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Aurora Cannabis is about to reveal an ‘extensive’ U.S. expansion plan

FILE – In this April 24, 2018, file photo, the first rendering from hemp plants extracted from a super critical CO2 extraction device on its’ way to becoming fully refined CBD oil spurts into a large beaker at New Earth Biosciences in Salem, Ore. Sens. (AP Photo/Don Ryan, File)

Aurora Cannabis Inc. (ACB.TO) is preparing to reveal “extensive” plans for the United States market, according to the company’s chief corporate officer.

“We’ll be unveiling our plans over the next several months,” Cam Battley told Yahoo Finance Canada in an interview. “We do intend to enter that market, especially given how involved in the hemp business Aurora already is.”

Questions about the Edmonton, Alta.-based cannabis producer’s stateside ambitions surfaced last week after Aurora announced plans to issue US$300 million in convertible senior notes. The move, which could provide as much as $345 million in cash if an over-allotment option is exercised, fueled speculation that the company is preparing to deploy the proceeds south of the border.

Battley said the debt was issued in U.S. dollars to appeal to American institutional investors, and does not necessarily signal Aurora’s plan to invest in non-psychoactive, hemp-derived CBD assets in that country, for example.

Canadian companies listed on the Toronto Stock Exchange and major U.S. exchanges are barred from investing in cannabis production in the U.S., as the drug remains illegal at the federal level. However, the passage of the U.S. farm bill recently opened up the market for hemp-derived cannabidiol (CBD). The wellness-oriented compound is being infused into everything from coffee to bath bombs.

Aurora’s chief rival, Canopy Growth Corp. (WEED.TO), announced a plan to spend as much as $150 million on a large-scale hemp extraction operation in New York state on Jan. 14.

That same day, Australis Capital Inc. (AUSA.CN), a spin-off of Aurora’s U.S. assets which now trades on the Canadian Securities Exchange, invested $3 million in a Colorado-based hemp-derived CBD producer called Folium Biosciences.

Aurora holds two warrants allowing it to acquire an ownership interest in Australis if investments in U.S. cannabis assets becomes permissible.

“We can talk about our plans for the United States, and they are extensive,” Battley said. “You can see that we are already busy with that spin-off, which we don’t control. They’re assembling a suite of assets across the U.S. As soon as it is federally permissible, and as soon as the exchanges allow us, it is our intention to exercise our back-in right.”

Aurora already has an expansive global footprint, including several assets in the hemp space.

“ICC Labs in Latin America is the market leader there, producing both cannabis and hemp. Agropro in the EU is the largest producer of organic hemp in the European Union. And of course, Hempco Food and Fiber Inc. (HEMP.V) in Alberta, which we now own more than 50 per cent of, is a hemp business as well,” Battley said. 

Steadying Canadian supply

Meanwhile, in Canada, Aurora and its peers are grappling with how to remedy supply shortages at provincial warehouses that have persisted since the country legalized recreational sales on Oct. 17.

Canadians bought C$54 million of worth of cannabis from stores in the first full month after sales were legalized, according to Statistics Canada data released on Wednesday. The agency’s previous estimate found sales were $43 million in the first two weeks following legalization.

“Nobody has a crystal ball here, but I would imagine that we will see a better amount of supply closer to meeting demand in the Canadian consumer system in 2019, and early into 2020,” Battley said.

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