RE:RE:RE:RE:150 million annually at 1000kgLets get realistic. If the black market is selling at around a $8 a gram if you buy an ounce then a kilo would go for $8,000 retail before any further discounts so 1,000 kilos would go for $8,000,000. Can we agree on that?
Now if that's the retail price, i.e. money out of the consumers pocket, it includes all taxes 8%+5%=13%, retailers gross margin (not mark up) lets put in 30% say and where do we get to for the wholesaler. Before tax would be $7.08 plus 13% gets you to $8.00 and a 30% gross margin $7.08 means the retailer is going to be buying from the producer or the whomever for $4.96. Please correct my maths guys.
The investors deck stated that by the end of 2017 production will be annualized at 1,764 kilos broken into 5 harvests per year. so we could assime that by the end of 2018 we may have production of 2,500 kilos for the year. If this is all sold through wholesaleing to retail it would give 2,500kgs x $4.96 x 1000 grams or $12.4 m in gross revenues to Delta. If it was sold direct to the public or as oils or capsules, do they have a licence for these product lines??, then they would be getting $7.08 a gram plus. The reality is Delta sales will be a mix of both. So if they average $6 a gram their gross revenues would be$15 m . Pretty dam decent IMO for calender 2018
If we then look at cost the cheapest producer in Canada at present I believe is Aphria and it states it's production cash cost was $0.95 per gram last quarter. Delta stated in the investors pack as low as $1.11. Not sure if their definitions are exactly the same though. Aphria then goes on to say that their all in Costs of Sales cost is $1.61. Let's say Delta to come in at $2.00 all in costs of sales per gram. That leaves $4.96 less $2.00 = $2.96 to cover Gen and Admin, Sales and MKt, Share based comp, amortization, R&D etc.
So IMO if we end up with $1.00 of taxable profit per gram we're doing good. That's 20,000 kgs $20,000,000 pre tax profit. Just chaage the numbers to suit your own estimates/price forecasts.
That's how I see the economics. The SP premium comes from the fizz and speculation as to what is a big boy prepared to pay to buy this. Who is anyone to say what that might be! Not me for sure. Just look at WEED's price over the last 8 trading days.
So congrats to all, especilally the Arbuthnots, and enjoy the ride. It's alot of fun so far.
GLTA