Neptune Technologies and Bioressources Inc (NEPT) Q4 2019 Earnings Call Transcript
Ryan Macdonell -- GMP Securities -- Analyst
Okay. Can you expand a little bit maybe on which product categories specifically you're referring to?
Jim Hamilton -- President and Chief Executive Officer
Yes, we like, Ryan, specifically, the two-piece hardshell a lot, and some who are maybe marijuana obsessed, they may find that a little bit surprising. We're big believers in formulated products especially broad spectrum including an element of hemp CBD. And we say that because these are typically products taken chronically not sort of on an occasion basis, a social occasion basis, but chronically for things like information, sleep, anxiety what have you. So -- and we are very encouraged if you will by the data we're seeing in terms of the stability of this product, and the ability to, and I think this is early I want to be a little bit careful with this statement, but the ability to -- for this vehicle to retain the volatiles, the terpenes which there is some growing evidence to suggest these could be a powerful component in terms of the whole health profile.
So, we like capsules a lot. We think vapes and vape cartridges, clearly if you look at the U.S. model are a large part of this business that will be part of it. And I would say, there's also some interesting novel unique delivery forms that one of our partner customers would like to support with, and we'll be collaborating with them to jointly install and engineer some equipment for those specific applications. So those would be examples, Ryan.
Ryan Macdonell -- GMP Securities -- Analyst
Okay, interesting. And just on the CapEx requirements, is the CAD7 million going to be enough to fund all the capacity needs you foresee for these white label product services?
Jim Hamilton -- President and Chief Executive Officer
I would say for what we've identified and what we're doing today, Ryan, we don't -- and I don't mean to suggest this. We don't have a beverage project where we're going to build onto the plant and install a lot of beverage equipment, that's not in scope right now. But for the applications that we're looking to deliver in terms of a unique and value added formulated products, largely for wellness, this would be adequate investment for us at that point in time. And we also like the step approach to growing into the 6,000 metric ton capacity. We think this is for speed reasons. And for the payback and value add, it's an exceptional value. John was -- even John Moretz is smiling when he looked at the payback on that one. We like that a lot, Ryan. We're very encouraged by both of these projects.
Ryan Macdonell -- GMP Securities -- Analyst
Excellent, cool. Thanks for the color there. Maybe just one more from me again kind of on future products. I'm curious to hear your comments on, in your discussions with clients, be it LPs or otherwise, what are some products that you've been hearing lots of inter -- product categories and you've been hearing lots of interest from -- for white labeling services.
Jim Hamilton -- President and Chief Executive Officer
Yes, it's a good question, and Martin may want to pipe it on this one. But I would say, we're seeing a lot of interest in topicals, and I would say, we're also -- it's an application form that we're looking at. Ryan, I'd like to build on that a little bit, where we see a lot of topical interests especially in the United States, because it's sort of safe gateway into the hemp CBD business, and the major multinationals are probably more comfortable establishing a product line with that initially, and then broadening that out.
I think what we'll see in the United States is that as a first move and followed up rapidly with a formulated product, probably capsules again, where it's in combination with, for example, omega-3 or melatonin, and now use the structure function claims that they can get on the nutrition product along with hemp/CBD. And as the regulatory frames become more clear, there's more comfort with the majors. I think that's probably step-wise, but topicals are big on everyone's mind right now.
Ryan Macdonell -- GMP Securities -- Analyst
Okay. Thank you. That's all for me.
Jim Hamilton -- President and Chief Executive Officer
Ryan, that was great. Thank you for calling in. Appreciate it.
Operator
Your next question will come from the line of Doug Loe of Echelon Wealth Partners. Please go ahead. Your line is open.
Siew Ching Yeo -- Echelon Wealth Partners -- Analyst
Hi. This is actually Siew (ph) calling on behalf of Doug. Just two quick updates. Two quick questions from me, sorry. The first one, just looking for any further updates that you might have on your Lonza partnership. And the second being just a clarification on the timelines to the projects that you outlined in your CAD7 million in CapEx investment that was on Slide 10 like when do you sort of see that being completed by? And that's it for me. Thanks.
Jim Hamilton -- President and Chief Executive Officer
Well, if I understand the question, first of all, I would say that the customer relationships that we announced in the last days to Cree (ph) include a major portion of our capsule capabilities that we're collaborating with Lonza on, that's in Canada. I would say part of our collaboration and motivation with working with again just a little bit back on Lonza there, Basel Switzerland-based API drug delivery form active ingredient company. And clearly we wanted to start in Canada, but I think there is an ambition to explore possibilities beyond Canada. But this is a great place to start, and we're very, very pleased with the progress in collaboration with Lonza.
Both investments, if I understood the question, will be starting. The engineering is complete, the project plans have been put in place. We have the board green light today and they will begin, and the capacity expansion remember this is already built and exists. It's mostly around security. And as people know and it was since called before we basically like to put cameras up in every corner, so there is no space unmonitored. Doors have to be secured and we'll also have to put in some handling. But fundamentally, I would call them not significant construction, but rather adaptations of existing infrastructure, and that could be probably characterized in the course of months, and then the following year. So that's why we say the latter half of the year.
I think on the application forms, we also have the room built. The utilities are there but what we have to do is make it a clean and former style GMP environment, and that will take us probably a similar timeline. So both we think have the potential to be ready this fall. The licensing, of course, is the unknown. But we do believe licensing will be a faster process in future as we move forward.
Did that answer the question?
Siew Ching Yeo -- Echelon Wealth Partners -- Analyst
Yeah, it does. Thanks a bunch, Jim.
Jim Hamilton -- President and Chief Executive Officer
Okay. Thank you.
Siew Ching Yeo -- Echelon Wealth Partners -- Analyst
Thank you.
Operator
Your next question will come from the line of Chen Lin of Lin Asset Management. Please go ahead. Your line is open.
Chen Lin -- Lin Asset Management -- Analyst
Yeah, hi. Thank you for taking my questions. First, I want to ask with today's press release with The Green Organic Dutchman, on their press release they mentioned there is some kind of exclusivity. Can you comment on that? Did they exclude you from sending any other similar deal in Canada?
Jim Hamilton -- President and Chief Executive Officer
We'll be doing with -- first of all, they are a great company and a great team and we've really, really enjoyed the engagement with them. They also have installed a very large capability not too far from us here in Montreal, so geographically it is very conducive to the relationship. The number three, I think when you look at The Green -- TGOD, let's just call it, TGOD, they have a very interesting and differentiated approach. I mean, these guys are The Green Organic Dutchmen. They are going organic and this is a segment I'm looking at Martin right now, but this is -- I wouldn't say the majority of the market, but is a clear segment of consumer preference. This is their focus. They will be working with us to help us with getting organic certified in some of our processes and what we have agreed is that, for certain elements of our process-certified organic, we would work with them on an exclusive basis.
Chen Lin -- Lin Asset Management -- Analyst
Okay. Thank you. That is a very good clarification. And also, when you plan to expand to 1,500 before the end of the year, so you need to -- you probably implying earlier you need to Health Canada to come in to do another inspection to get another approval process before this could be online, is that correct?
Jim Hamilton -- President and Chief Executive Officer
Yeah. And I think, as I mentioned earlier, the licensing process in Canada has been probably the ban and the frustration of the industry and I think the good news, as I stated earlier, is two-fold. One is the initial licensing process is a gigantic hurdle, and it can be measured in years, and we're happy we started our process years ago and achieved that as -- a short while ago as January of this year. But we are licensed and we are in this business and we are manufacturing today and that is a great place to be. The amendments, as I mentioned earlier, we anticipate will not be measured in years, will be measured in months and we think these amendments and where Health Canada is going with their prioritization processes are very conducive to where we want to go and more quickly. So we're encouraged there but I wish I could tell you when that is. So we can't do that. But I don't think this will be a topic for our Phase II and capsule production will not be a topic in August but it likely will be a topic in late this year as we look for the amendments to come through on the Phase III.
Commercially, however, it doesn't slow us down from already engaging with customers in terms of occupying that capacity and I'd like to add that this is an active dialogue as we speak. As I said, before with a line of sight I think there is an interesting demand dynamic in the market right now, and it is a capacity that will serve this industry very, very well.
Chen Lin -- Lin Asset Management -- Analyst
Okay, great. Thank you. And I believe I would talk to Mario before and then you have gave a guidance with your last year's deal with Canopy. It's basically with margin of CAD0.50 to CAD1 per gram on the extraction marijuana side. Do you have any guidance for those two deals you just announced this week, or gave some rough idea what kind of margin, is that similar or higher than last year's contract?
Jim Hamilton -- President and Chief Executive Officer
So, Mario, do you want to start on?
Mario Paradis -- Chief Financial Officer
Yeah. So, Chen, I think we -- I don't think I ever gave guidance on the CAD0.50. I think gave you probably an example on how to build your financial ball model. That being said, we are not publicly said what would be the total revenue of these two agreements. So, again, we talk about the volume that we agreed with these two new partners. And coming along we will disclose the revenues and again, it will be easier for everybody to see what kind of revenue and margin, and don't forget that we are not selling products, we're selling services. So we're not buying materials. So the gross margin when you compare with other LP that have materials is completely different.
Jim Hamilton -- President and Chief Executive Officer
But Mario, you want to comment in terms of what are our fixed costs of the site, or we've share that information before that might be helpful?
Mario Paradis -- Chief Financial Officer
Yeah. So, at full capacity meeting the 200,000 kilogram, this site, the total fixed costs, including variable costs could be in a range of CAD15 million per year.
Chen Lin -- Lin Asset Management -- Analyst
Okay.
Mario Paradis -- Chief Financial Officer
Excluding white label and different type of delivery forms, I'm talking about extraction here.
Chen Lin -- Lin Asset Management -- Analyst
Okay, great. Thanks. Just last question, in your SugarLeaf acquisition, that's mainly for hemp, do you foresee any possibility for it to modify some of the equipment to extract marijuana?
Jim Hamilton -- President and Chief Executive Officer
That's a great question. And the answer -- we actually -- I think there was a question this morning and the answer was that the characteristics of the plant -- well, they're all in the same family or fundamentally the same. Look, we believe there is, as I mentioned earlier, just a fantastic opportunity for hemp CBD in the United States and it's evolving as we speak. And we are happy to have a footprint in the United States should marijuana ever become federally legal, it's something that we think we could adapt our organization and our process to very, very quickly. Of course, we cannot do that until there is a regulatory frame that would permit that.
But we -- I personally believe, as I said before, we're a tweet away from at that, that the majority of Republican voters are in favor. There is north of 30 states that have some kind of legalization. There is a ton of jobs and there is a ton of tax revenues, and I think it will come, it's a question of when? And when that day comes, we're going to be very happy as a corporation to have that footprint, that team, those capabilities, that equipment in place to take advantage of it. And that was part of our motivation to look at the situation.
Chen Lin -- Lin Asset Management -- Analyst
Okay, great. Thank you for taking my question.
Jim Hamilton -- President and Chief Executive Officer
It's a great pleasure.
Operator
And your next question will come from Chris Damas of BCMI Research. Please go ahead. Your line is open.
Chris Damas -- BCMI Research -- Analyst
Yes, congratulations on those deals. I'm an ex-organic chemist and I was curious. It sounds like you have legacy ethanol extraction equipment in size. Could you comment on flammability risk and how much of that CAD11 million is going into ensure against that kind of hazard since you're going holus-bolus in ethanol versus supercritical CO2? Thank you.
Jim Hamilton -- President and Chief Executive Officer
Yeah. It's an interesting question and probably best answered by our manufacturing. Let me just say that, when one is running with ethanol, clearly the security and the safety measures are more. I'll give you an example, your cameras need to be explosion proof as an example and you need more sensors through the process and the buildings, et cetera. So, it is a -- from a technology standpoint, more demanding. We're pleased that this building has already been constructed and it's a legacy capability that we can adapt to this business. But it -- and you would know this with your ethanol experience, we like it a lot. It is -- for example, it takes about 20% of the energy that CO2 does. It -- you can do it minutes, would takes hours in CO2. And the purity of the quality of the product can be great. In fact, some of the motivation of our commercial agreements was an element of the sustainability in Green capability that people could use when they're translating, communicating with their consumers about how their products are ultimately processed. So, we like ethanol a lot. The percent exactly on the question you speak I would have to refer to our production head.
Chris Damas -- BCMI Research -- Analyst
Well, thank you very much. I certainly enjoy seeing that facility.
Jim Hamilton -- President and Chief Executive Officer
Well, there's a great video online if you want to check it out, it's about 60 -- 90 seconds and it walks through the plant and you'll get a feel for the technology that is there. And we're very excited to be turning on an element of that computer process control fully automated operation. I think we haven't talked about this much but I think there is a tremendous demand profile in -- not only for marijuana but hemp in Canada and export markets in future. But we also believe that this already constructed capability is probably the low cost facility in the country, and we think that is a great advantage over the long-term depending on how markets develop. So we're happy about this from a -- clearly an offensive standpoint and we're very, very reassured by that long-term in terms of his cost profile for future.
Chris Damas -- BCMI Research -- Analyst
And that was $15 million to run the place for 200,000 kilograms of biomass process that comes out the (inaudible) a gram. Is that correct?
Mario Paradis -- Chief Financial Officer
Yeah, that's correct.
Chris Damas -- BCMI Research -- Analyst
Okay. Great. Thank you, gentlemen.
Jim Hamilton -- President and Chief Executive Officer
Thank you.
Mario Paradis -- Chief Financial Officer
Thank you.
Operator
And your next question will come from Chen Lin of Lin Asset Management. Please go ahead. Your line is open.
Chen Lin -- Lin Asset Management -- Analyst
Yeah, thank you. I have another question just concerning the margin -- profit margin. What is the ongoing rate right now with MediPharm your other competitor, how much they charge for the margin, basically how much they take marijuana extraction and what the spread they're charging?
Jim Hamilton -- President and Chief Executive Officer
That's a great question. But you probably have to ask them.
Chen Lin -- Lin Asset Management -- Analyst
Okay. All right. So what's -- when you're talking to your customer, what's like in general the market not -- the market going rate with those extractions?
Jim Hamilton -- President and Chief Executive Officer
Yeah. I would -- yeah, look, it's -- we don't really want to comment on that per se, because it's not really helpful for our business with customers going forward. But I think one can read in various analyst reports, what their expectation is for pricing and it's probably not a bad estimate in our experience. And I think it's important to look at those estimates that are published by the experts and maybe compare them to some of the numbers that Mario just shared in terms of what our fixed costs are on our site is and one could probably have a fairly good view on the operation. That would be my advice.
Chen Lin -- Lin Asset Management -- Analyst
Okay, great. Thank you.
Operator
We have no further questions at this time. Mr. Jim Hamilton, you may begin with your closing remarks.
Jim Hamilton -- President and Chief Executive Officer
Well, yeah, thank you. And -- well, first of all, it was great having Martin Landry here. And Martin, we look forward to your engagement with the business. And I welcome all the investors that would like -- that call me and call Mario to also feel free to call Martin and Martin will be on the road with us and on his own and talking to people. He'll also be helping us with, not only his deep, deep network of contacts in the business, but help us shape also the future moves for our business in terms of how we move forward with further relationships, collaborations, acquisitions, et cetera, and it's just great having somebody with such deep experience on-board.
I'd also like to acknowledge John Moretz, who has been strangely quiet.
John Moretz -- Chairman
I hadn't had any chance to say anything. All the wonderful news is that you and Mario have been stating, but I just wanted to say, being with Neptune for five years is, first as a shareholder and then on the Board, seen it through a lot of twists and turns as many of you have experienced. Today, I've never been more pleased or static to encourage for where the Company is, not only that I'm involved with and not only that I'm invested with that one that I've followed through the years. We're in a position now of -- at the brink of just getting started. And the opportunity to what we have is really unparalleled by any company that I've ever invested in much less been a part of.
And I'm very pleased to state to all of you shareholders and analysts out there that, just as the quality of our GMP facility is in the scale and the efficiency that that can drive, these results and what's coming up in the near future for us all, is a result of our management team, the leadership, the dedication and that has been so strengthened through the years and Jim and the team have brought in some additional great power like Martin, Graham and others that have come in to and Patti have come into the Company along with the current staff that we have. And so, as they always say, you got to have the right people on the bus, and we really do that now. And I think all of us have a lot to look forward to, and some unparalleled success is what we're planning for. And I will thank Jim, you and the team for that.
Jim Hamilton -- President and Chief Executive Officer
Well, John, thank you, who is not only as our Chairman, but one of our largest investors and we appreciate that. So, with all that said, thank you, everybody, for listening. Again, we welcome your questions as we go through the days and the weeks and the months to come. We'll look forward to talking to everybody formally again in August. And I believe Mario, it's August 13 that will be -- in the mid-August, we'll do our AGM and we'll also have the first quarter results and at that time, John I think will have some more visibility on SugarLeaf and other business things.
John Moretz -- Chairman
Absolutely.
Jim Hamilton -- President and Chief Executive Officer
So, thank you, everyone, for listening and thank you for support, and we'll look forward to talking to you all soon. Bye-bye.
Operator
And this concludes today's conference call. You may now disconnect.
Duration: 53 minutes
Call participants:
Mario Paradis -- Chief Financial Officer
Jim Hamilton -- President and Chief Executive Officer
John Moretz -- Chairman
Ryan Macdonell -- GMP Securities -- Analyst
Siew Ching Yeo -- Echelon Wealth Partners -- Analyst
Chen Lin -- Lin Asset Management -- Analyst
Chris Damas -- BCMI Research -- Analyst
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