stone crushing

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COMMUNITY BASED LIVELIHOOD RECOVERY PROGRAM (CBLRP)

FOR EARTHQUAKE AFFECTED AREAS OF AZAD JAMMU AND KASHMIR

AND NWFP

CBLRP-UNIDO

INVESTMENT OPORTUNITY PROFILE

FOR

STONE CRUSHING UNIT

IN

NWFP

SEPTEMBER 2007

SUBMITTED TO

AYESHA KHANCHIEF TECHNICAL ADVISORCommunity Based Livelihood Recovery Program (CBLRP)United National Industrial Development Organization (UNIDO)

BY

Sardar Shahid Farid

Chartered Accountant

Disclaimer

All material included in this document is based on data/information gathered from various sources and certainassumption. Due care and diligence has been taken to compile this document. The document may containhuman, mechanical error or non accuracy of the information at the source. No liability for error, or omission orunintentional misrepresentation will be accepted. We reserve the right to make correction and changeswherever desired in this document or its subsequent versions


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1. PROJECT EXECUTIVE SUMMARY

1.1 PROJECT BRIEF

The project objective is to set a stone crushing plant in the surrounding of Manshera. The plant will be ableproduce crushed stones of various sizes that can be used in various construction and road projects.The productwill be hard lime stone crush of different sizes as required. Working with the proposed plant and machinery,the project will be capable of producing 30,000 C.ft. of crushed stone at 100% capacity utilization with singleshift of 8 to 12 hours a day.

The total capital cost of the project is Rs. 21.324 million . For crushed stone manufacturing purposes, themajority of the crushing units use Hard Limestone, the reason lies in its extreme hardness and it also givesmaximum strength to the building structure. Another reason is that it is easily available across the country inlarge quantities although granite could also be used for this purpose, as it is used by many other countries,though its excavation is comparatively difficult. Hard Lime Stone is found almost in every part of the country;so proposed sites and the availability of raw material are in abundance. According to extraction data forindustrial minerals for FY 2002-03 the reserve of Lime Stone in NWFP are 4,921 million tons which arefairly large. However, in case of Granite, so far known sources of workable granites in the country whichcould be used for crushing purposes are available in Manshera in the North (NWFP). Gilgit Region (NorthernAreas) does indicate great potential of variety, quality and quantity of granites that according to geologicalevidences have superiority over other granites in Pakistan (Source Expert Advisory Cell Digest of IndustrialSectors 2003)

Approximately 19 employees will be employed directly on the project. The civil works and installation ofplant is estimated to complete in 3 months.

1.2 FINANCIAL SUMMARY

Sales Rs 49Million

Gross Profit Margin 60%

Net Profit 51%

Internal Rate of Return 48%

Foreign collaboration sought Joint Venture Loan Market access Sub contracting Buy back arrangement Equipment purchase

Management expertise Technical expertise Marketing expertise Technology transfer Joint R&D Other :-

Studies Available Feasibility study Other Specify

Project description

Date: 25 October 2007


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2. PROJECT RATIONALE

Stone crushing industry is an important industrial sector in the country. The crushed stone isthen used as raw material for various construction activities i.e. construction of roads,bridges, buildings and canals.

Over the last 10 years, the Construction sector has been registering strong growth rates in

the range of 7-8%. Housing and construction is one of the major drivers of growth in morethan 40 allied industries including STONE CRUSHING. In addition, for the building ofroads, flyovers and bypasses, there is a mass and consistent need of crushed stone across thecountry. Several projects are in progress and are being commenced shortly which will havehigh demand of crushed stone all over the country. In order to make up the backlog andmeet the projected requirements for the next 20 years, overall housing construction has toraise 500,000 housing units per annum. The area under consideration is badly affected bythe earthquake and rehabilitation and reconstruction is in process. This process leads toconstruction of roads, bridges, new houses , markets , etc resultantly gear up constructionactivities and more use of crushed stones. Construction of Diamir-Basha Dam and KohalaHydro Electric Project are also synergic factor for this project. The aforementioned factsand statistics provide enough evidences, assuring a steep and continuous growth vis a vis

investment opportunity in the STONE CRUSHING business.

There are increasing allocations from budget in the Public Sector Development Projects ofPakistan. There is sufficient skilled labor available at less cost to run the project. The rawmaterial is abundantly available. If the machinery needs to be imported there are less importduties. The availability of initial depreciation made the project pragmatically five years taxfree. There is need to employ latest and modern exploration techniques and machinery.The lack of coordination among various mineral sector agencies is also point of concern forthe stone crushing industry.

3. MARKET OPPORTUNITY

Since it is an allied industry of the construction sector, growth in construction sector may beconsidered as proxy for the growth in stone crushing sector, i.e. around 7-8%.

Crushed stone has a very minor share among the exports of non-metallic mineral productsof Pakistan. It is observed that during the year 2000-03, total export volume of the crushedstone has been US $ 8,222, whereas, Marble with the highest share of US $ 5,968,232remained at the top. The market scope for crushed stone is found to be encouraging in localmarket with the increased demand from building industry & construction fields. There isalso a sufficient demand from Govt. Contractors for lying of roads and construction ofindustries etc. The entry in the target market is easy and there is a narrow gap in the supplyand demand, which is expected to grow in the coming years.

4 BUSINESS PLANThe business opportunity to fill the demand and supply gap would be quite profitable. Theplant will be made to operate to the maximum capacity possible. Good quality products ofhigh strength will be used


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4.1 Product Sales

Working with the proposed plant and machinery, the project will be capable of producing30,000 C.ft. of crushed stone at 100% capacity utilization with single shift of 8 to 12 hours aday. All projections are based on 22 working days a month.

STONE CRUSHING SALES

Sr No. Product Name % age share inSelling Price/C.ft. Qt c.ft AMOUNT

1 1 inch crush 25% 8 7,500 60,000

2 inch crush 25% 8 7,500 60,000

3 inch crush 30% 6 9,000 54,000

4 Stone Powder 20% 2 6,000 12,000

Daily sales 30,000 186,000

Working days in a year 264

Total annualsales 49,104,000

4.2 Raw MaterialHard Lime Stone will be used as raw material for manufacturing crushed stone. Raw stonecould be purchased directly from the excavator (quarry lease holder) or crusher may holdhis own quarry lease to produce raw stone. It is recommended to obtain a quarry leaseholding to avoid any possible threat in procuring raw stone as well as to keep the projecteconomically stable. For the proposed project, a total of 15,000 C.ft. of Hard Lime Stonewould be the daily requirement. This requirement could sufficiently be fulfilled from theobtained quarry site over a period of years.Availability of raw material in the region is as follows: NWFP - 4921Million tons. This ismostly available in and around Manshera

4.3 PRODUCT MANUFACTURING PROCESS

The main machinery involved in the stone crushing industry is Hammer Crusher, Screen,Conveyers etc. The process involved is to feed the stone in to the Hammer Crushers to makeit further smaller in size as required by the customer. In the hammer crusher, the stone iscrushed. The crushed stone is screened to separate the produce in different sizes by theseparator. The crushed stone is conveyed by the conveyors to trucks for transport to themarket place or storage area. Process flowchart of a stone crushing unit has been given


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4.4 PRODUCT MARKETING CHANNELS

In the manufacturing industry, marketing is considered to be of significant importance. Inthe Stone Crushing industry, marketing parameters are very limited and usually in somedegree associated with the construction sector. Some of the marketing promotion activitieswhich should duly be rendered are given below:

-Connection development with the building material suppliers, well known buildersand contractors.-Update information on civil and construction works initiated by local, provincialand central government.-Draw linkages with material suppliers to the housing industry at town level.-Establish contacts with local civil engineering firms, individuals and professionals.

4.5 HUMAN RESOURCE REQUIREMENT

Construction and allied industry is a labor intensive industry; therefore, a total of 19 personswill be required to handle the production operations of a stone crushing unit. The businessunit will work on one shift basis (8 hours daily). Total approximate manpower required forthe business operations along with the respective salaries are given in the table below:


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4.64.7 PROJECT FINANACIALS

4.7.1 OPERATIONAL DATA

The plant is to start production at 70% of capacity thereby increased by 10% in the nextthree years till the plant operates at 100% which is to be maintained for the next sevenyears.

4.7.2 FIXED COSTS

Land and Building (Note) 1,530,000Plant & Machinery 4,000,000Furniture & Fixtures & Office Equipment 905,000Vehicles 14,040,000

Total Project Investment 20,475,000

Note: Land for setting up the proposed stone crushing unit would be acquired on lease for aperiod of 30 years. Lease concession would be granted by the Mineral DevelopmentAuthority of the concerned Area.


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4.7.3 WORKING CAPITAL

Following are the initial working capital requirements, for the stone crushing unit.

Description Amount in Rs.

First Three Months Salaries (Production staff) 312,000

First Three Months Utilities Charges (Otherthen fuel/diesel)\

124,500

Fuel Inventories (Diesel) - 15 Operational Days 343,000First Three Months Misc. Expenses 15,000

Annual Quarry Lease Charges for first year 100,000

Cash balance required 40,000

Total 934,500

4.7.4 OVERHEAD COST

Following Overheads are assumed to occur in the first year of production.

Expense Year amount

Utilities 120,000

Depreciation 2,000,600Maintenance 261,600

Selling and Distribution 450,244

Miscellaneous 550,000

Total 3,381,844

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