A Sudbury-based cannabis company that announced Aplans to set up shop in Espanola last summer has hit a funding snag that's delaying the project's development.
Jeff Scharf, president and CEO of GaiaCann Inc., said plans for the construction of a first-phase cannabis cultivation and extraction facility in northeastern Ontario have been deferred.
Locals from the northeastern Ontario paper mill town about 40 minutes west of Sudbury recently took to Facebook to express confusion.
The 32,000-square-foot facility and a nearby 100,000-square-footfacility located at 37 & 85 Panache Lake Road at the southeast corner of the community, dubbed "The Innovation Project" and "The Greenhouse Project" on GaiaCann's website, were listed for sale by Royal Lepage in September.
Scharf explained that the building is owned by one of his former companies, but the lender doesn't support cannabis operations, so they needed to explore different funding opportunities.
In May, his company had secured a commitment for a $6.5-million loan from a Houston, Texas bank to purchase the building and also complete construction. Unfortunately, the deal fell through.
According to Scharf, financing for cannabis operations in Canada is a challenging endeavour because traditional banks won't back them.
Scharf has not provided an update on when the situation should be resolved. The operation is still moving forward, he said. He expects the extraction facility to be fully operational by August 2020.
Scharf said he remains positive.
The last six months have seen a lot of changes in the cannabis industry as stock prices dropped and larger cannabis companies like Canopy Growth and Aphria Inc. have seen a decline in value.
"The cannabis bubble burst," said Scharf. "During that time, we had the ability as a newcomer in the industry to watch what was happening in that landscape and then try to ensure we don't hit those same growing pains as we launch out."
While the original plan was to grow cannabis in Northern Ontario, Scharf said that due to the high cost of production here, GaiaCann has obtained two licences in Colombia and Suriname to grow crops in those South American countries for shipment to Espanola for processing.
Production costs to grow cannabis in South America, he said, are equal to about five cents per gram.
"The facility in Espanola will be primarily for extraction," said Scharf. "We're looking at not just extracting a general cannabis flower, but also looking heavily into...