Shares of CannTrust Holdings (CTST) leaped after the Canada-licensed producer of medical and recreational marijuana agreed to set up a U.S. operation by forming a joint venture in California.
The 50-50 venture is with Elk Grove Farming, a unit of Tech Ag Financial, a Bakersfield, Calif., land consultant and adviser.
Shares of CannTrust were nearly 7% higher at $5.31.
CannTrust said the deal, via long-term lease, will give it access to 3,000 acres in Southern California to cultivate hemp and produce derived cannabidiol formulations. The land is controlled by the Houchin family, which owns Elk Grove Farming.
The Vaughan, Ontario, company said it aimed to produce hemp with high CBD content at low cost.
It expects the venture to produce commercial-scale cultivation of hemp in 2020. CannTrust estimated the investment in the venture at $20 million through the end of that year.
CannTrust said it would provide expertise in hemp growth, drying and extraction, as well as genetics. Elk Grove will provide farm management, packaging, transport and warehousing, among other services.
CannTrust provides dried, extract and capsule products to more than 72,000 medical patients.
Cannabidiol is a key active ingredient within marijuana. It is derived from hemp, a related plant. CBD by itself creates no high from consumption.