Tourism, Culture, Industry and Innovation
September 4, 2019 

Provincial Government Announces Production and Supply Agreement with Atlantic Cultivation

The Provincial Government continues to position the province as a leader in Canada’s cannabis industry by entering into a production and supply agreement with Newfoundland and Labrador’s Atlantic Cultivation Inc. and its strategic partner, Auxly Cannabis Group. By 2024, this agreement will contribute an estimated $215 million annually to the provincial GDP; will result in over 400 jobs through direct, indirect and induced employment; and, provide nearly $28 million in wages and salaries.

The Honourable Christopher Mitchelmore, Minister of Tourism, Culture, Industry and Innovation, and Chris Crosbie, COO of Atlantic Cultivation, announced details today in St. John’s. They were joined by Andrew McMillan with Auxly Cannabis Group.

As a result of this 20-year agreement, Atlantic Cultivation has committed to creating a minimum of 117 person years of employment, and will invest over $37 million to construct an 110,000 square foot cannabis production facility on Kenmount Road in St. John’s. Construction of this new facility will commence immediately, and when in full production, will have the capacity to produce 16,000 kilograms of cannabis annually.

Auxly Cannabis Group, a Health Canada licensed producer based in Toronto, will provide the majority supply for Atlantic Cultivation for entry into the Newfoundland and Labrador market. Atlantic Cultivation will have access to up to five retail licenses, and will be investing $500,000 over five years to support cannabis research and development in the province.

This agreement with Atlantic Cultivation and Auxly Cannabis Group will allow for the sale of its cannabis products in the province through the Newfoundland and Labrador Liquor Corporation licensed retailers and online through CannabisNL.

The Provincial Government now has three agreements in place for local cannabis production, totaling at least 44,000 kilograms per year by 2025. Direct jobs associated with the three agreements is 382. Discussions continue with other potential producers, including local firms, who are pursuing cannabis production and processing.

Quotes
“Attracting new investment and new industries to the province is important to our government. This performance-based supply and production agreement with Atlantic Cultivation capitalizes on opportunities to diversify our economy and contribute to sustainable employment. As we open the door to growth and export opportunities, we are taking another step in our goal to become a leader in the cannabis industry, nationally and internationally.”
Honourable Christopher Mitchelmore
Minister of Tourism, Culture, Industry and Innovation

“We are excited to finalize this agreement with the Government of Newfoundland and Labrador. Since the announcement of our partnership with Auxly back in October, we have been focused on designing a built-for-purpose world class cannabis production facility while finalizing the terms of our agreement with the province. Now that we have the contract in place and the facilities design is complete, it is full steam ahead on starting construction of the production facility, opening our stores and hiring a local operations team that is passionately dedicated to producing high quality cannabis and derivative products. We look forward to announcing the location of our retail stores in the coming weeks.”
Christopher Crosbie
COO, Atlantic Cultivation Inc.

“We are excited to continue to build on our partnership with Atlantic and reinforce our commitment to Atlantic Canada, where we are building meaningful cannabis businesses that have a positive impact on the region. We look forward to delivering high quality cannabis products and ultimately exceptional in-store experiences to the Newfoundland and Labrador community.”
Hugo Alves,
Chief Executive Officer, Auxly

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Media contacts
Eric Humber
Tourism, Culture, Industry and Innovation
709-729-4819, 725-9655
erichumber@gov.nl.ca

Katherine Hickey
Atlantic Cultivation
709-728-5273
media@atlanticcultivation.com

Investor Relations
Auxly Cannabis Group
1-833-695-2414
IR@auxly.com

BACKGROUNDER

Terms of Agreement with Atlantic Cultivation Inc. and Auxly Cannabis Group

Production Agreement

  • Once full production is reached, Atlantic Cultivation is committed to creating 117 person years of employment annually and producing approximately 16,000 kg of cannabis annually. This will result in over 400 jobs through direct, indirect and induced employment; and nearly $28 million in wages and salaries.
  • The average salary for jobs related to the production facility is approximately $55,800.
  • A new cannabis production facility to be built on Kenmount Road in St. John’s totaling 110,000 square feet.
  • Atlantic Cultivation is committed to produce local cannabis by Spring 2021 and to operate its production facility for a minimum of 20 years.
  • Atlantic Cultivation will receive access to five retail licenses as well as the same premium percentages as provided in the original cannabis framework by government. For 10 years, from the effective date of the agreement, Atlantic Cultivation will be eligible to reduce its monthly remittances to the Newfoundland and Labrador Liquor Corporation (NLC) for sales of its cannabis sold in the province, up to the confirmed eligible expenditures.
  • A 10 per cent reduction in remittances paid to the NLC on the product sold in its retail stores; a five per cent reduction for online sales and a three per cent reduction for product sold in other retail stores. This exists for a 10 year period, after which time the reduction in remittances will end.
  • No upfront grant or loan by the Provincial Government.
  • Atlantic Cultivation will pay corporate income tax and government will receive additional tax associated with labour, which is estimated to exceed $55 million over 10 years.

Supply Agreement

  • No obligation for the Provincial Government to purchase cannabis; however, guaranteed supply is available.

2019 09 04                                                    2:25 p.m.