Dried fruit producer Murray River Organics (ASX: MRG) is selling the farm - or at least part of it - to pay down debt, reaching a deal to sell 390 hectares of farmland to a subsidiary of Costa Group (ASX: CGC) for $4.5 million.
MRG is in the thick of a battle to turn its fortunes around, with drought impacts and the effects of a strategy pivot deepening losses by 225 per cent to $39.1 million in FY20.
The group recorded one-off farm write-downs of $15.6 million for the year, including a $11.7 million loss on a lease that it exited in Colignan, Victoria.
It is in that same region that MRG has now reached a deal to sell a property parcel to Costa, of which 113ha are planted with conventional (non-organic) citrus and wine grapes.
Costa acquired Nangiloc Colignan Farm (NCF) in the greater Sunraysia district in 2018, comprising 567ha of citrus, table grape and wine grape crops.
In its most recent update Costa Group was upbeat about its citrus crop - a fruit that has been in high demand worldwide during COVID-19 due to its widely known Vitamin C benefits.
The deal's final settlement will be subject to the registration of a plan of subdivision which is anticipated in early 2021, and will give Costa close to 13 per cent of MRG's current 3,040 property.
The remaining 2,650 hectares MRG will hold are part of a feasibility study underway called Project Magnum, focusing on optimum crop combinations and a potential localised desalination plant water solution.
Phase 1 of this program began in October last year with a low-THC cannabis pilot program that yielded a successful harvest of approximately 21 tonnes of high-quality seeds, and in April 2021 MRG expects to sow its first organic oat crops under pivot to be used in its organic muesli.
The group is also exploring the possibility of cultivating dried vine grapes, almonds, dates and pistachios on the remaining land.
"This is another important milestone for the group to realise its vision to become a leading integrated organic branded food business," says MRG managing director Valentina Tripp.
"The funds will be used to pay down debt and allow the business to focus on growth in our branded portfolio."
Under the terms of the sale, Costa will take responsibility for the operations and management of the parcel to be sold, including responsibility for operational costs, and entitlement to crops.
MRG will lease the property to Costa until the sale is finalised.
Business News Australia
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