Pubdate: Wed, 08 Mar 2017
Source: Globe and Mail (Canada)
Copyright: 2017 The Globe and Mail Company
Authors: Jen Skerritt and Josh Wingrove
Page: B12


As investors flock to Canada's burgeoning marijuana sector, Prime
Minister Justin Trudeau's government is signalling recreational pot
sales aren't imminent.

Member of Parliament Bill Blair - the former Toronto police chief
leading Mr. Trudeau's legalization effort - confirmed a bill is due in
Parliament this spring, but it won't be the last hurdle as ample
regulatory work remains. The federal government will take its time and
work with provinces, territories and cities to build a framework and
develop specific regulations, he said.

The government is also looking for ways to control production,
distribution and consumption of legalized marijuana, while testing it
for quality and keeping it out of the hands of minors, Mr. Blair said.

"We will take as much time as it takes to do it right," Mr. Blair, the
parliamentary secretary to the Justice Minister, said in an interview.
"I'm pretty reluctant to suggest a specific time frame, frankly,
because I don't know how long this will take in each of our 10
provinces and three territories."

Mr. Blair's comments come as Canada's nascent marijuana industry
balloons, with investor optimism being fuelled by analyst estimates
that recreational sales could start as early as 2018.

The government's plan to introduce legislation in the spring of 2017
"could pave the way for the legal sale of recreational cannabis by
2018," Canaccord Genuity analysts Matt Bottomley and Neil Maruoka said
in a November research note. Canada's recreational pot industry has
the potential to reach $6-billion in sales by 2021 if legalization
occurs along "expected timelines," according to the note.

Canopy Growth Corp. became the first marijuana unicorn in 2016 and had
a valuation of $1.9 billion on Monday. Other producers, including
Aurora Cannabis Inc. and Aphria Inc., have seen their share prices
surge more than 400 per cent in the past 12 months.

Canopy shares fell 7.1 per cent in Toronto while Aurora tumbled 7 per
cent and Aphria slid 4.9 per cent.

Dampened buzz

"If they delay, there's going to be a lot of eggs that are going to
break in this business," Chris Damas, an analyst at BCMI Research in
Barrie, Ont., said by phone on Monday. "The valuations are extreme."

Licensed marijuana producers are in the midst of expanding their
capacity and there will be a "huge amount" of excess cannabis if
Canada delays legalization, Mr. Damas said. The analyst said Mr.
Blair's previous comments suggest it's unlikely the government will
introduce a bill by June and companies with huge valuations "won't
have any serious business" if the recreational market takes longer to
come to fruition.

"There could be a lot of disappointment," he said.

In a separate interview on Monday with the CBC, Mr. Blair said the
government was going to design a legalized marijuana system that
included measurement and testing of products, as well as enforcement.
While the proposed legislation is due this spring, "it's not
sufficient to simply come forward with a bill," he said.

The government may also explore ways to direct revenue from marijuana
sales to funding additional drug treatment, including for fentanyl as
Canada grapples with an opioid crisis, he added.

Since taking a position on legalization ahead of the 2015 election,
Mr. Trudeau has gradually turned toward emphasizing safety, saying
regularly it shouldn't be easier for youth to buy marijuana than to
buy beer. Putting the file in the hands of a prominent law-enforcement
veteran is another signal the government is approaching legalization
with an eye to tight regulation.

Mr. Blair declined to comment on whether the regulations could be
finalized by 2018 - an expected election year in Ontario, home to
Canopy and other companies - or 2019, when the next federal election
is scheduled.

The Task Force on Cannabis Legalization and Regulation issued a report
in December that recommends the Canadian government regulate the
production of marijuana while provinces control the distribution and
retail sales, including through dedicated storefronts with
well-trained staff or by mail.

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Bloomberg News

Canopy Growth (WEED)

Close: $10.92, down 84c

Aurora Cannabis (ACB)

Close: $2.39, down 18c

Aphria (APH)

Close: $6.63, down 34c
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MAP posted-by: Matt