China Sky One Medical, www.cski.com.cn, reported that wholly-owned subsidiary Harbin Tian Di Ren Medical Science and Technology Company (TDR) entered into an agreement with the Heilongjiang Tang Wang He Forest Bureau, whereby TDR gains access to some 74k-acres of prime land for growing herbs/plants.
The 30-year agreement (started Dec. 21 of this year), will allow TDR ample capacity to produce GAP-conformant (Good Agriculture Practice) inputs for both their broad array of over 90 different pharmaceutical products and other objectives.
The forested Xiao Xing’an Mountain region, in which the planting area is located, is ideally situated in a national park within Heilongjiang Province. This is a great location for growing the kinds of highly sought-after raw ingredients necessary for high-quality traditional Chinese medicines (TCMs) and other potent health foods.
The Company has projected a strategy to capture significant space in the booming Chinese health food sector and plans to independently produce a series of delicious, high-potency foods. Additionally, raw materials will generate premium revenues via sales to eager third parties.
Chairman and CEO of CSKI, Yan-Qing Liu, cited increased long-term demand, scarcity of choice farmland and recent disasters like the flooding in Southwest China earlier this year, as components in the overall vector of TCM herb prices and TCMs.
This agreement effectively upgrades CSKI to a level within the industry where the Company is able to compete directly with larger producers who have their own capacity for the production of raw materials.
With further plans to build an extraction and preparation facility near the planting area, the Company has locked-in terms for rent, avoiding future changes in governmental regulation:
• Total Rent for 30-year period of $40M (RMB270M), or $18/acre per year
• Lowest possible rate as regulated by local authority
• Upfront payment of $36M made to avoid increases and receive the discount