stellarton. Previous design capacity performance summaries have only disclosed performance at Zenabis Atholville, and given Zenabis Stellarton is not a key cultivation facility, Zenabis does not intend to report a performance ratio for Zenabis Stellarton.
2019 Harvest Forecast – Zenabis Atholville, Zenabis Stellarton and Zenabis Langley Site A – Part 1
For its existing licensed facilities of Zenabis Atholville, Zenabis Stellarton and Zenabis Langley Site A – Part 1, Zenabis expects to produce approximately 14,8883 kg of dried cannabis from September through December of 2019. The following table sets out Zenabis’ estimated monthly harvests for Zenabis Atholville, Zenabis Stellarton and Zenabis Langley Site A – Part 1 for the remainder of 2019.
|Forecast3||1,212 kg||1,579 kg||1,731 kg||3,758 kg||5,199 kg||4,200 kg||17,679 kg|
|Actual||1,238 kg||1,996 kg||3,234 kg|
3 This forward-looking estimate of future harvest results is based on the following material assumptions: (1) Zenabis Stellarton and Zenabis Langley Site A – Part 1 operate at their published design capacity on a room by room basis for the cultivation space that is licensed and in cultivation at the forward-looking periods noted; (2) Atholville rooms operate based on the current flower schedule and at revised design capacity (a 35% increase relative to original design capacity)); and (3) Cultivation commencement at Zenabis Langley Site A – Part 1 in September 2019.
Zenabis intends to provide a monthly cultivation forecast for Zenabis Langley Site A – Part 2 upon receipt of the cultivation license amendment for this phase.
The timeline from harvest to the point at which Zenabis completes a sale of that product ranges from a minimum of three weeks (in the case of a bulk sale to a licensed producer) to more than eight weeks (in the case of soft gel capsules which involve external extraction, processing, filling, packaging and shipment). Zenabis recognizes the revenue from completion of such sales in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.
Construction and Facility Update
Now that construction is substantially complete4 at Zenabis Atholville, Zenabis is now focused on operational improvements to reduce operating costs (increasing packaging automation, for example) and post-harvest processing.
Zenabis is currently in the process of upgrading its extraction capacity at Zenabis Atholville to 55,200 kg of extraction capacity using equipment being relocated from the Zenabis Delta extraction project. This upgrade is expected to be complete by November 2019, and will provide Zenabis with the capacity to fill vape cartridges at both Zenabis Delta and Zenabis Atholville when and as permitted under applicable laws. The table below provides outlines Zenabis’ revised extraction design capacity:
|Extraction Design Capacity||Prior Plan||New Plan|
|Zenabis Atholville||18,000 kg||55,200 kg|
|Zenabis Delta||165,600 kg||110,400 kg|
|Total||183,600 kg||165,600 kg|
Zenabis is currently removing the original extraction machine from Zenabis Atholville and is determining the appropriate course of action for this machine which has an annual extraction design capacity of 18,000 kg.
The first phase of Zenabis Langley is now complete and licensed for cultivation activities (Zenabis Langley Site A – Part 1). Zenabis is currently converting the second phase of the first 10 acres at Zenabis Langley (Zenabis Langley Site A – Part 2). For reporting purposes, Zenabis has now split Part 2 into two phases (Part 2A and Part 2B).
Site A is divided into six flower zones, which are similar to those in an indoor facility, but much larger in size. A summary of construction status by phase is provided below:
|Site A – Part 1||Licensed and operational|
|Site A – Part 2A||Consists of 101,300 sq. ft. of flower room space (two flower rooms) and 19,300 sq. ft. of other operational space (includes 10 drying rooms and 2 packaging rooms)Table installation is ongoingHVAC, flooring, shade screen, security and lighting installation is substantially complete|
|Site A – Part 2B||Consists of 120,200 sq. ft. of flower room space (three flower rooms) and 103,000 sq. ft. of other operational spaces (includes mother and vegetation space)HVAC, flooring and shade screen installation is ongoingSecurity equipment and lighting installation is substantially complete|
On September 6, 2019, Zenabis received a cannabis processing license for Zenabis Stellarton. Zenabis commenced pre-roll production at Zenabis Stellarton during the week of September 9, 2019. Zenabis’ current pre-roll production capacity at Zenabis Stellarton is estimated at ~400kg of pre-rolls per month. Zenabis intends to achieve output of 1,200 kg of pre-rolls per month at Zenabis Stellarton by November 2019 subject to market demand for pre-rolls.
Zenabis is currently in the process of constructing extraction and post-processing capacity, a product development lab, a formulation design lab, and a full ISO certified analytical testing lab at Zenabis Delta. This construction project is expected to be complete by the fourth quarter of 2019.
Zenabis is currently in the process of various licensing activities for Zenabis Delta, Zenabis Atholville, Zenabis Langley and the Zen Craft Grow program as outlined in the table below:
|License Submission||Submission Month||Annual Design Capacity|
|Zenabis Delta – Analytical Testing||June 2019||N/A|
|Zen Craft Grow – Grower 1||July 2019||350 kg|
|Zenabis Atholville Phase 2C – Part 2||August 2019||3,000 kg|
|Zenabis Langley Site A – Part 2A||September 20195||39,400 kg|
|Zenabis Langley Site A – Part 2B||November 20195||46,800 kg|
5 Expected submission timeline subject to receipt of prior license or license amendment for each facility.
Zenabis is currently using Zenabis Pitt Meadows, Zenabis Aldergrove and Zenabis Langley for our propagation and floral business, as well as hemp cultivation activities. All hemp cultivation at Zenabis Aldergrove that uses greenhouse space is in space currently not being used by the propagation and floral business. As a result, this will not have a negative impact on Zenabis’ propagation and floral business. Hemp cultivation will neither interfere with the planned cannabis cultivation activities at Zenabis Langley, nor will it reduce the cannabis cultivation design capacity of Zenabis Langley.
Launch of Re-Up
Re-Up, Zenabis’ latest recreational brand has been launched with the aim of providing consumers across Canada with various cannabis products that were created under the concept of “no waste, no fuss, and no compromise”. Re-Up’s containers and labels have been chosen to minimize the use of inks and dyes, and to be easily recyclable. Available in pre-roll and dried flower formats, Re-Up products will be available for purchase in New Brunswick and Saskatchewan by the end of October, with several other provinces to follow in Q4 2019.
This article is written and published by The Cannabis Stock
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