Investor Presentation November 2018 AN UNMATCHED PLATFORM FOR THE GLOBAL CANNABIS OPPORTUNITY

Transcription

1 Investor Presentation November 2018 AN UNMATCHED PLATFORM FOR THE GLOBAL CANNABIS OPPORTUNITY 1

2 Forward Looking Statements This presentation contains certain "forward looking statements". These statements relate to future events or future performance and reflect the Company's expectations regarding its growth, results of operations, performance, business prospects, opportunities or industry performance and trends. These forward looking statements reflect the Company's current internal projections, expectations or beliefs and are based on information currently available to the Company. In some cases, forward looking statements can be identified by terminology such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential", "continue" or the negative of these terms or other comparable terminology. A number of factors could cause actual events or results to differ materially from the results discussed in the forward looking statements. In evaluating these statements, you should specifically consider various factors, including, but not limited to, such risks and uncertainties as availability of resource, competitive pressures and changes in market activity, risks associated with U.S. and Canadian sales and foreign exchange, regulatory requirements and all of the other "Risk Factors" set out in the Company's current annual information form for the year ended December 31, 2017 and the most recent management's discussion and analysis for the quarter ended September 30, 2018, which is available electronically at Actual results may differ materially from any forward looking statement. Although the Company believes that the forward looking statements contained in this presentation are based upon reasonable assumptions, you cannot be assured that actual results will be consistent with these forward looking statements. These forward looking statements are made as of the date of this presentation, and other than as specifically required by applicable law, the Company assumes no obligation to update or revise them to reflect new events or circumstances. 2

3 Market Facts 3 (As of November 23, 2018) LISTING SYMBOL PRICE MARKET CAPITALIZATION SHARES OUTSTANDING 52-WEEK HIGH/LOW MANAGEMENT & BOARD OWNERSHIP TSX:VFF OTCQX: VFFIF C$5.64 ~ C $268 M (basic) ~ C $289 M (diluted) 47.6 M (basic) 51.2 M (diluted) C $9.80 C $4.36 ~22% Listed on the TSX since 2006 Very strong alignment of management and shareholders 3

4 Canadian Legal Cannabis: $4B+ in US Legal Cannabis: $25B by Global Hemp CBD: $22B by Global Legal Cannabis: $146B+ by Deloitte 2. New Frontier Data 3. Grand View Research 4. Brightfield Group 4

5 Unmatched North America Greenhouse Assets 5 Owned Assets 10.5 M ft 2 of technologically (240 acres) advanced facilities Canada: Delta, BC 3 Facilities 4.8 M sq. ft. (110 acres) 1 Cannabis (1.1 M sq. ft) 2 Vegetables (3.7 M sq. ft.) U.S.: West Texas 4 Facilities - Vegetables 5.7 M sq. ft. (130 acres) Growing Partners Mexico: 1.5 M sq. ft. (35 acres) Ontario: 3.0 M sq. ft. (70 acres) BC: 3.0 M sq. ft. (70 acres) 5

6 Leaders in High-Tech, Low-Cost Vertically Integrated Greenhouse Growing 6 Experts in agricultural product safety 750 years of combined master grower experience from around the world Leaders in crop management registrations in North America Decades of experience as a vertically integrated grower/distributor 30-year history developing and operating mega-scale greenhouses Proven track record as a low-cost operator Cannabis is an agricultural product like any other 6

7 Fast Mover Advantage: Ability to Rapidly Transition to New Crops with Low Risk 7 Existing facilities require lower cap ex and allow faster time to market compared to new builds Existing operations with experienced management, skilled labour force Proven operating systems and decades of experience managing the local climate Extensive in-house facilities development and conversion expertise 7

8 Canada On Track to be One of the Largest Vertically Integrated Producers 8

9 Canada: On Track to be One of the Largest Vertically Integrated Producers 9 (50% Owned Joint Venture) PSF: 1.1 M sq. ft. conservative projected yield of 75,000 kg D1 & D2: Options on an additional 3.7 M sq. ft. conservative projected yield of 300,000 kg Pure Sunfarms has the potential address nearly half of forecasted Canadian market 9

10 Creating One of Canada s Largest Vertically Integrated Cannabis Companies 10 Well positioned for the evolution of the Canadian cannabis market Immediate Term: Capitalize on wholesale opportunity Wholesale distribution agreement with Canadian LP for 40% of 2018/2019 production Supply shortage: Realizing very favourable spot market pricing Strong demand from other Licensed Producers Next Step: Vertically integrated supplier with a leading brand and reputation Appointed President and CEO, Mandesh Dosanjh Joined from LCBO: SVP, Supply Chain & Wholesale Developed/managed LCBO s supply chain/ wholesale strategy for legalization of adult-use cannabis Developing product and brand strategy Extraction capabilities in place by mid-2019 In advanced discussions for supply agreements with provincial government distributors Committed to building a reputation for quality, consistency and reliability 10

11 Capital Efficient, Rapid Conversion of Existing Produce Operation 11 Fully automated, high-capacity nursery, 16 state-of-the-art flower rooms Meticulous attention to the growing environment and systems, processing areas and production ramp up Growing system with automation proven in different crops to provide optimal efficiencies Industry-leading HVAC systems based on extensive climate management experience, with technically advanced data systems High-tech light deprivation/supplementation systems Configured for continuous weekly harvesting year round 11

12 GOAL: Be the Low-Cost, High-Quality Cannabis Producer in Canada 12 Ingrained culture of high-quality, low-cost production built over decades Greenhouse growing provides significant capital and operating cost efficiencies Lower energy needs Greater economies of scale Allows for greater scale conservative target of <$1.00/gram Continuous year-round harvesting and processing allows for a consistent, experienced, skilled agricultural labour force Ability to be Sustainably Profitable in a Commoditized Market 12

13 Rapid Transition to Production and Sale 13 Initiate Cultivation License Process File Cultivation License Application Commence Conversion of Delta 3 to Cannabis Licensing Standards Obtain Cultivation License Complete Conversion of Full 250,000 ft 2 (Quadrant 1) of Delta 3 Commence Commercial- Scale Production Obtain Selling License Commence Sales June 2017 Sept 2017 Oct 2017 March 2018 April 2018 May 2018 July 2018 Sept 2018 Pure Sunfarms has consistently achieved key milestones on or ahead of schedule 13

14 Rapid Ramp to Large-Scale Commercial Production 14 Targeted Production Area Ramp Up August 2018 Q ,000 sq. ft. October: 550,000 sq. ft. in production 550,000 sq. ft. 775,000 sq. ft. 1.1 M sq. ft. 1 Targeted Annual Production ,000 8,000 kg ,000 52,000 kg ,000 kg 1. Conversion of 1.1 M sq. ft. completed. Production in Quadrant 1 temporarily suspended from October to March for installation of supplemental lighting. 14

15 Production Ramping Very Well at Scale 15 Facility operating as intended benefitting from 20 years of site-specific experience, existing operational/growing team and existing labour force Quality and consistency firmly in line with expectations Yield consistent with production targets Production to date validating low-cost assumptions Nursery capable of supplying production well in excess of Delta 3 requirements On track to achieve or exceed all production expectations/forecasts 15

16 Positioned to be a Leading Large-Scale Supplier in Canada 16 Currently one of the largest production capacities On track to be a top-ten producer at full production Potential to be a top-three producer Existing and Announced Future Capacity of Top 10 Public LPs by Funded Future Capacity 570,000 Existing Capacity (kg) Future Capacity (kg) 300, , , , ,000 90,000 88,000 87,000 65,000 57,300 Pure Sunfarms Wayland Group At Nov. 23/18 Expect to reach run-rate full production of 75,000 kg in Q

17 U.S. & Beyond Uniquely Positioned for Both Near-Term & Longer-Term Opportunities 17

18 Massive U.S. Opportunity Independent of Canadian JV M sq. ft. Existing, state-of-the-art, mega-scale produce operations in best growing climate in U.S. (5,000 ft. elevation, most sunlight in US) U.S. assets are NOT PART of Canadian cannabis joint venture 20+ year operating history and >600 employees Can be rapidly converted to hemp or cannabis Will benefit from cannabis experience in Canada Significant U.S. opportunities are a free option 18

19 Significant Near-Term U.S. Hemp Opportunity 19 Hemp Farming Bill 2018: Will See Hemp Removed from Federal Controlled Substances Act and Cultivation of Hemp Federally Legalized Industrial Hemp: Cannabis plant with <0.3% THC (non-psychoactive) Key input in vast array of consumer products (e.g. food & beverage, materials) U.S. market for hemp-derived CBD is forecast to grow to US$22B by Hemp-derived CBD increasingly popular to improve general health and wellness 1. Brightfield Group. Convert existing Texas assets and pursue opportunities in other states 19

20 Compelling Valuation on De-Risked Scale Up 20 Comparative Value: 2020 Planned Production Capacity Top 10 LPs (planned 2020 production 2) ~199,310 kg average Planned Production 37,500 kg 50% of Pure Sunfarms production (1.1 M square feet) 150,000 kg 50% of Pure Sunfarms production (4.8 million square feet) ~$5,594 M average Market Cap 1 ~$289 M ~$289 M ~$28.00 average Market Cap/Gram of Planned Production ~$7.70 ~$ Fully diluted. At Nov. 23, WEED, ACB, APH, TRST, OGI, TLRY, TGOD, XLY, WAYL, VIVO. PLUS underlying produce business PLUS U.S./Mexico opportunities 20

21 Investment Summary 21 Uniquely Positioned for Multiple Large-Scale Opportunities Unmatched platform with proven ability to move quickly into new high-value crops Canada: Pure Sunfarms is firmly on track to be one of the largest cannabis producers with capability to be the low-cost, high-quality producer U.S.: Own one of the very largest greenhouse footprints (independent of Canadian JV) to capitalize on hemp and cannabis opportunities Mexico: Strong existing partnerships with large-scale growers to pursue cannabis opportunities Well aligned management team 19.9% owned by founder and CEO Compelling valuation on Canadian cannabis business alone PLUS underlying produce business PLUS US/international hemp and cannabis opportunities 21

22 Investor Presentation November 2018 AN UNMATCHED PLATFORM FOR THE GLOBAL CANNABIS OPPORTUNITY 22