Cann Group (ASX:CAN) share price rockets on NAB (ASX:NAB) update

The Cann Group Ltd (ASX:CAN) share price is rocketing higher on Monday after National Australia Bank (ASX:NAB) provided a $50 million debt facility…

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ASX Cannabis share price represented by asx investor holding card with cannabis leaf on it

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The Cann Group Ltd (ASX: CAN) share price has started the week in sensational form.

In afternoon trade the cannabis company’s shares are up a sizeable 13% to 35 cents.

Why is the Cann Group share price rocketing higher?

Investors have been buying the company’s shares on Monday after it provided an update on its debt facility.

According to the release, the company has received credit approval from National Australia Bank (ASX: NAB) for a $50 million secured debt facility. Management expects to complete the execution of documentation with the banking giant within the next month.

Why does Cann need a $50 million debt facility?

The release explains that the loan is a construction facility which will be used by Cann to complete the first stage of its state-of-the-art medicinal cannabis production site near Mildura.

Management advised that it is being provided through NAB’s agribusiness division, which it feels represents a strong endorsement of its strategic growth plans.

It notes that the approval clears a path to recommence construction at the Mildura site, with work expected to be underway in February 2021.

The first stage of the Mildura site has an estimated 9 month build time, with first product expected to be processed and released by March 2022. This will come at a total cost of $112 million, with $53 million already spent on site works and the facility superstructure. The balance will be funded by the new bank loan facility and current cash reserves.

Once complete, the first stage of the project will provide annual capacity to produce 12,500 kgs of dry flower equivalent. 

Cann Group’s CEO, Peter Crock, commented: “The commissioning of production at Mildura is an important step in Cann’s plan to produce GMP certified medicinal cannabis at scale. The facility will utilise world-leading technology, providing Cann with a globally competitive unit price based on substantial economies of scale.”

“Securing the support of a tier one bank is a strong validation of our strategic growth plans. Given the building demand for our products, we have the confidence to immediately ramp up production as soon as the facility is ready,” he concluded.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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