Final Business Plan For Quarrying and Aggregate Plant

PROJECT PROMOTER:
PROJECT PROPOSAL FOR MAGI STONE CRUSHING

AND SELLING PLC
ESTABLISHMENT AGGREGATE
PRODUCTION PLANT
Mobile :0911012534
Mobile: 0911012534
0994056288
Email:joe2012@gmail.com
PROJECT PROPOSAL FOR ESTABLISHMENT AGGREGATE PRODUCTION PLANT
CONTENTS
I. Executive summary................................................................................................. 0
II. Project Back Ground................................................................................................ 1
Introduction.................................................................................................................... 1
Company Overview..................................................................................................... 2
Objective of the Company......................................................................................... 2
The proposed lease financing.................................................................................. 3
Structure of the Feasibility Study..........................................................................4
III. MARKET STUDY AND PLANT CAPACITY....................................................4
over view of the Mekelle urban development History..................................4
Competitive Analysis.................................................................................................. 8
Demand Analysis.......................................................................................................... 8
demand and supply Gap analysis........................................................................10
Projected Demand..................................................................................................... 11
Pricing and Distribution.......................................................................................... 13
Marketing strategy.................................................................................................... 14
Marketing Strategy.................................................................................................... 14
Positioning................................................................................................................ 14
Product....................................................................................................................... 14
Promotion................................................................................................................. 15
Pricing......................................................................................................................... 15
SWOT ANALYSIS........................................................................................................ 16
Strength...................................................................................................................... 16
Weakness.................................................................................................................. 16
Opportunity.............................................................................................................. 16
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Threat.......................................................................................................................... 16
PLANT CAPACITY AND PRODUCTION PROGRAMME................................17
Plant Capacity.......................................................................................................... 17
Production Programme....................................................................................... 17
MATERIAL AND INPUTS......................................................................................... 18
RAW MATERIALS................................................................................................... 19
UTILITIES...................................................................................................................... 19
IV. Technical Feasblity............................................................................................ 20
Plant Location and Site............................................................................................ 20
project engenering.................................................................................................... 21
civil engenering...................................................................................................... 21
Machinery and Equipment..................................................................................... 21
Infrastructure Conditions....................................................................................... 22
Propduction Process................................................................................................ 22
Environmental Impact and Mitigation..............................................................22
Health and Safety................................................................................................... 23
Environment............................................................................................................ 23
V. Organization and Management........................................................................23
Organization Structure............................................................................................ 24
MANPOWER REQUIREMENT...............................................................................27
VI. FINANCIAL ANALYSIS...................................................................................... 29
TOTAL INITIAL INVESTMENT COST.................................................................30
Revenue prediction................................................................................................... 31
PRODUCTION COST.................................................................................................. 31
Projected financial statement...............................................................................32
FINANCIAL EVALUATION...................................................................................... 33
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Profitability and Return on investment........................................................33

Net Present Value................................................................................................... 33
INTERNAL RATE OF RETURN...........................................................................33
Break-even Analysis............................................................................................. 34
Payback Period....................................................................................................... 34
VII. socio-ECONOMIC BENEFITS..........................................................................35
Profit Generation....................................................................................................... 35
Tax Revenue................................................................................................................. 35
Employment and Income Generation...............................................................35
Pro-Environment Project....................................................................................... 35
VIII. Conclusions & Recommendations...............................................................36
Conclusions.................................................................................................................. 36
Recommendations..................................................................................................... 36
1. EXECUTIVE SUMMARY
The demand for quarrying and gravel is derived from urban development activities such
like building and road construction activities. When it comes to mekelle, in 1963 the
administration boundary was 240 HA and in 2014 the boundary was grown in to 25,995
3
HA . The city has grown about 110 times in 50 years. Its spatial expansion is geometric
and growing much more aggressively since recent years.
Currently the city planned to incorporate additional 14,263 HA of land for housing
(mixed use residences), Business and commerce, social and municipal services, Roads
and infrastructures and others which hugely demand aggregates as input of construction.
With understanding of this development MAGI Stone Crushing and Selling PLC
production envisioned to establish a production plant with the capacity of 100,000 m3
per a year in the area. already acquired a from agency of mining Tigray region in south
eastern zone Enderta wereda in particular site Endabo Gomgam and it is accessible only
10 km drive from all direction of quiha may mekden asphalt road. The project acquired a
production land from agency of mining Tigray region in south eastern zone ENDERTA
wereda in particular site Endabo Gomgam and it is accessible only 10 km drive from all
direction of Quiha May mekden asphalt road. The total project area is already
delineated to and the total miner able area with 150m thickness is covers 23,341m3 and
the potential volume for the processing is estimated to be 4,726,553 tons.
The Total investment cost of the project estimated to be 33,328,093.20-out of which ETB
26,408,624 allotted for plant and machinery and proposed to cover by lease financing
from development Bank of Ethiopia the rest 21 %(6,919,469) will cover by the equity.
The project is financially feasible. the project will generate a profit throughout its
operation life. Annual net profit after tax will grow from Birr 20.5 million to Birr 30.2
million during the life of the project. Moreover, at the end of the project life the
accumulated operating cash flow amounts to Birr 176.7 million. The pay back of the
project is 2 years. The IRR of this project is computed to be 75 % indicating the viability
of the project. The net present value of the project at 30 % discount rate is found to be
Birr 38.2 million which is acceptable
4
Based on the foregoing presentation and analysis, we can learn that the proposed project
possesses wide range of benefits that complement the financial feasibility obtained
earlier. In general, the envisaged project promotes the socio-economic goals and
objectives stated in the strategic plan of the Tigray National Regional State. These
benefits are listed as follows
The project is found to be financially viable and earns on average a profit of Birr 28
million per year and Birr 284.3 million within the project life. Such result induces the
project promoters to reinvest the profit which, therefore, increases the investment
magnitude in the region.
In the project life under consideration, the region will collect about Birr 121.8 million
from corporate tax payment alone (i.e. excluding income tax, sales tax and VAT). Such
result create additional fund for the regional government that will be used in expanding
social and other basic services in the region
The proposed project is expected to create employment opportunity to several citizens of

the country. That is, it will provide permanent employment to 35 professionals as well as
support stuffs. Consequently, the project creates income of Birr 3.2 million per year. This
would be one of the commendable accomplishments of the project. The proposed
production process is environmentally friendly
2. PROJECT BACK GROUND
INTRODUCTION
This project was commissioned by MAGI Stone Crushing and Selling PLC which is
considering entering into the business of producing aggregates by establishing a plant of
5
quarrying and production of Aggregates in Tigray Regional State in south eastern zone
ENDERTA wereda in particular site Endabo Gomgam.
Quarrying and gravel plant produces different sizes of gravel and selected materials. The
sizes of gravels that would be produced would include the following: 0 – 10mm, 10 – 15
mm and 15 – 25 mm. The products are used for building and road construction projects.
The process involves using explosives to break down reserve material into pieces.
The project acquired a production land from agency of mining Tigray region in south
eastern zone ENDERTA wereda in particular site Endabo Gomgam and it is accessible
only 10 km drive from all direction of Quiha May mekden asphalt road. The total project
area is already delineated to be 23,341m2 .The total miner able area with 150m thickness
covers 23,341m3 and the potential volume for the processing aggregates estimated to be
4,726,553 tons. Copy of the Geological study and agreement b/n the company and Tigray
Region Agency of Mining attached in the annex part 2
COMPANY OVERVIEW
MAGI Stone Crushing and Selling PLC established by Two young and energetic
entrepreneurs Mr MAMO was engaging in the operation and management of Block
production and MR Ataklti was also engaging the operation and Management of
construction enterprise. Currently both of envisioned to establish quarrying and
aggregate production plant to meet their Business growth aspiration.
OBJECTIVE OF THE COMPANY

The main objective of the project is to produce a quality aggregates in different sizes.
The specific objectives of the proposed company are presented as follows,
 Producing quality product
 Creating employment opportunities for employees from surrounding areas
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 Technology and knowhow transfer particularly in the industry
 Supply input for construction industry
THE PROPOSED LEASE FINANCING

The company proposed a lease financing for development Bank of Ethiopia for the
following machinery such like crusher plant, Excavator, Wheel loader heavy duty
generator from different company .copy of the performance invoice is attached in the
annex part of the proposal
Table 2.1: machinery and equipment
No FC Exchange TC
. rate
1 Crusher plant complete, crushing capacity 1 172,50 56 9660000
0
Of 150-350 TPH(QF-1380D) 0
0
2 Excavator XCMG NEW 38T model: XE380 1 171,80 56 9620800
DK340 0
3 Wheel Loader XCMG ZL50GN 1 48,525 56 2717400
4 Generator set KVA 1 33000 56
1,848,000.00
bank charge and others (10%)
FOB price 392,40 56 23,846,200
4
bank charge and others (10%) 2384620
Grand total 26,230,820
STRUCTURE OF THE FEASIBILITY STUDY

This feasibility study report is organized in 8 parts. Part 1 provides an introduction and
company background; Part 2 presents the market study which deals with issues related to
description of steel tube, profile and sheet metal and the demand and supply situation in
7
the country; Part 3 covers technical issues and deals with the production technology to be
used, production process flow, the specification of machinery and equipment and
environmental impact of the project.
Part 4 presents the organizational structure and the human resource required by the
project. Part 5 presents the implementation plan for the project while Part 6 and Part 7
deal with financial analysis and the socio-economic aspects, respectively. Finally, Part 8
presents the conclusion and recommendations of the project.
3. MARKET STUDY AND PLANT CAPACITY
OVER VIEW OF THE MEKELLE URBAN DEVELOPMENT HISTORY

The demand for quarrying and gravel is derived from building and road construction activities.
Historically, Mekelle has been established as an urban center in between 1869-1873, during the
reign of Emperor Yohannes the IV. The city was relatively equivalent to a small village. After
140 years, the city has expanded tremendously by engulfing many small villages and towns
surrounding the center of the palace (MCPPO, 2006). With population increase, the town
expanded horizontally. This expansion was on haphazard without systematic extension. This was
supported by erecting of infrastructure. The density of the town became high with no planning.
Access routes within settlements were for the foot and horse/mule path only. Public safety was at
8
risk with frequent fire accidents. Much later, 80 years after the foundation of the town, some of
the members of the royal families in Europe for higher education copied urban plan from abroad,
and physical plan was introduced. This was mainly focused on the opening of roads and
categorizing of land uses. This pioneer plan has lessened the disaster of fire in the town, the main
road and most of the present industrial areas are the remnants plan of this time. (RUPI, 2010) The
second and third development plan was prepared during the civil war in Ethiopia. This civil war
was more or less around Mekelle town (around the project city); its implementation is not very
feasible but the expansion area. After the end of this civil war in 1994 the National Urban
Planning Institution prepared the fourth development plan for ten-year service. This spatial plan
was supported by socio-economic, physical and environmental studies. One of the catastrophic
natures of this civil war was the dislodgment of the inhabitants from their permanent residences
in to central part of Ethiopia. Most of the citizens of the town were not return to the city in the
earlier time after the end of this civil war, for this reason the demographic projection misleads the
whole planning and the land trimmings up after four to five years (RUPI, 2010).
The land demand becomes crucial issue for the municipality. The new economic police of the
nation and the peace in the country encourage to return back and to invest some investments in
the Mekelle city. To answer the land demand the city administration urges a new development
plan that would support the fast development of the city and expansion area. For this purpose,
new project office established and starts to work a strategic master plan. The plan also allowed its
revision every five years (RUPI, 2010).
The 2008 Master plan was new in its approach as compared with the previous master plans there
by introducing and adopting an Integrated Development Planning (IDP) approach which is more
flexible, participatory and development oriented. In line with the approach, the major outputs
were the Structure Plan and Local Development Plans and implementation tools such as
regulations, norms and standards. The preparation of this plan was started in 2004 and completed
in 2006. It was endorsed and enacted by the City Council in 2008 having ten years of valid
planning period. However, with the fast and complex population dynamics and activities growth
of the city, the Master plan is becoming obsolete to guide the development of the city (TOR,
2013). It is the first plan prepared in integrated way and incorporated the three towns in
metropolitan approach. For the study this master plan takes about three years and involves
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different disciplines and delivered different documents and graphics reports. Despite its efforts,
the defect of the pioneer plan was to collect information from different residents and stakeholders
and is the first plan to incorporate Mekelle city, Quiha town and Aynalem town under one
comprehensive structure plan. After these 130 years the city has expanded tremendously by
encroaching many small villages and towns up to 30km surrounding the center of the palace
(RUPI, 2010).
Figure 1: Spatial growth trend of Mekelle city
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Source: MCPPO, 2008
Boundary expansion trends are exponentially growing from time to time. In summary, the
table below can give the spatial growth trends of the city for the last 50 years.
Table3.1: Urban expansion pattern of Mekelle at different period

S/n Year Administrative Administrative source Physical Change from
11
boundary (HA) boundary (KM2) previous referenced year

1 1963 2401 2.4 MCPPO, 2008 Base Year
2 1984 16002 16 1993 plan 567% in 21 years
3 1994 2600 26 MCPPO, 2008 62.5% in 10 years
4 2004 10240 102.4 MCPPO, 2008 293% in 10 years
5 2006 21000 210 MCPPO, 2008 105% in 2 years
6 2014 25995.4 259.9 Estimation 23.8% in 8 years
Source: S/N2 Shishay Mehari, 2011 citing urban rural linkage/TUDO(2008), Source:
S/N6, own computation, Source: S/N-others, MCPPO (2008)
The city has grown about 110 times in 50 years. Its spatial expansion is geometric and
growing much more aggressively since recent years.
Besides fulfilling the current land demands of the city, possible impacts due to the
transformation of rural agricultural land to urban related uses and other environmental
consequences on both the city and the hinterland areas need due consideration.
COMPETITIVE ANALYSIS
Though, the existence of several suppliers of Aggregates around mekelle, except few
most of them used old machines for production. Because of this there is a critical gap to
provide the existing demand of the city. Because of this gap most of big projects forced
to establish their own plant for production of aggregates for their project.
Hence our company is envisioned to establish its plant with modern and new machines
enables it quality products as well as meeting turnkey projects demand.
DEMAND AND SUPPLY GAP ANALYSIS
1
Developed area of Mekelle city in 1963, assumed as the administrative boundary
2
Developed area of Mekelle city in 1984, assumed as the administrative boundary
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DEMAND ANALYSIS
Changes in the boundary of the city by engulfing surrounding villages have aggravated
the disproportions in the land use of the city. The existing land use proportion is put on
the table below.
Table3.2: Existing land use proportion
No. Land use category Area (Ha) Percent (%)
1 Housing/Residence 5233.03 20.13
2 Business and Commerce 123.13 0.47
3 Social Services 1095.03 4.21
4 Green, recreation, sports, and 16914.07 65.07
environment sensitive areas
5 Administration 66.73 0.26
6 Manufacturing and Storage 857.68 3.3
7 Infrastructure, utilities, and 1705.49 6.56
Transportation
Total 25995.4 100.0
The disproportion in land use pattern can be explained in terms of quantity and
distribution of services throughout the city implying the need for high public expenditure
on various infrastructure and services development in the future.
The major land use subcategories are shown in the chart below.
Chart 1: City proper land use proportions Source: own computation, 2014
13
Land use proportion

70
60
50
40
% share
30
20
10
0
Business Green, recr Manufactu Road, Tran
Secial Administra
Residence and eation, and ring and sport, and
Services tion
Commerce ESA Storage Utilities
Land use proportion 20.13 0.47 4.21 66.07 0.26 2.3 6.6
The extensive and diverse development activities being carried out in and around the city
of Mekelle demand enormous volume of raw material, it requires huge amount and
continues supply of selected material, crushed aggregate stones and dimension stones.
According to the available general information Government organization, there are
various public and private sector development activities which demands aggregates at
constant increasing rate. According the earlier survey made in Tigray area the demand for
crushed stone in the year ended 2018 was about 1,519,666.92 m2 and by 2019 the
demand has increasing 1,641,240.27 still there is an increased by projecting with a
minimum growth rate the demand for next 10 years is described in the under below table.
Table 3.2: Demand and supply of aggregates (2018-2022)
year Supply m3 demand in m3

2018 1,519,666.92
14
549,130.43
2019 1,641,240.27
554,677.20
2020 1,772,539.50
554,677.20
2021 1,914,342.66
637,560.00
2022 2,067,490.07
644,000.00
2023 2,232,889.27
700,000.00
2028 3,037,821.2
0
According the historical data of supply and demand of aggregates of

Mekelle city there is threefold gap between supply and demand. most of the
time the gap has been filled from the areas surrounding the region and the
trunk projects are forced to establish a mobile crush plant to feed the
aggregate demand for their projects. with understanding of these gap the
promoter of this project the promoter of this project intended to establish an
aggregate plant with a capacity of 100,000m3 per year to contribute its
share in full filling of the Gap.
PROJECTED DEMAND
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The rapid development of high-rise buildings, housing complexes, malls, governmental

and non-governmental buildings and road construction has created high demand for
gravel. The demand for gravel is directly related with the growth in the construction
sector which in turn depends on the overall economic development of the country.
Therefore, demand is projected at the annual average GDP growth rate achieved in the
past few years i.e. 8. %.
According rapid assessment the supply of selected material and crushed stone aggregates
for Mekelle city is from quarries around the city. the quarries produce about 700,000 m3
per year it is nearly 50 % of the current demand but the demand is increasing at high
increment rate. There is a critical shortage of aggregates around the city when it is cross
checked with the proposed structural plan of Mekelle city.
When it is seen the projection for the land required of different functions in the planning
period is basically based on the population growth scenario (medium variant 7.1%) and
the subsequent needs for different services. Economic development potential,
environmental protection, the existing disparity in proportions of the different land uses,
and density issues were also part of the consideration in negotiating and manipulating the
land required. The amount of land proposed for different functions for the coming ten
years only is put in the tables below.
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Table:3.3 projected land use expansion for Mekelle city
Land use component Area (Ha) % age
1 Housing/Mixed Residence 5705.44 40.0
2 Business and Commerce 1141.088 8.0
3 Social and Municipal Services 1426.36 10.0
4 Green, recreation, Sports, and environment sensitive 1426.36 10

areas
5 Administration 285.272 2.0
6 Manufacturing and Storage 2139.54 15.0
7 Infrastructure, Utilities, and Transportation 2139.54 15
Total 14263.6 100.0
According the structural plan of Mekelle city there will an excessive future demand on
lands of total area 14,263.3 HA for future consumption. from this housing and mixed-use
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buildings accounts 40% (5705 HA), Business and services 8% (1141HA), social and
municipal services 10% (1426 HA) and infrastructure and transportation 15% (285 HA)
According the new Mekelle structural plan suggestion the new buildings for all functions
should be G+4 and above based on this we can make a professional guess based on the
following assumptions
 50% of the proposed land will be built up area
 Gravel Consumption Per M2 of Floor Area 0.35 m3
Accordingly, the aggregate demand in Mekelle for the coming 10 years city assumed to
be a cumulative of 57,904,000.00 m3 and an amount of 5,790,400.00 M3 at annual
level. This indicates there will be a huge Gap demand and supply side so the investment
on quarrying and gravel is important from socio-economic perspective
PRICING AND DISTRIBUTION
When you review the last five years aggregate prices in Mekelle city it properly indicates
the sky rocketing increment. It increased from Birr 120/ m3- 700 /M3 .The current price
of crushed stone around Mekelle at quarrying site is Birr 700/m 3. Accordingly, a factory-
gate price of Birr 563/m3 is considered for the product of the envisaged plant. With
regard to distribution, the plant can sell its product directly to users including private
house builders and contractors or to retailers that purchase from production site using
their own means of transportation.
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MARKETING STRATEGY
The proposed subject plant will design and implement carefully its marketing strategy to
penetrate the untapped market for star level and high end accommodation and build
reputation through appropriate marketing mix or 4p’s (positioning, product, promotion,
and pricing) based on the market analysis.
POSITIONING
The subject property will establish its positioning strategy on strength, opportunities,
weakness and threat analysis. The strong management experience of the project
promoter as corporate business will be exploited to create strong management and
motivated staff that can provide market oriented products/services and easily position the
plant establishment of in the market. The management and staff shall work on the
identified target markets (public, private and housing association investors) to position
as , quality and affordable products/services provider.
PRODUCT
The proposed plant will focus on the Delivery of quality products and it strongly works
on satisfying the national standard regarding the proposed products of the plant.
PROMOTION
The plant will design, develop and implement comprehensive promotion package to
promote its products/services as single brand identity. These promotional packages will
be communicated through different promotional methods, namely; advertising, personal
selling, direct marketing, and digital marketing among others.
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A. Advertising: This comprises advertising in print Medias, TV channels, on permanent

screens like airport and Radio stations. The print media shall be undertaken through trade
and industry publications like business magazines. Both national and private TV channels
and radio stations will be used for advertising products/services of the plant.
B. Personal Selling: Undoubtedly customer solicitation face-to-face will be a powerful

form of promotion mainly due to the fact that its flexibility will enable the business to
match the customer's needs to specific attributes of its services as well as giving concise
details of what it has to offer. Another important determinant in utilizing personal selling
is the fact that the business is relatively new on the market. As such, potential
customers/clients will, to a certain degree, be skeptical towards the intended service(s)
and how they are able to benefit from the service that the business will provide.
In cases where the opportunity of obtaining a large order exists it may be necessary for
the top management to go out personally, especially considering the fact that the business
is still a relatively new firm on the market. However this shall be the situation in the
majority of cases due to our relative infancy.
In all the above, the plant establishment intends to communicate its ability to deliver a
quality product/ service that will satisfy the customers’ needs. Hence our messages will
influence the engagement decision of prospective customers by emphasizing our
customer focus and, persuade prospective clients that it is different from its competitors.
PRICING
Products of the proposed plant will be competitively priced in relation to the dictates of
the market. It is intended to implement market based (demand based) pricing strategy
which will ensure that potential customers are not frightened away by the price. However
this will dictate that the costs are prudently kept so as to ensure the financial goals are
realized.
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SWOT ANALYSIS
STRENGTH
 Ownership of the quarry site
 Managerial experience of the owners
 Location nearest to the market
 Availability of infrastructure and utility
WEAKNESS
 Lack of capital financing
 Shortage of hard currency
OPPORTUNITY
 High demand of construction

 City strategy for growth and development
 The recovery of peaceful condition
 Government commitment
THREAT
 Fear of instability
 The entry of new entrants
While reviewing the swot analysis, our company has a strong advantage for its business
growth .it acquires the enough quarry site .its location is advantageous for its
marketability. the managerial experience of the founders and its eligibility for lease
21
financing from development bank will contribute an ample of success factors for its
success full Business growth .
PLANT CAPACITY AND PRODUCTION PROGRAMME
PLANT CAPACITY
The capacity of the Quarrying and Gravel Plant is envisaged to be about, 100,000 m 3 of
gravel per annum. This is based on the projected demand and supply gap and the
technology recommended.
PRODUCTION PROGRAMME
It is envisaged that the plant would attain full capacity in the second year, while 80%
capacity utilization is planned for the first year – during which time it is presumed the
learning experience curve would also reach the optimum level. The plant would operate
on a single shift of 8 hours a day and 277 working days in a year.
Table 3.4: PRODUCTION PROGRAMME
Year 1 2-10
Production[m3] 80,000 100,000
Capacity utilization 80 100
22
[%]
MATERIAL AND INPUTS
RAW MATERIALS
The raw materials and other inputs requirements of the plant at full capacity operation are
provided in Table 3.5 below. The total cost of explosives and accessories and the
quarrying royalty fee for basalt is would be Birr 3,160,020.
The plant site would be selected on the basis of basalt reserve in the area in the outskirts
of the city. Other materials have to be imported.
Table 3.5: ANNUAL RAW MATERIAL AND OTHER INPUTS

REQUIREMENT AND COST
Sr. Material/Input Unit of Qty. Cost (Birr)

Measure
No. LC FC TC
1 Basalt m3 200,000 1,668,000 - 1,668,000
2 Ammonium Nitrate Kg 250,000 87480 495,720 583,200
3 Detonating cord & M 20,000 13,122 74,358 87,480
Cap
4 Safety fuse Kg 2 10,935 61,965 72,900
5 15,309 86,751 102,060
Short Delay Detonating pcs 3,000 34,020
6 Dynamite Kg 100,000 91,854 520,506 612,360
Grand Total 3,160,020
UTILITIES
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Electricity and water are the major utility requirement of the project and is shown in
Table 3.5.
Table 3.6: UTILITIES REQUIREMENT & COST
Utility Qty. Unit Rate Cost (Birr)
Electricity 300,000 0.4736 142,080
Water 5,000 3.25 16,250
Total 158,330
4. TECHNICAL FEASBLITY
PLANT LOCATION AND SITE

The project location and site are located in Tigray Regional State, Mekelle city the
project acquired a production land from agency of mining Tigray region in south eastern
zone ENDERTA wereda in particular site Endabo Gomgam and it is accessible only 10
km drive from all direction of Quiha may Mekden asphalt road. The total project area is
24
already delineated to be 23,314m2. Land preparation for parking and machine installation
already completed.
PROJECT ENGENERING
CIVIL ENGENERING
The total land requirement for aggregate source is estimated to be about 23,314m 2. The
project pays royalty fee for land use right, which is 3% of annual sales Moreover, the
envisaged quarry requires office, stores and workshop. The total land area requirement of
which is estimated at about 200 m2, of which 60square meter would be used for office;
and 60 square meters each would be for store and workshop.
MACHINERY AND EQUIPMENT

The list of machinery and equipment required for quarrying and gravel plant is given in
Table 5.1 below. The total cost of machinery and equipment is estimated to be about Birr
26,230,820, out of which some of them could found locally with local currency.
Table 5.1: MACHINERY AND EQUIPMENT REQUIREMENT AND COST
N FC Exchange TC
o. rate
1 Crusher plant complete, crushing 1 172,5 56 9660000
capacity 00
Of 150-350 TPH(QF-1380D) 0
0
2 Excavator XCMG NEW 38T model: 1 171,8 56 9620800
XE380 DK340 00
3 Wheel Loader XCMG ZL50GN 1 48,52 56 2717400
5
4 Generator set KVA 1 33000 56
1,848,000.00
25
bank charge and others (10%)

FOB price 392,4 56 23,846,200
04
Bank charge and others (10%) 2384620
Grand total 26,230,820
INFRASTRUCTURE CONDITIONS
The basic infrastructure is already in place. The project site can be accessed by the all-
weather asphalt road. There are many factors which determine the location of any project.
Some of these factors are source of raw materials and other inputs, near to market places,
availability of infrastructure facilities such as transportation, electricity, water, telephone,
postage, etc. and also availability of both skilled and unskilled manpower in the area.
PROPDUCTION PROCESS
At the quarry site the raw material, basalt deposit is drilled and blasted. The resultant
fragmented rock is loaded onto dump trucks and transported to the crushing plant. The
jaw crusher crushes the stone into smaller size and passes to the cone crusher. The
crushed product is conveyed to the sieves where the product is screened and separated
into different sizes of gravels which constitute the final product.
ENVIRONMENTAL IMPACT AND MITIGATION

The impact of the Project on the general Environment is discussed below with respect to
health and operator safety and the environment. This is just to show the main issues with
the Plant as a separate and comprehensive Environmental Impact Assessment will be
done.
HEALTH AND SAFETY
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All machinery and processes in the workshops use electric power as source of energy,
while supplemental machinery and vehicles use mainly diesel. The fabrication processes
are essentially mechanical: high frequency and automated crushing machinery. These are
relatively safe for the operators because the processes involved are routine and come
within the standard training of the operators.
Safety measures and apparel suited to the particular process will help in preventing
routine accidents. Proper training at the Plant to acquaint operators with the particular
machinery should mitigate any possible problem areas comfortably.
ENVIRONMENT
The processes involved are smoke and chemical free. The effluent at the plant is routine
dust waste which should be taken care of by regular tubular disposal system.
Beside to this, the regional state of Tigray Environmental protection and land use
administration agency has been certified as the project is environmentally feasible.
Copy of the certification letter is attached in the annex part of the proposal
5. ORGANIZATION AND MANAGEMENT
The organizational structure plays an important role in the day-to-day functioning of

an organization. It is an organization’s skeleton which defines the roles and
departments that make up an organization’s functioning and shows how everything fits
together into a whole. It depicts the relationship among those involved and their
various levels of authority and responsibility for organizational performance.
This section presents the proposed organization structure and the manpower
requirement for the company to make the production and commercialization of
aggregates operational and lead profitable venture.
27
ORGANIZATION STRUCTURE
The overall oversight of proposed factory will be shouldered by the General Manger
which is the highest body in the hierarchy of the factory. The General Manager will be
responsible for the overall management of the company as a whole as per the detailed
duties and responsibilities presented of the factory.
The organization structure is proposed three departments in the company which are
led by their respective Department Managers. The roles and responsibilities of Magi
production and sales of crushes Profile Manufacturing Project is presented below.
28
Generalmanager
secretary
production commercial Admin and

manager manager finance manager
General Manager
 Set goals for organization and make decisions.
 Strategic planning- understanding the target customer, its product, and
competitions. Short run of (6 month or 1 year) and the long run (5-10 year).
 Defining a firm’s purpose includes: Mission statement, Description of the target
customer, Description of the product line,
 Financial plans that allocation of resources for achieving the goals of firm.
 Heading the business and managing overall activities.
 Implementation and maintenance of quality systems and continuous improvement
methodologies with specific focus on growth, cost reduction and process
improvements.
 Budgeting and goals/targets setting
29
 Process optimization to meet the production target.

 Resource allocation, manpower allocation and optimizing the cost
 Assessing and knowing the customer requirements in different markets and
building business strategy accordingly.
 Handling logistics activities including export/sourcing documentation.
Production Manager
 Production planning for the lines (manpower and machine)

 Giving instruction to the line supervisors
 Line performance analysis (efficiency, man to machine ratio, cost/pieces), plan
for continuous improvement and analysis of quality data
 Discussion with other team members for each production line
 Deciding rate for piece rate employees
Commercial Manager
 Develop marketing strategies

 Conduct and report customer research to describe target customers
 Position the firm relative to target markets and to the competition
 Develop the image of the company and its product line.
 Propose marketing programs
 Propose advertising/promotion strategies
 Forecast sales.
 Determines the demand for products and services offered by a firm and its
competitors and identify potential customers.
 Develop pricing strategies with the goal of maximizing the firm's profits or share
of the market while ensuring the firm's customers are satisfied.
 Oversee product development or monitor trends that indicate the need for new
products and services.
30
 Direct the hiring, training, and performance evaluations of marketing and sales
staff and oversee their daily activities.
Admin and Finance Manager
 Formulating budget estimates in support of program objectives and presenting and

justifying budget requests
 Reviewing and interpreting accounting and financial management policy,
procedures, standards and statutes to ensure compliance
 Monitoring and examining accounts, specific appropriations or financial records
for account status and reporting requirements; and verifying accounts
documentation.
 Planning and conducting performance and financial reviews of major programs
and entities to evaluate the reliability, effectiveness, and efficiency of the
Organization.
Accordingly, The General manager of the company, Mr. Ataklti has a bachelor degree
in constricting and technology management engineering. he has more than 10 years’
experience in managing his own business enterprise in construction engineering,
landscaping and environmental protection projects. and he is successful in his business
life. Ha has more than 50+1 share in the company. the details of management profile
described in attached Resume in the annex part of the proposal
In addition to this Mr. Ataklti Mamo has participated in the training organized by
development Bank in Mekelle in the contents of entrepreneurship, marketing, financial
management. The training information is avail on the Database of Development Bank of
Ethiopia
31
MANPOWER REQUIREMENT
The total number of employees will boost the implementation as a result of the
introduction of steel tube and profile production and operations. For the proposed
project, manpower is critical factor for the successful implementation and
manufacturing of steel tube and profile. Hence, the availability of technical employee
and its productivity is essential in the industry.
Out of the total 35 employees, 4 will be recruited to fill in management, finance and
administration, procurement and supply, quality positions and the rest for production
and marketing related positions.
The factory has both technical and managerial staffs in order to achieve its desired
objective of the company. The types of positions that are going to be filled in through
recruitment and selection process and the estimated starting salaries for the positions
are shown in table 16 below. Moreover, the estimated benefits are estimated at 25% of
the salaries of employee.
Table 5.1: MANPOWER REQUIREMENT & ANNUAL LABOUR COST
Sr. Req
.
No Description No. Monthly Salary (Birr) Annual salary (Birr)
.
1 Manager 1 15,000 180,000
2 production head 1 9,000 108,000
3 commercial head 1 9,000 108,000
4 Admin and finance head 1 9,000 108,000
5 Supervisor 2 8,000 192,000
6 Technician/Mechanic 3 7,000 252,000
7 Operator 5 9,000 540,000
8 Driver 2 5000 120,000
9 Clerical Workers 4 5,000 240,000
10 Laborer 12 4,000 576,000
32
11 Guard 3 3000 108,000

Sub-Total 35 40,400 2,532,000
Employees benefit (25% of basic salary) 633,000
Total 3,165,000
TRAINING REQUIREMENT
Operators and technicians will be given training on the operation and maintenance of
machineries by the experts of the machinery supplier during commissioning of the plant.
Such training is estimated to cost Birr 125,000.
33
6. FINANCIAL ANALYSIS
The financial analysis of the quarry and gravel project is based on the data presented in
the previous chapters and the following assumptions: -
Construction period 1 year

Source of finance 20 % equity
80 % loan
Tax holidays 2 years
Bank interest 12.5%
Discount cash flow 30%
Accounts receivable 30 days
Raw material local 30 days
Raw Material import 90 days
Finished products 30 days
Cash in hand 5 days
Accounts payable 30 days
34
Repair and maintenance 5% of machinery cost
TOTAL INITIAL INVESTMENT COST

The total investment cost of the project including working capital is estimated at Birr
33.04 million, of which 80% will be financed by lease financing and 20% will finance by
equity.
Table 7.1: INITIAL INVESTMENT COST
Sr. Cost Items Local Foreign TC

No. Cost Cost
1 land preparation for 800,000.00 - 800,000.00
installation
2 Plant Machinery and 26,230,820.00 26,230,820.00
Equipment
3 Vehicle rent 2,400,000 - 2,400,000.00
4 Working Capital 3,616,124.00 - 3,616,124.00
Total Investment cost 6,816,124.00 26,230,820.00 33,046,944.00
% share 20.63 79.37 100.00
35
REVENUE PREDICTION
The capacity of the Quarrying and Gravel Plant is envisaged to be about, 100,000 m 3 of
gravel per annum. This is based on the projected demand and supply gap and the
technology recommended.
It is envisaged that the plant would attain full capacity in the second year, while 80%
capacity utilization is planned for the first year – during which time it is presumed the
learning experience curve would also reach the optimum level. The plant would operate
on a single shift of 8 hours a day and 277 working days in a year.
The current price of crushed stone around Mekelle at quarrying site is Birr 120/m3.
Accordingly, a factory-gate price of Birr 563/m3 is considered for the product of the
envisaged plant. With regard to distribution, the plant can sell its product directly to
users including private house builders and contractors or to retailers that purchase from
production site using their own means of transportation.
TABLE 7.2: REVENUE PREDICTION

years capacity production in price/ TR
m3 m3
1 80% 80000 576 46,080,000.
00
2up to 10 100% 100000 576 57,600,000.
00
36
PRODUCTION COST
The annual production cost at full operation capacity is estimated at Birr 18.8 million
the major components of the production cost are described in the under below table
Table 7.3: ANNUAL PRODUCTION COST AT FULL CAPACITY (' BIRR)
Items Cost %
Raw Material and Inputs 1,492,020.00 8
Utilities and fuel 1,158,330.00 6
Maintenance and repair 1,400,000.00 7
salary and wage 3,165,000.00 17
Dump truck rent 1,200,000.00 6
Royalty 1,668,000.00 9
maintenance and service 2,694,528.00 14
Total Operating Costs 12,777,878.00 68
Depreciation 2,725,862.40 14
Cost of Finance 3,301,078.00 18
Total Production Cost 18,804,818.40 100
37
PROJECTED FINANCIAL STATEMENT

The projected profit and loss statement (presented in Annex part of the proposal) shows
that the project will remain profitable over its lifetime. The projected annual net profits
show steady growth over the project period, from Birr 21.1 million in year 1 to Birr 30.8
million in years 10.
FINANCIAL EVALUATION
PROFITABILITY AND RETURN ON INVESTMENT

Based on the projected profit and loss statement in the annex 1, the project will generate a
profit throughout its operation life. Annual net profit after tax will grow from Birr 20.5
million to Birr 30.2 million during the life of the project. Moreover, at the end of the
project life the accumulated operating cash flow amounts to Birr 184.1 million.
In financial analysis financial ratios and efficiency ratios are used as an index or yardstick
for evaluating the financial position of a firm. It is also an indicator for the strength and
weakness of the firm or a project. Using the year-end balance sheet figures and other
relevant data, the most important ratios such as return on sales which is computed by
dividing net income by revenue, return on assets (operating income divided by assets),
return on equity (net profit divided by equity) and return on total investment (net profit
plus interest divided by total investment) has been carried out over the period of the
project life and all the results are found to be satisfactory
NET PRESENT VALUE
Net present value (NPV) is defined as the total present ( discounted) value of a time
series of cash flows. NPV aggregates cash flows that occur during different periods of
time during the life of a project in to a common measuring unit i.e. present value. It is a
standard method for using the time value of money to appraise long-term projects. NPV
38
is an indicator of how much value an investment or project adds to the capital invested. In
principal a project is accepted if the NPV is non-negative.
Accordingly, the net present value of the project at 30 % discount rate is found to be Birr
39.8 million which is acceptable.
INTERNAL RATE OF RETURN
The internal rate of return (IRR) is the annualized effective compounded return rate that
can be earned on the invested capital, i.e., the yield on the investment. Put another way,
the internal rate of return for an investment is the discount rate that makes the net present
value of the investment's income stream total to zero. It is an indicator of the efficiency or
quality of an investment. A project is a good investment proposition if its IRR is greater
than the rate of return that could be earned by alternate investments or putting the money
in a bank account. Accordingly, the IRR of this porject is computed to be 78 %
indicating the vaiability of the project.
BREAK-EVEN ANALYSIS
The break-even analysis establishes a relationship between operation costs and revenues.
It indicates the level at which costs and revenue are in equilibrium. To this end, the
break-even point of the project including cost of finance when it starts to operate at full
capacity (year 2) is estimated by using income statement projection.
BE = Fixed Cost = 74 %
Sales – Variable Cost
39
PAYBACK PERIOD
The payback period, also called pay – off period is defined as the period required
recovering the original investment outlay through the accumulated net cash flows earned
by the project. Accordingly, based on the projected cash flow it is estimated that the
project’s initial investment will be fully recovered within 2 years.
7. SOCIO-ECONOMIC BENEFITS
Based on the foregoing presentation and analysis, we can learn that the proposed project
possesses wide range of benefits that complement the financial feasibility obtained
earlier. In general, the envisaged project promotes the socio-economic goals and
objectives stated in the strategic plan of the Tigray National Regional State. These
benefits are listed as follows
PROFIT GENERATION
The project is found to be financially viable and earns on average a profit of Birr 29
million per year and Birr 290.2 million within the project life. Such result induces the
project promoters to reinvest the profit which, therefore, increases the investment
magnitude in the region.
TAX REVENUE
In the project life under consideration, the region will collect about Birr 124.4 million
from corporate tax payment alone (i.e. excluding income tax, sales tax and VAT). Such
result create additional fund for the regional government that will be used in expanding
social and other basic services in the region
40
EMPLOYMENT AND INCOME GENERATION

The proposed project is expected to create employment opportunity to several citizens of
the country. That is, it will provide permanent employment to 35 professionals as well as
support stuffs. Consequently, the project creates income of Birr 3.2 million per year. This
would be one of the commendable accomplishments of the project.
PRO-ENVIRONMENT PROJECT
The proposed production process is environmentally friendly.
8. CONCLUSIONS & RECOMMENDATIONS
CONCLUSIONS
The following are the major conclusions that can be drawn from the foregoing sections
of the feasibility study:
 Given the recent trajectory of the Ethiopian economy and the huge
development has registered in the construction industry and infrastructural
projects, demand for aggregates s is expected to rise significantly in the
Country;
 Domestic suppliers involved in the proposed have very limited capacity and
cannot meet the required demand. The analysis for projected demand of the
Region revealed that an increasing trend and local production capacity is low
as compared with the demand and implies that there is market opportunity.
41
 The processes involved in the fabrication activity are smoke and chemical free.
The effluent at the plant is routine dusts which can be taken care of by regular
tabular disposal system. The potential health hazards to employees can be
easily mitigated;
 The proposed project is financially and commercially feasible. The proposed

project will also be a critical link in the growth and development of the
construction industry as well as the country. The construction industry is labor
intensive and provides employment opportunity to large numbers of people;
RECOMMENDATIONS
Besides offering attractive financial returns to its promoters, the project has other
positive socio-economic impacts which contribute to the poverty alleviation efforts of
the Country and are consistent with the Government’s development strategy.
The overall conclusion is that the project is financially and economically viable and
socially acceptable. Hence, the Consultants recommend its implementation so that the
macro and micro level benefits associated with the project can be realized.
ANNEXES
42
ANNEX 1: PROJECTED INCOME STATEMENT
years 1 2 3 4 5 6 7 8 9 10
sales
revenue 46,080 57,600 57,60 57,60 57,60 57,60 57,600 57,60 57,600, 57,60
,000 ,000 0,000 0,000 0,000 0,000 ,000 0,000 000 0,000
Royality
fee 1,334, 1,668, 1,668 1,668 1,668, 1,668, 1,668, 1,668, 1,668,0 1,668,
400 000 ,000 ,000 000 000 000 000 00 000
cost of
raw 1,193, 1,492, 1,492 1,492 1,492, 1,492, 1,492, 1,492, 1,492,0 1,492,
material 616 020 ,020 ,020 020 020 020 020 20 020
salary
and 2,476, 2,476, 2,476 2,476 2,476, 2,476, 2,476, 2,476, 2,476,5 2,476,
wage 500 500 ,500 ,500 500 500 500 500 00 500
fuel and
utility 1,158, 1,158, 1,158 1,158 1,158, 1,158, 1,158, 1,158, 1,158,3 1,158,
330 330 ,330 ,330 330 330 330 330 30 330
Vehicle
Rent 1,200, 1,200, 1,200 1,200 1,200, 1,200, 1,200, 1,200, 1,200,0 1,200,
000 000 ,000 ,000 000 000 000 000 00 000
mainten
ance 2,623, 2,623, 2,623 2,623 2,623, 2,623, 2,623, 2,623, 2,623,0 2,623,
and 082 082 ,082 ,082 082 082 082 082 82 082
service
Total
operatin 9,985, 10,617 10,61 10,61 10,61 10,61 10,617 10,61 10,617, 10,61
g cost 928 ,932 7,932 7,932 7,932 7,932 ,932 7,932 932 7,932
EBDIT
36,094 46,982 46,98 46,98 46,98 46,98 46,982 46,98 46,982, 46,98
,072 ,068 2,068 2,068 2,068 2,068 ,068 2,068 068 2,068
Depreci
ation 2,623, 2,623, 2,623 2,623 2,623, 2,623, 2,623, 2,623, 2,623,0 2,623,
082 082 ,082 ,082 082 082 082 082 82 082
EBIT
33,470 44,358 44,35 44,35 44,35 44,35 44,358 44,35 44,358, 44,35
,990 ,986 8,986 8,986 8,986 8,986 ,986 8,986 986 8,986
Interest
3,278, 2,950, 2,623 2,295 1,967, 1,639, 1,311, 983,6 655,771 327,8
853 967 ,082 ,197 312 426 541 56 85
EBT
30,192 41,408 41,73 42,06 42,39 42,71 43,047 43,37 43,703, 44,03
,138 ,019 5,904 3,789 1,675 9,560 ,445 5,330 216 1,101
corporat
e tax 9,057, 12,422 12,52 12,61 12,71 12,81 12,914 13,01 13,110, 13,20
43
641 ,406 0,771 9,137 7,502 5,868 ,234 2,599 965 9,330
Net
income 21,134 28,985 29,21 29,44 29,67 29,90 30,133 30,36 30,592, 30,82
,496 ,613 5,133 4,652 4,172 3,692 ,212 2,731 251 1,771
ANNEX 2: CASH FLOW STATEMENT
operating cash flow

discount rate 30%
intial investment -33046944 -33046944
return 21,134,496.25 ($12,915,107.07)
return 28,985,613.13 278,162.44
return 29,215,132.80 $10,507,192.52
return 29,444,652.48 $18,437,493.52
return 29,674,172.15 $24,585,276.07
return 29,903,691.83 $29,350,917.27
return 30,133,211.50 $33,044,931.82
return 30,362,731.18 $35,908,125.08
return 30,592,250.85 $38,127,230.37
return 30,821,770.53 $39,847,041.32
CCFT 184,124,319.35
NPV $39,847,041.32
IRR 78%
44
ANNEX 3: LOAN REPAYMENT SCHEDULE
years 1 2 3 4 5 6 7 8 9 10
begning 26,230 23,607 20,984 18,361 15,738 13,115 10,492 7,869, 5,246, 2,623,
balance ,820.0 ,738.0 ,656.0 ,574.0 ,492.0 ,410.0 ,328.0 246.0 164.0 082.0
0 0 0 0 0 0 0 0 0 0
interest 0.125 0.125 0.125 0.125 0.125 0.125 0.125 0.125 0.125 0.125
rate
interest 32788 29509 26230 22951 19673 16394 13115 98365 65577 32788
52.5 67.25 82 96.75 11.5 26.25 41 5.75 0.5 5.25
princip 26230 26230 26230 26230 26230 26230 26230 26230 26230 26230
al 82 82 82 82 82 82 82 82 82 82
ending 23,607 20,984 18,361 15,738 13,115 10,492 7,869, 5,246, 2,623, 0.00
balance ,738.0 ,656.0 ,574.0 ,492.0 ,410.0 ,328.0 246.00 164.0 082.0
0 0 0 0 0 0 0 0
45

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PROJECT PROMOTER:

PROJECT PROPOSAL FOR MAGI STONE CRUSHING

Profitability and Return on investment........................................................33

The proposed project is expected to create employment opportunity to several citizens of

2. PROJECT BACK GROUND

OBJECTIVE OF THE COMPANY

 Producing quality product

 Creating employment opportunities for employees from surrounding areas

 Technology and knowhow transfer particularly in the industry

 Supply input for construction industry

THE PROPOSED LEASE FINANCING

Table 2.1: machinery and equipment

STRUCTURE OF THE FEASIBILITY STUDY

3. MARKET STUDY AND PLANT CAPACITY

OVER VIEW OF THE MEKELLE URBAN DEVELOPMENT HISTORY

Figure 1: Spatial growth trend of Mekelle city

Source: MCPPO, 2008

Table3.1: Urban expansion pattern of Mekelle at different period

boundary (HA) boundary (KM2) previous referenced year

DEMAND AND SUPPLY GAP ANALYSIS

Land use proportion

Table 3.2: Demand and supply of aggregates (2018-2022)

year Supply m3 demand in m3

According the historical data of supply and demand of aggregates of

The rapid development of high-rise buildings, housing complexes, malls, governmental

Table:3.3 projected land use expansion for Mekelle city

Land use component Area (Ha) % age

1 Housing/Mixed Residence 5705.44 40.0

2 Business and Commerce 1141.088 8.0

3 Social and Municipal Services 1426.36 10.0

4 Green, recreation, Sports, and environment sensitive 1426.36 10

5 Administration 285.272 2.0

6 Manufacturing and Storage 2139.54 15.0

7 Infrastructure, Utilities, and Transportation 2139.54 15

Total 14263.6 100.0

 50% of the proposed land will be built up area

 Gravel Consumption Per M2 of Floor Area 0.35 m3

PRICING AND DISTRIBUTION

A. Advertising: This comprises advertising in print Medias, TV channels, on permanent

B. Personal Selling: Undoubtedly customer solicitation face-to-face will be a powerful

 High demand of construction

PLANT CAPACITY AND PRODUCTION PROGRAMME

Table 3.4: PRODUCTION PROGRAMME

Production[m3] 80,000 100,000

Capacity utilization 80 100

MATERIAL AND INPUTS

Table 3.5: ANNUAL RAW MATERIAL AND OTHER INPUTS

Sr. Material/Input Unit of Qty. Cost (Birr)

Table 3.6: UTILITIES REQUIREMENT & COST

Utility Qty. Unit Rate Cost (Birr)

Electricity 300,000 0.4736 142,080

Water 5,000 3.25 16,250

PLANT LOCATION AND SITE

MACHINERY AND EQUIPMENT

Table 5.1: MACHINERY AND EQUIPMENT REQUIREMENT AND COST

bank charge and others (10%)

ENVIRONMENTAL IMPACT AND MITIGATION

HEALTH AND SAFETY