BPH Energy Limited (ASX:BPH) investee Patagonia Genetics has acquired the rights to a recently discovered and rare high CBD hemp strain.

Known as the Carmangola Italian Hemp strain, it is an industrial hemp strain derived from Italy and cultivated for more than 15 years.

The hemp seeds are dioecious meaning that both male and female plants can be grown. The strain is mainly grown for fibre production as well as for Cannabidiol (CBD) oil extraction and resin.

The Carmagnola cultivar has a historically low Tetrahydrocannabinol (THC) reading (below 0.5%). THC is the psychoactive element of cannabis that is generally still banned for use in cannabis products in most global markets.

Whilst low in THC, the strain contains a high CBD content of 7-9%, which makes it ideal for CBD resin and oil extraction. This hemp strain is also capable of producing high quality CBD flower.

Researchers spent considerable time cultivating, testing and phenotype searching (phenotypes are the observable physical properties of an organism and include appearance, development, and behaviour) thousands of Carmagnola plants.

Forthwith, the breeder was able to identify a particular phenotype that carries exceptionally high levels of CBD compared to traditional Carmagnola, whilst maintaining THC levels well below 0.3%.

This particular phenotype of Carmagnola carries a cannabinoid profile of 18.4% CBD and 0.11% THC.

This new phenotype discovery was tested by the 'Centro Tecnológico Nacional Agroalimentario Extremadura (CTAEX), a research association inaugurated in January 2001 as a private centre for innovation and agricultural and food technology. CTAEX produced a Certificate of Analysis (COA).

This phenotype appeals to Patagonia due to its low THC.

The THC reading is substantially lower than the United States Department of Agriculture (USDA) THC limit of 0.3%, meaning it can sold worldwide as hemp, with little risk to the cultivator of exceeding THC limits.

Patagonia establishes relationship with Spanish cultivator

Patagonia recently completed due diligence on Gibraltar-based Calpernia Planters Limited, which holds various licenses which permit it to import and export hemp and cannabis related genetic material, but with a limit on THC content of 0.3% or less.

Patagonia has entered into exclusive distribution agreement with Calpernia.

Calpernia director Michael Trinidad has an agreement in place with Calpernia and is contracted to exclusively cultivate their genetics in Spain under his license and supply them.

Under current capacity, the licensed Spanish farm can supply feminised seed in the vicinity of 20,000,000-30,000,000 by mid to late 2020,  with the ability to scale into 2021 and beyond.

Commercialisation

Under the terms of the distribution deal, Patagonia can immediately begin selling this newly discovered genetic phenotype under Calpernia's hemp license.

It is expected to supply the market with genetic cuttings or clones of this phenotype by Q1 2020 and feminised seeds by Q3 2020.

The Carmangola strain of hemp.

Patagonia has already sent the COA results to major grow shops, distributors and licensed producers worldwide and has received significant interest to supply them with genetics for 2020 cultivations.

* Newly discovered phenotypes of the Carmagnola Hemp Cultivar

Exclusive rights

Patagonia has the exclusive global rights to the newly discovered high CBD phenotype of the Carmagnola Hemp variety, through execution of deal with Calpernia.

Under the terms of the deal, Patagonia has agreed to purchase from Calpernia the following minimum volumes of seeds in order to maintain exclusivity:

• 2020. 3,000,000 seeds;
   
• 2021. 10,000,000 seeds; &
   
• 2022. 15,000,000 seeds (capped onwards).

Patagonia will update the market as and when it enters material distributions or sale agreements on this particular phenotype.