Exploration company Firestone Energy has rejected a bid by Tata Power for a 30 per cent stake in a coal project in South Africa, citing a huge undervaluation of the project, a report has said.
Tata had offered R480 million for the stake in the Limpopo venture, which is a partnership between Firestone Energy and South Africa-based Sekoko Resources, the report by South African daily Business Day said.
Tata had based its bid on a valuation of R1 billion, while the true value of the asset was R1.6 billion, Sekoko Chairman Tim Tebeilatold the daily.
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“I was expecting (Tata Power) to come up with a good value, but it's not a major setback because we have a good asset,” Tebeila said.
Work on the mine is expected to start in 2012 with a production output of two million tons of coal annually, with a gradual increase to 10 million tons within five years.
In a release Firestone Energy said, “Following consideration of the offer, the board of Firestone has decided to reject the (Tata Power) offer ... materially undervalues the value built up in the project to—date.”
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The company had received an offer from Tata Power Company Limited to invest in its joint venture with Sekoko Resources to develop a coal mine in the Waterberg area of South Africa, it said.
Queries sent to Tata Power in this regard did not elicit any reaction immediately.