Homeland Mining and Energy SA Proprietary Ltd (HMESA), a wholly owned subsidiary of Homeland Energy Group Ltd, has entered into an agreement to sell its 50 per cent stake in Tshedza Mining Resource (Pty) Ltd to Mbuyelo Group for $12 million as per a company disclosure. Tshedza Mining Resource (Pty) Ltd holds the licence to develop Eloff mines.
Toronto Stock Exchange-listed Homeland Energy is majority owned by GMR Infrastructure.
Mbuyelo is engaged in mining and production of coal and also owns a fleet of trucks and earth moving equipment, which is used for mining contracting.
Simultaneously, HMESA has also entered into an agreement for the sale of its entire shareholding of Ferret Coal (Kendal) (Pty) Ltd. The firm did not disclose the deal value but in a separate report The Economic Times said Kendal mine is being sold to Joe Singh Group for $38 million.
The Kendal mine is an operating mine and sells coal in domestic market while the Eloff mine is under development stage.
In 2008, GMR acquired majority stake in Homeland for around $50 million to secure feedstock for its Indian power projects.
GMR, which now has a debt burden of over $7 billion, aims to slash its debt by selling assets.
Early this month, GMR Group decided to sell its 70 per cent stake in power plant GMR Energy (Singapore) Pte Ltd (GMRE) to FPM Power Holdings Ltd for S$660 million ($530 million). GMR Infrastructure (Singapore) Pte Ltd held 66.4 per cent in GMRE and 3.6 per cent is held by GMR Infrastructure Ltd.
The funds will be used to reduce the principal amount of the bank loan to ICICI Bank and for general working capital. The decision was made by Homeland to divest the Eloff Property following the completion of a feasibility study.
“The logistics infrastructure difficulties and evacuation costs would make the export of this coal to be uneconomical. The risks associated with the substantial capital cost of commencing production at Eloff were considered to be too high given the limited upside of the project,” according to Homeland.
“The divestment is the off-shoot of the group’s well-thought-out strategy of an asset right-asset light and cash flow-based model that the group has embarked on in the recent times. This is the second such strategic move after last month’s divestment of 74 per cent stake in GMR Jadcherla road project at a premium. The cash flows will help GMR Energy to focus on our domestic energy business and accelerate ongoing projects of 5,790 MW,” said GM Rao, chairman of the GMR Group at the time of announcing the exit from GMRE.
Shares of GMR Infra were trading at Rs 21.55, up 3.1 per cent in a strong Mumbai market at 3.11 pm on Thursday.
(Edited by Prem Udayabhanu)