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Sky is the limit of Aurora and Radient cannabis oils – Aurora Cannabis Inc. (NYSE: ACB)




Oil, The Green Kind

"Cannabis oils" refers to the wide range of valuable compounds that can be extracted from the cannabis plant. Such compounds include THC, CBD, and a variety of other cannabinoids, as well as terpenes (organic compounds that give cannabis aroma and flavor). Cannabis companies can combine these oils in a variety of formulations, depending on the desired effect they want to achieve. A THC heavy formulation will give consumers the psychoactive "high" associated with cannabis use, while a CBD heavy formulation will not give users high, but it can provide relief from epilepsy, pain and other ailments.

Cannabis oils are the future

For many of the same reasons that cigarettes lose business to weapons, cannabis flower gives way to cannabis oils. Health concerns related to smoke inhalation, offensive odors and lack of discretion are the primary motivators of marijuana consumers seeking alternatives to blunts and bongs.

Increasingly, consumers are moving towards products derived from cannabis oils, such as topical creams, cannabis-infused foods and beverages (AKA "edibles") and concentrated oils used for vaping or subliminal dosing. The figures carry out this industry trend.

In the state of Colorado, cannabis flower was up to 67% of all dispensary sales in 2014; this figure fell to 44% in 2018. In the US, the CBD (the medical, non-psychoactive portion of the cannabis plant) increased from $ 108 million in 2014 to $ 512 million in 2018.

Demand for cannabis oils should continue to grow as less traditional and health-conscious consumers become a larger part of the market. This industry trend and the impending legalization of edibles throughout Canada is creating a huge demand for access to high quality cannabis oils. The companies that can produce such oils most cost-effectively stand for managing a significant part of the market. Aurora Cannabis (ACB) and Radient Technologies (OTC: RDDTF) are able to cope with this challenge.

A Better Extractor

Although there are a number of methods for extracting the oils from the cannabis plant, the industry's favorite is known as supercritical CO2 recovery. Basically, the pressure of CO2 goes through the cannabis biomass and extracts the oils. While supercritical CO2 extraction is an improvement over other extraction processes, Radient Technologies believes it has a superior method: Microwave Assisted Treatment (MAP).

As the name suggests, MAP is dependent on microwaves to extract the precious oils from the cannabis plant. The technology allows for the precise use of microwaves, heating of the biomass in such a way that the maximum amount of oil is extracted with as little solvent and waste as possible, leading to higher purity and throughput. MAP technology is also good at achieving an industrial size. These properties suggest that MAP can provide not only a higher quality product, but also increased efficiency and reduced costs.

Source: Radient Technologies

A Booming Partnership

Aurora Cannabis is one of the world's leading cannabis companies. It is primarily active in Canada, but also has operations in South America and Europe. One of its biggest projects to date has been its Aurora Sky growing facility in Edmonton, Alberta. The 800,000 square meter plant, which recently received its license to start production, is highly automated and is expected to produce over 100,000 kg of cannabis annually to cost well below $ 1 / gram.

Aurora's management expects industry's development against cannabis oils when planning Aurora Sky construction. This led to the creation of a partnership with Radient, which resulted in Aurora purchasing 17% of the Radient in December 2017, as well as an agreement between the two, where Radient would provide Aurora with recovery as a service. Radient Technologies used funds generated, as well as funds raised elsewhere, to build new facilities with additional recovery capacity.

The first of these plants stood at 23,000 square feet and was able to process 73,000 kg of cannabis (or over 400,000 kg of hemp) per year, recently licensed from Health Canada and began production in early March. The resort is less than 10 miles from Aurora Sky and currently treats cannabis taken from there. Radient's CEO has stated that Aurora is the only customer for now, as Aurora Sky's production is expected to record the entire Radient's current capacity.

Radient expects to bring its next facility, also in Edmonton and measure over 100,000 square feet and able to process over 350,000 kg of cannabis (or 3.7 million kg hemp) annually online by 2020. This facility is expected to cater for further throughput from Aurora Sky, as well as any other customer in the Edmonton area that Radient is able to contract with. There is also the possibility of treating cannabis from Aurora's upcoming Aurora Sun plant in Medicine Hat, Alberta, located about 200 miles from Edmonton.

At the same time, Radient is building another 100,000 + square footprint in Germany, where Aurora only happens to have been authorized to produce and distribute cannabis. Should the recovery for Aurora Sky prove to be equally fertile for both companies as expected, there is little reason why they would not come to a similar arrangement for their German business.

Risk

The biggest risk for investors is that both Radient and Aurora have been the mother of the economies behind the event. None of the companies have given any guidance on how much Aurora will pay Radient to treat cannabis, or accurate figures on how much cannabis Radient will recover for Aurora. With production at Radients plant now along the way, expect some of this information to be available when either Radient or Aurora reports revenue, if not before.

The Aurora / Radient partnership relies on Radient's MAP technology. If the MAP does not perform as advertised, or if a superior recovery technology is developed, the partnership, as well as both companies in general, will be significantly affected in a negative way.

Conclusion

Both Radient Technologies and Aurora Cannabis have recognized the need for large quantities of high quality cannabis oils and implement plans to address this need. With Auror's high-tech growth plant and Radient Technologies' superior production process, the two companies stand together as leaders in the cannabis oil segment.

Notice: I am / we are long ACB, RDDTF. [19659025] I wrote this article myself, and it expresses my own opinions. I do not receive compensation for it (other than from Seeking Alpha). I have no business relationship with a company whose stock is mentioned in this article.



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