Midas Letter

AltaCorp Capital Inc Managing Director and Senior Equity Research Analyst David M. Kideckel, PhD, MBA explains why AltaCorp is bullish on HEXO Corp (TSE:HEXO) (NYSE:HEXO) (FRA:74H). AltaCorp recently initiated coverage on a number of names, including HEXO, which it gave an outperform rating and a $10.50 share price target. Kideckel emphasizes the importance of branding, beverages, and CPGs to success in the cannabis market and notes that HEXO is partnered with Molson Coors (NYSE:TAP), one of only three companies with an industry-leading partnership. Kideckel suggests the joint venture between the two companies, Truss, has been undervalued by the market and investors. Kideckel indicates that AltaCorp’s HEXO price target is conservative and takes into account the relative newness of the infused beverage space. Kideckel also discusses AltaCorp’s coverage of Cardiol Therapeutics Inc (TSE:CRDL) (OTCMKTS:CRTPF), a player in the biosynthetics space. Kideckel highlights Cardiol’s exclusive partnership with Noramco, the world leader in chemical synthetics as a significant differentiator.

Benjamin A. Smith: Welcome to Midas Letter Live. I’m with David M. Kideckel. He is the Managing Director and Senior Analyst at AltaCorp Capital. David, welcome back to the program.

David M. Kideckel: Thanks for having me, Ben.

Benjamin A. Smith: Now, last week AltaCorp initiated HEXO with an outperform rating and a $10.50 per share price target. That implies another 50 percent or so upside from current prices. Now, could you explain why you like HEXO so much, and where the salient points on that report?

David M. Kideckel: Absolutely. So I’ll take a step back for a second; we actually launched on a number of names last week. HEXO was one of them. We also launched some Cardiol Therapeutics.

As you know, Ben, April 1st was a big day for Ontario when legalized

Auxico Resources Canada Inc (CNSX:AUAG) (FRA:A0H) is an acquisition, exploration, and development company with operations in Mexico and Colombia. CEO Pierre Gauthier discusses how Colombia’s changing political environment has made previously off-limits areas of natural resources available to commercialization in the country. Gauthier explains that Auxico has developed a technology to mine gold without the use of cyanide or mercury, a chemical banned by the Minamata Convention. The company’s technology uses ultrasound assisted extraction to break up particles and speed up extraction without the use of harmful chemicals. Auxico’s technology can be used by artisanal miners, who mine 20 percent of the world’s gold. Auxico has signed an agreement with the Bolivar government, a department of Colombia, to use this technology for gold mining. In addition, Auxico has made a deal with the Bolivar government to organize commercial exploitation of coltan, a key component in cellphone production, in the region. Using the company’s ultrasound assisted extraction process, Auxico will upgrade the value of the ore by making it less radioactive.

Narrator: Auxico Resources Canada Inc is a Montreal-based, mining exploration company founded in 2014. Auxico is engaged in the acquisition, exploration, and development of mineral properties in Mexico and Colombia. Auxico Resources Canada Inc is listed on the Canadian Securities Exchange under the symbol AUAG.

SLANG Worldwide (CNSX:SLNG) (OTCMKTS:SLGWF) (FRA:84S) CEO Peter Miller is thrilled with the recent performance of the company’s stock. SLANG’s stock rose almost 50 percent in the first week in April. Miller credits recent M&A activity in the space as validating brand and distribution players like SLANG. Miller shares details of the company’s recent partnership with Trulieve Cannabis Corp (CNSX:TRUL) (OTCMKTS:TCNNF), a major player in the Florida market. The Trulieve partnership leverages SLANG’s operational experience and manufacturing success to gain access to an important market in an affordable way. Miller discusses the robust margins investment bank Clarus Securities forecasts for SLANG. Miller highlights SLANG’s joint ownership of a Canadian licensed producer, Agripharm, with industry leader Canopy Growth Corp (TSE:WEED) (NYSE:CGC) (FRA:11L1). The facility will be used for co-packing and manufacturing of SLANG’s brands for the Canadian market. The segment wraps with a discussion of SLANG’s online sales strategy and plans.

Benjamin A. Smith: Welcome to Midas Letter Live. Back in studio to join us again: Peter Miller, CEO of SLANG Worldwide. Peter, welcome back to the program.

Peter Miller: Thanks for having me.

CB1 Capital Management CIO Todd Harrison discusses the issues facing US MSOs and the rise of hemp as an investment opportunity. He warns that California, Washington, and Oregon are serving as a cautionary tale at the state level, in terms of the strength of the illicit market in those states. Harrison believes with time and greater enforcement, the illicit market in those states will evaporate. He asserts that hemp is going to be ubiquitous and believes that the cannabis wellness market will experience a bifurcation between products marked as containing CBD, which make specific health claims, and products marked as “full spectrum hemp oil.” Harrison comments that hemp is an alternative for many everyday products and is an unexplored global investment opportunity that simply requires reclassification at the international level to take hold. Harrison stresses the importance of banking reform for MSOs and shares his thoughts on Cresco Labs Inc’s (CNSX:CL) (OTCMKTS:CRLBF) acquisition of Origin House (CNSX:OH) (OTCMKTS:ORHOF) (FRA:CY4).

James West:   Todd, I want to start with a conversation with an overview of, let’s just call it the superior performance of US issuers on the Canadian exchanges relative to Canadian issuers. Certainly you’ve been an advocate for the preference towards the US MSO story relative to the Canadian story, just because the Canadian story is long in the tooth relative to the US MSO story and there’s so much more money in the United States. At this point today, does this hold true at this outset of Q2?

Todd Harrison: Well, that’s not necessarily the only reason why we prefer the multi-state operators. I mean, there’s, you know, we’ve spoken a lot about the artificial impediments in the US market and why these companies have to go to Canada to list. You know, US institutions, we think, are clamoring at the gates to get involved in this space, and a large part of our preference for US operators is that asymmetry that arrives when you have all this latent demand on the horizon in the form of US institutions and/or Canadian majors. The LPs, we think, are going to turn buyer too, and you have valuations which are, in some cases, 60 or 70 percent cheaper than Canada.

And as you know, just in LA, you know, the

Charting Man Dan McDermitt, founding partner and analyst with the Chart Guys, explains the relationship between tightening patterns and periods of volatility. Technical analysis shows that after periods of volatility, investors consistently see tightening stock ranges. He notes that investors look for these patterns because ranges can only tighten so much before breaking. He indicates that while traders do not know which way a trend will break, trend breaks bring volatility and volume spikes. McDermitt discusses the allocation of risk and details how traders assess the odds of a break against the risk-to-reward factor. Charting Man Dan walks viewers through the CV Sciences Inc (OTCMKTS:CVSI) chart as a recent example of an acceptable reward-to-risk move. McDermitt examines the Tilray Inc (NASDAQ:TLRY) (FRA:2HQ) chart and acknowledge that while the stock has not established many support levels, the conditions are right for a solid bounce once a bottom is reached.

James West:   Hey, Charting Man Dan joins me now from TheChartGuys.com. Dan, how are you today?

Dan McDermitt: Wonderful, James, how are you doing?

James West:   Yeah, I’m great. It’s good to see you.

Dan McDermitt: You as well.

James West:   Okay, so let’s, today, let’s talk a bit about some of the tradeable patterns that technical analysis yields to people like you who have developed expertise in what can only be described as acute pattern recognition. So tell me about some of the patterns you’re seeing today in some of the stocks, and rather than just dive in straight technically what’s happened, tell us what it is about the pattern generally that you like.

Dan McDermitt: Absolutely. So a consistent pattern that we see in the market is, after periods of large volatility, the market will generally give us tightening ranges as it’s a bit of price discovery. So if we see, you know, a 10 percent move, we usually get tighter and tighter and tighter, and we look for these tightening patterns, because when they break, they get a spike in volatility again.

So it’s almost like going from a period of volatile action, to calming down, reaching an equilibrium of a really tight range, and then we get a volume and volatility spike, and that’s a trading opportunity that we jump on. So while we don’t know which direction those patterns are going to break, we look for the signals, and we’ll ta

Analyst Dmitry Zaytsev discusses recent market events and shares his current investment strategies. Zaytsev reveals he tried to buy CannTrust Holdings Inc (TSE:TRST) (NYSE:CTST) (FRA:C9S) after the company missed its earnings targets. Zaytsev used a stop-loss on the trade and emphasizes the importance of proper risk management when trading. Zaytsev believes valuations in the cannabis space are artificially high right now; however, US MSOs have a much greater potential market and still represent a better value proposition, according to him. He notes that Ontario’s retail lottery rollout was underwhelming and warns about similar disappointment when edibles are legalized. Zaytsev examines Tilray Inc’s (NASDAQ:TLRY) (FRA:2HQ) downward trend and is concerned by insider share selling, recency bias, and unimpressive financials. He notes there are still “pockets of value” in cannabis space such as companies with high-value indoor grow, brick and mortar retail, and cheap cultivation and production costs.

James West:   Analyst Dmitry Zaytsev joins me now. Dmitry, welcome back.

Dmitry Zaytsev:    Happy to be here, James, as always.

James West:   Dmitry, what is going on in your cannabis portfolio these days?

Dmitry Zaytsev:    Yeah, so, I think last time we chatted two or three weeks ago, we were discussing how the US MSOs are the place to be, and just shortly after that, we had the Curaleaf news. So with them selling CBD products in CVS, and that sent, you know, the US space higher. I think it’s very notable that the Canadian names, even though we’ve had such market strength with the US markets, they’ve been really lacklustre.

We had, CannTrust missed their earnings, and there was quite a bloodbath from that. So a lot’s happened the last two weeks.

James West:   So which – were you able to expose yourself to the upside in Curaleaf?

Dmitry Zaytsev:    Yeah. So I actual

Aurora Cannabis Inc (TSE:ACB) (NYSE:ACB) (FRA:21P) CCO Cam Battley discusses Aurora Sun, the company’s latest production facility, which promises to produce more cannabis than the company’s state-of-the-art Aurora Sky design. The 1.6 million square foot new facility in Medicine Hat, Alberta is significantly larger than Aurora Sky and Battley anticipates Aurora Sun producing more than 230,000 kilograms per year. Battley explains that Aurora is scaling rapidly to meet the global demand for legal, regulated cannabis. He highlights that there are eight EU GMP certified cannabis production facilities in the world and Aurora owns two, in addition to its EU GMP certified distributor, Aurora Deutschland. Recently, Aurora won 5 of the 13 German tenders to supply the German system with medical cannabis and to create a production facility in Germany. Battley emphasizes Aurora’s selection cements its place in the German market while still allowing the company to export considerable amounts of product to that country. Battley believes cannabis will remain a free and open market internationally because of the scarcity of legal and regulated production facilities around the world. Battley addresses the impact of Nelson Peltz joining the company and Aurora’s plans to make multiple partnerships across a variety of verticals.

James West: Joining me now is Chief Corporate Officer of Aurora Cannabis, Cam Battley

Cam, welcome back.

Cam Battley: Nice to see you again.

James West: Cam, the news is all about Aurora Sun these days.

Cam Battley: All of it? All of the news?

James West: Well all the news that I’ve been following and it&

Alcanna Inc (TSE:CLIQ) (OTCMKTS:LQSIF) is an Edmonton based wine, beer, and spirits retailer with operations in Alberta, British Columbia and the United States. CEO James Burns explains why the company has added cannabis to its portfolio and discusses how recent structural changes to the company position Alcanna for continued growth. Burns provides an introduction to Alcanna’s Nova Cannabis branded retail stores. Alcanna opened 5 store locations in Alberta on October 17 and plans to continue to expand once the provincial regulator resumes granting licenses. Alcanna has partnered with an Ontario lottery winner to open a Nova Cannabis-licensed retail store at Queen Street West and Bathurst Street in Toronto. Burns stresses the company learned from Alberta’s retail roll out and are prepared for such a high-volume location. Burns addresses why the company eliminated its dividend and discusses Alcanna’s transformation into a growth company with multiple revenue streams.

James West:   James Burns joins me now via Skype. He’s the CEO of Alcanna. James, welcome back.

James Burns:  Hey, James, good to see you.

James West:   Yes, you too! James, let’s go straight to the 800-pound gorilla in the room: your share price has basically been cut in half since the last time I talked to you. Why is that, and how’s it going to go in the other direction?

James Burns:  Well, if I knew why the stock market did things, James, I’d be a multi-billionaire.

James West:   Right.

James Burns:  Yeah. We, our company, is transforming itself from a dividend-paying income stream into a growth company with several lines of business, where we intend to grow aggressiv

420Investor and New Cannabis Ventures Founder Alan Brochstein shares his take on the winners of Germany’s public tender process for medical cannabis cultivation and distribution licenses. Brochstein notes that the reaction to the news that Aurora Cannabis Inc (TSE:ACB) (NYSE:ACB) (FRA:21P), Aphria Inc (TSE:APHA) (NYSE:APHA) (FRA:10E), and Wayland Group (CNSX:WAYL) (FRA:75M) (OTCMKTS:MRRCF) were each selected as winners of the public tender process has been muted. He points out that while the deals include relatively small amounts of cannabis, it puts the companies in leadership positions in Germany. Brochstein also analyzes the recent M&A activity in the US and likes Cresco Labs Inc’s (CNSX:CL) (OTCMKTS:CRLBF) acquisition of Origin House (CNSX:OH) (OTCMKTS:ORHOF) (

Emerald Health Therapeutics Inc (CVE:EMH) (OTCMKTS:EMHTF) (FRA:TBD) CFO Rob Hill shares details of the company’s Delta, British Columbia operations and gives an update on Emerald’s extraction push. As a result of the company’s joint venture with Village Farms International Inc (TSE:VFF) (NASDAQ:VFF) (FRA:02V), Emerald has converted existing greenhouses in Delta for cannabis production. Hill explains Delta 2 and Delta 3 will be able to produce 150,000 kilos when at full capacity. In addition, Emerald has the option to convert Delta 1 as well. While primarily a medical player, Emerald also sells products in the recreational market. The company has expanded its Quebec operations and is building out its extraction capacity. Hill emphasizes that Emerald is preparing for the legalization of derivative products by increasing its capacity and technical proficiency at extraction in coordination with partner Indena.

Narrator: Emerald Health Therapeutics, Inc. is a Canadian licensed producer of cannabis, with indoor cultivation facilities in BC and Quebec. The company is focused on developing proprietary cannabis products for medical and adult-use customers.

Emerald is part of the Emerald Health Group, which represents a group of companies focused on developing pharmaceutical, botanical and nutraceutical products to provide wellness and medical benefits by interacting with the human body’s endocannabinoid system.

Emerald Health Therapeutics trades on the TSX Venture under the ticker symbol EMH.