smeda stone crushing

Pre-Feasibility Study

SSttoonnee CCrruusshhiinngg

(((SSSMMMEEEDDDAAA DDDOOOCCCUUUMMMEEENNNTTT)))

Small and Medium Enterprise Development AuthorityGovernment of Pakistan

www.smeda.org.pk

HEAD OFFICE

Waheed Trade Complex, 1st Floor , 36-Commercial Zone, Phase III, Sector XX, Khayaban-e-Iqbal, DHA LahoreTel: (042) 111-111-456, Fax: (042) 5896619, 5899756

[email protected]

REGIONAL OFFICE PUNJAB

REGIONAL OFFICE SINDH

REGIONAL OFFICE NWFP

REGIONAL OFFICE BALOCHISTAN

6th Floor, LDA Plaza, Egerton Road, Lahore

Tel: (042) 111-111-456Fax: (042) 6304926, 6304927

[email protected]

5TH Floor, BahriaComplex II, M.T. Khan Road,

Karachi.Tel: (021) 111-111-456

Fax: (021) [email protected]

Ground FloorState Life Building

The Mall, Peshawar.Tel: (091) 9213046-47


Bungalow No. 15-AChaman Housing Scheme

Airport Road, Quetta.Tel: (081) 831623, 831702


March, 2005

Pre-Feasibility Report Stone Crushing

PREF-8/Mar, 2005/Rev1

DISCLAIMER

The purpose and scope of this information memorandum is to introduce the subject

matter and provide a general idea and information on the said area. All the material

included in this document is based on data/information gathered from various sources and

is based on certain assumptions. Although, due care and diligence has been taken to

compile this document, the contained information may vary due to any change in any of

the concerned factors, and the actual results may differ substantially from the presented

information. SMEDA does not assume any liability for any financial or other loss

resulting from this memorandum in consequence of undertaking this activity. Therefore,

the content of this memorandum should not be relied upon for making any decision,

investment or otherwise. The prospective user of this memorandum is encouraged to

carry out his / her own due diligence and gather any information he/she considers

necessary for making an informed decision.

The content of the information memorandum does not bind SMEDA in any legal or other

form.

DOCUMENT CONTROL

Document No. PREF-8

Revision 8

Prepared by SMEDA-Sindh

Approved by Provincial Chief - Sindh

Issue Date March, 2005

Issued by Library Officer



PPRROOJJEECCTT PPRROOFFIILLEE

11..11 OOPPPPOORRTTUUNNIITTYY RRAATTIIOONNAALLEE

Over the last few years, the Construction sector has been registering strong growth rates in the range of 7-8%1. Housing and construction is one of the major drivers of growth in more than 40 allied industries including STONE CRUSHING. In addition, for the building of roads, flyovers and bypasses, there is a mass and consistent need of crushed stone across the country. Several projects are in progress and are being commenced shortly which will have high demand of crushed stone all over the country.

In order to make up the backlog and meet the projected requirements for the next 20 years, overall housing construction has to raise 500,000 housing units per annum2. This is the extent of the annual housing market in Pakistan which positively predicts a strong growth in construction sector which reinforces the potential in Stone Crushing segment of the industry.

The total length of roads in the country is in excess of 250,000 km, including nine National Highways and one Motorway (M-2). The construction work on Islamabad-Peshawar Motorway, started in 1998, is in progress. The total length of motorways planned in the country is 2169 k.m. 367 Km Lahore- Islamabad section is completed and 208 Km Islamabad – Peshawar Motorway (M1) is under construction3.

Karachi Northern Bypass and Makran Coastal Highway are under construction. Total length of Makran Coastal Highway is 248 Km. The construction of Pakistan Motorway connecting the Northern and Southern parts of the country with a link to Gawadar has been initiated. Two additional Motorway projects, Pindi Bhattian – Faisalabad (M-3) of 52 Km and Karachi – Hyderabad (M-9) have been awarded on Built Operate Transfer (BOT) basis. The main Karakuram Highway (N-35) 735Km long is being improved.

The aforementioned statistics provide enough evidences, assuring a steep and continuousgrowth vis a vis investment opportunity in the STONE CRUSHING business.

11..22 PPRROOJJEECCTT BBRRIIEEFF

The proposed project envisages the setting up a unit for crushing stone. Stone crushing industry is an important industrial sector in the country engaged in producing crushed

1 Economic Survey of Pakistan 2004

2 Daily Times Site Edition of Nov. 18, 2004 – Quoted by Shaukat Aziz at a two-day conference on the housing finance system of Pakistan.

3 Ministry of Communications



stone used as raw material for various construction activities i.e. construction of roads, bridges, buildings and canals. For building and construction purposes, generally Hard Lime Stone is used. Though, low quality Granite could also be used, its excavation is difficult and it is comparatively a high cost option. In addition, it is mostly used for decorative construction for its beauty and shaded colors. The stone crushing units couldbe seen in the vicinity of almost all major cities and towns of Pakistan.

The mined stone is transported to the crusher sites by road (if crusher is located on different point) through tractor trolleys, dumpers or pay-loaders. The dumpers unload the mined stones into storage hoppers located at elevated levels of the crusher sites. These stones are crushed in a Primary Crusher and sent to a vibratory screen. The oversize stones from the screen is sent for further size reduction in secondary and tertiary Crushers. From the secondary and/or tertiary Crushers, the crushed stones are sent for screening. In the screen, products of various sizes get separated which are stored in heaps. Movement of stones from crusher to screen to product piles is done through belt conveyors. The product is generally stored in open areas. The schematic of typical stone crusher units is given on page 13 of this document under the heading of process flow.

11..33 MMAARRKKEETT EENNTTRRYY TTIIMMIINNGG

Stone Crushing business depends on activity and movement in construction industry. Housing and construction plus government initiated development projects demand mass availability of crushed stone all over the year. Therefore, a crushed stone manufacturing unit could be established at any time of the year.

11..44 PPRROOPPOOSSEEDD BBUUSSIINNEESSSS LLEEGGAALL SSTTAATTUUSS

The legal status of business tends to play an important role in any setup; the proposed Stone Crushing Unit is assumed to operate on Sole Proprietorship basis.

11..55 PPRROOJJEECCTT CCAAPPAACCIITTYY AANNDD RRAATTIIOONNAALLEE

Production capacity of the plant for the proposed stone crushing unit would be 15,000 Cubic ft per day at the beginning of the project. It is estimated that the construction of a small house of 120 sq. ft need minimum of 500 C. ft. of crushed stone to be used in the construction of columns/pillars, ceiling etc. Estimated countrywide requirement of 500,000 housing units per annum and development works in construction and civil sector by the government, all indicate a persistent high growth and mass demands of crushed stone.

1.5.1 Raw Material Sourcing & Legal Implications

Hard Lime Stone is the basic raw material which is used for the production of quality crushed stone. God has bestowed Pakistan with huge reserves of mineral wealth which are spreading all over the country and especially enormous reserves of Hard Lime Stone



are generally found around the country in all provinces. All mineral resources of Pakistan are managed under the administration of Provincial Mineral Development Authoritieswho have the licensing authority for mining and quarrying.

For the procurement of raw stone which is the basic raw material, it would be a pre requisite for the entrepreneur to take a quarry license and land lease holding from the concerned provincial licensing authorities for mineral development.

In order to obtain quarrying license and lease holding, an entrepreneur first would contact the concerned provincial mineral department and will identify a location where he is interest in setting up the crushing unit along with the size of land and its exact location on the map provided by the department. After geographical identification of the site,entrepreneur submits a lease procurement application.

Provincial licensing authority may grant a mining/quarrying lease in accordance with the Provincial Mining & Quarrying Concession Rules, over the land specified by theapplicant provided they consider the applicant fit for it.

Concerned authority after the scrutiny of the documents and the case, authorize the lease allotment in a group meeting headed by the concerned Director General. This license permits the entrepreneur to setup crushing factory and could excavate raw stone from the land for which he hold the lease license.

11..66 PPRROOJJEECCTT IINNVVEESSTTMMEENNTT

A total of Rs. 21.324 million is estimated to be the cost of the project. The working capital requirement is estimated around Rs 0.894 million and Rs. 20.43 million would be the fixed investment.

11..77 PPRROOPPOOSSEEDD PPRROODDUUCCTT MMIIXX

For the purpose of this feasibility, mechanized manufacturing process involved to produce crushed stone, product output would be of the following ratio:

S. No.

Product Name% age share in

Total ProductionSelling Price/ C.ft.

1 1 inch crush 25% Rs. 8

2 ¾ inch crush 25% Rs. 8

3 ½ inch crush 20% Rs. 6

4 Stone Powder 30% Rs. 2

Total 100%



11..88 RREECCOOMMMMEENNDDEEDD PPRROOJJEECCTT PPAARRAAMMEETTEERRSS

Capacity Human Resource Technology/Machinery Location70% Capacity Utilisation (based

on 8 working hrs. daily19 Local Nooriabad,

Sindh

Financial Summary

Project Cost IRR NPV Payback PeriodCost of Capital

(WACC)Rs. 21.324 million 48% 26,589,958 2 Year 3 Months 15 Days 17.50%

11..99 PPRROOPPOOSSEEDD LLOOCCAATTIIOONN

Proposed location for setting up a stone crushing unit largely depends on the availability of raw stone and its transportation to the factory at low cost; however, factors like availability of manpower, utilities and easy access to the target markets should also be carefully examined. For this pre-feasibility we propose a location around Karachi somewhere in Hub, Superhighway, Manghopir, Jhampir or Nooriabad. The reason being most of the crushing units are already working in these areas.

The stone crushing units are being operated countrywide; the reason is the demand whichis spread all over the country, though, concentrated around developed cities and towns i.e. Karachi, Lahore, Multan, Faisalabad, Peshawar, Quetta etc.

To set up a unit, quarrying sites are generally preferred. As we have proposed to setup the unit somewhere around Karachi to cater to its massive housing construction needs as well as government initiated projects i.e. Lyary Express Way, Makran Coastal Highway and a number of small overhead bridges etc. It is proposed that the unit would be installed at Nooriabad Industrial Estate where all necessities are available and market access and transportation of produce is easy.

11..1100 KKEEYY SSUUCCCCEESSSS FFAACCTTOORRSS//PPRRAACCTTIICCAALL TTIIPPSS FFOORR SSUUCCCCEESSSS

Crushed Stone business is dependent on the pricing and margins given to builders, suppliers and retail customers. It also depends on efficient supply of crush to the customer and communication facilities provided to the prospective clients, retailers and order bookers.

11..1111 SSTTOONNEE CCRRUUSSHHIINNGG –– BBUUSSIINNEESSSS MMOODDEELL AANNDD DDIISSTTRRIIBBUUTTIIOONN

Generally crushed stone units pile the produce on quarry sites (mostly outside the city) in huge volumes in the open space. Construction contractors, retail customers and builders contact crusher in order to obtain crushed stone.



1.11.1 Conventional Order Booking Arrangements

As we have discussed earlier, stone crushing is one of the allied sector of construction industry. Therefore, all raw material suppliers to the construction industry are considered to be the part of the distribution network for the crushed stone.

A stone crusher when setting up a crushing unit, initiate and institute contacts with the construction material suppliers, retailers and signup a contract in order to appoint them as order booking agents. Generally, construction and building material supplier, who is the part of the whole chain, links up customer and operator [of stone crushing unit]. Sometimes he has his own delivery vehicles and in most of the cases, keeps arrangement with the commercial vehicle operators, material manufacturers, and buyer, thereby assuming a significant role in the value chain.

1.11.2 Ordering and Delivery Procedure:

Crusher appoints order booking agents (building material suppliers) with in the city who entertain the customer. Customers usually send someone or personally go to the booking office and place the order which includes details indicating quantity, quality, size and time of delivery etc. Booking agent gets the payment in cash (mostly) and issues an order / delivery slip to the customer, showing order details.

Buyer hires a truck or loading vehicle and goes to the crush storage site, where he produces the order slip (in local term called ‘perchi’) to the person responsible for the physical delivery of the crush. That person renders the order as given on the slip. After loading the vehicle, he hands over it to the buyer /order booker and here ends the role of the crusher.

Crushed stone producers also book direct orders at crushing site office for the construction contractors, retail customers and builders on phone and supply directly to the identified delivery points. However, these types of facilities are only provided for bulk orders with using their own delivery vehicles. Bulk deliveries constitute around 30% of total annual sales.

In the Stone Crushing industry, middle man role is being played by building material suppliers at a nominal margin of 1% to 2% of the order booked.

11..1122 PPRROODDUUCCTT MMAARRKKEETTIINNGG

In the manufacturing industry, marketing is considered to be of significant importance. In the Stone Crushing industry, marketing parameters are very limited and usually in some



degree associated with the construction sector. Some of the marketing promotion activities which should duly be rendered are given below:

Connection development with the building material suppliers, well knownbuilders and contractors.

Update information on civil and construction works initiated by local, provincial and central government.

Draw linkages with material suppliers to the housing industry at town level.

Emphasis on image development and acquaintance across individual contractors who are serving private sector.

Establish contacts with local civil engineering firms, individuals and professionals.

22.. SSEECCTTOORR && IINNDDUUSSTTRRYY AANNAALLYYSSIISS

22..11 SSEECCTTOORR CCHHAARRAACCTTEERRIISSTTIICCSS AANNDD OOVVEERRVVIIEEWW

Pakistan has enormous wealth of Non-metallic mineral deposits round the country. It mainly consists of building stones, marble, onyx, gemstone etc. In the following table we have provided a brief account of the non-metallic mineral products4 of Pakistan:

MINERAL/COMMODITY RESERVES (IN TONNES) LOCATION QUALITY

Cement Raw Material Very Large Deposits All provinces of Pakistan

V. Good

Very Large Deposits Chagai – Balochistan V. Good Marble/Aragonite

Noushehra - NWFP

Rock Salt Very Large Deposits Salt Range - Punjab V. Good

Very Large Deposits Many districst of Balochistan –

Good Building Stones

NWFP - Sindh

Limestone Very Large Deposits All provinces and AJK Good

Dolomite Very Large Deposits Jhimpir - Sindh Medium

Very Large Deposits Surghar Range – Punjab Medium

Silica Sand Thano Bulla Khan -

Sindh

Fuller's Earth Fairly Large Deposits Khairpur, Dadu - Sindh Good

4 Sector Profile, Board of Investment, Pakistan 02-03



MINERAL/COMMODITY RESERVES (IN TONNES)

LOCATION QUALITY

5-6 billion Tonnes Salt Range, D.G.Khan –Punjab

Good

Gypsum and Anhydrite Spintangi - Balochistan,

Dadu - Sindh

100,000,000 Kala Chitta and Salt Range - Punjab

Good Fire Clay

Meting Jhimpir - Sindh

Clays (including China Clay) 34,000,000 NWFP - Punjab - Sindh Good

30,000,000 Lasbela, Khuzdar –

Balochistan

Mostly drilling mud

type Barite

Hazara - NWFP

Phosphate 22,000,000 Kakul - NWFP Medium to low grade

12,000,000 Abbottabad – NWFP Medium

Magnesite Muslimbagh, Wad -Balochistan

Sulphur 800,000 Koh-i-Sultan -Balochistan

Medium to low grade

Soap Stone 600,000 Parachinar - NWFP Good

185,173 Million Tonnes

Sindh, Balochistan, Sindh, N.W.F.P.

Lignite A to Bituminous A

CoalMianwali, Attock -

Punjab

Fluorite 100,000 Kalat Good

Gemstone Not Estimated Northern Areas Good

Geographical studies give evidence on availability of enormous reserves of decorative and building stones such as granites, diorite, dunite, tonalite, pyroxenite, syenites, serpenites, gabbro, onyx, marble of different shades, recrystallized limestone, fossiliferrous limestones, sand stone and magnesium sandstones, etc.

According to Geographical Survey of Pakistan, Balochistan has large deposits of building stones with an estimated annual production of 13,000 metric tones for the year 2002-03. Production estimates of 2002-03 for various types of building stones in Pakistan aregiven in the following table:



S. No.

Stone Type Deposits Production (000 tonnes)

1 Aragonite/Marble Large 497,317

2 Basalt Large 217

3 Building stone Large 16,011

4 Conglomerate Large 276

5 Ebry stone Medium 209

6 Granite Large 5,676

7 Gravel Large 19,684

8 Onyx marble Large 28,780

9 Ordinary stone Large 1,887

10 Sand / Bajri Large 92,670

11 Sandstone Large 2,255

12 Serpentine Large 4,204

13 Slate stone Large 108,182

Source: Sector Profile, Board of Investment, Pakistan 2002-03

22..22 SSUUBB SSEECCTTOORR IINNFFOORRMMAATTIIOONN

2.2.1 Hard Lime Stone and Granite5

For crushed stone manufacturing purpose, majority of the crushing units use Hard Lime Stone, the reason lies in its extreme hardness and it also gives maximum strength to the building structure. Another reason is that it is easily available across the country in large quantities; however, 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; however, in case of Granite, so far known sources of workable granites in the country which could be used for crushing purposes are only found in Nagarparkar, South East (Sindh) and Manshera in the North (NWFP). Gilgit Region (Northern Areas) does indicate great potential of variety, quality and quantity of granites that according to geological evidences have superiority over other granites in Pakistan.6

5 Sector Profile by Board of Investment, Pakistan 2002-03

6 Expert Advisory Cell Digest of Industrial Sectors 2003



The reserves of Hard Lime Stone in Pakistan have not been specifically estimated, yet broad figure of tens of billions of tonnes is generally quoted.

2.2.2 Stone Crushing Units in Pakistan

Cumulative figures on province wise distribution of stone crushing units and their production are not available from formal sources; however, in Balochistan, there are 75-80 stone crushers working only in the Dhadar and Mach sub-divisions run by the private sector, except for one which is run by the National Logistics Cell (NLC).

Based on our discussions with the industry experts and entrepreneurs, it is estimated that in Sindh, more than 30 stone crushing units are working. In case of Punjab, the working units are estimated at more than double to that of the units working in Sindh, whereas in NWFP, around 15 units are reportedly operational.

22..33 LLEEAASSEE RREENNTTAALL AANNDD TTAAXX SSTTRRUUCCTTUURREE

Other than the sales tax which is 15%, there will be a fixed amount of Rs. 10,000,payable at the time of submission of quarry land lease application (This amount has been built in preliminary expenses). Besides, there is another sum of around Rs. 70,000 to 100,000 on account of annual lease rental, payable at the beginning of the year.Aforementioned figures are based on the assumption that the size of leased land would be of around 200-250 acre.

22..44 EENNVVIIRROONNMMEENNTTAALL && PPRROOTTEECCTTIIOONN AASSPPEECCTTSS

Persistent exposure to asbestos which is a natural fiber found in the dust particles of crushed stone, are produced in stone-crushing factories during the crushing process. To avoid its harmful effect on human health, it is suggested to follow complete instructions and procedures provided by the provincial agency of environment protection.

The major environmental aspects for stone crushing units are discussed in the following lines.

Location of plant has to be such that ingress of heavy vehicles does not block the traffic. Evening and late night operation is to be avoided if passage is through residential areas. Payload area is covered by tarpaulins when transporting crush to prevent fall out of fines and emissions of dust.

Dust containment enclosures are required for the purpose of containing the emissions within an enclosure and to prevent wind currents, which can spread the dust to larger areas.



The enclosures should be, complete from all four sides and roof. There should not be open windows/ openings etc. The gaps should be sealed using gaskets or wool type packing etc.

The Dust Suppression System should comprise of a covered water storage tank, a pump, an online water filter, connecting GI pipes, spray nozzles each fitted with flowregulating valves.

Volume and strength reduction of the effluent is to be achieved by preventing mixing of waters from washing activities and processing activities

Liquid effluent is to be treated by sedimentation process meaning subjecting the effluent to flow through settling tanks

Effluent is to be treated by coagulation, i.e. adding any coagulant to the settling tanks.Though this treatment is expensive as compared to the sedimentation process, it isreportedly more efficient.

33.. MMAARRKKEETT IINNFFOORRMMAATTIIOONN

33..11 MMAARRKKEETT PPOOTTEENNTTIIAALL

Stone Crushing units across the country are working mostly as unorganized sector and no reliable data is available for the installed capacity and the number of operational units.However, since it is an allied industry of the construction sector, growth in construction sector may be considered as proxy for the growth in stone crushing sector, i.e. around 7-8%.

33..22 EEXXPPOORRTTSS AANNDD IIMMPPOORRTTSS OOFF CCRRUUSSHHEEDD SSTTOONNEE7

Crushed stone has a very minor share among the exports of non-metallic mineral products of Pakistan. It is observed that during the year 2000-03, total export volume of the crushed stone has been US $ 8,222, whereas, Marble with the highest share of US $ 5,968,232 remained at the top.

The market scope for crushed stone is found to be encouraging in local market with the increased demand from building industry & construction fields. There is also a sufficient demand from Govt. Contractors for lying of roads and construction of industries etc.

7 Source: Federal Bureau of Statistics



33..33 PPRROOBBLLEEMM//TTHHRREEAATTSS TTOO TTHHEE SSTTOONNEE CCRRUUSSHHIINNGG SSEECCTTOORR88

Local customs and traditions, non-availability of infrastructure facilities like roadsand electricity are the major hurdles in the development of the sector.

Poor law and order situation particularly in geologically promising areas.

Non-availability of modern machinery in local market at cheaper rates. Lack of reliable and comprehensive geological data base/ mapping.

Non-availability of latest and modern exploration techniques/ machinery. Non development oriented Mineral Concession Rules Lack of investment friendly environment created by the relevant government

agencies. Lack of coordination among various mineral sector agencies.

44.. PPRROODDUUCCTTIIOONN PPRROOCCEESSSS

44..11 SSTTOONNEE CCRRUUSSHHIINNGG -- PPRROODDUUCCTTIIOONN PPRROOCCEESSSS FFLLOOWW

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 make it further smaller in size as required by the customer. In the hammer crusher, the stone is crushed. The crushed stone is screened to separate the produce in different sizes by the separator. The crushed stone is conveyed by the conveyors to trucks for transport to the market place or storage area.

Process flowchart of a stone crushing unit has been given on the following page.

8 Digest of Industrial Investment in Pakistan, Expert Advisory Cell



SSttoonnee CCrruusshhiinnggPPrroocceessss FFllooww

MinedStone

PrimaryCrusher

Raw MaterialHopper

Primary VibratoryScreen

Tertiary Crusher Secondary Crusher

Product to Stockpile

Secondary VibratoryScreen

Product to Stockpile



44..22 RRAAWW MMAATTEERRIIAALL RREEQQUUIIRREEMMEENNTT

Hard Lime Stone will be used as raw material for manufacturing crushed stone. Raw stone could be purchased directly from the excavator (quarry lease holder) or crushermay hold his own quarry lease to produce raw stone. For the purpose of this pre-feasibility, it is proposed to obtain a quarry lease holding to avoid any possible threat in procuring raw stone as well as to keep the project economically stable.

For the proposed project, a total of 15,000 C.ft. of Hard Lime Stone would be the daily requirement. This requirement could sufficiently be fulfilled from the obtained quarry siteover a period of years.

44..33 MMAACCHHIINNEERRYY RREEQQUUIIRREEMMEENNTT

Machinery required for the crushing / processing of stone is available from both local and imported sources. Local machinery reportedly gives good quality output. Following machinery will be required for setting up a Stone Crushing Unit:

S. No

Name of the Machine Specification NoTotal Cost

in Rs.

1 Hammer Crusher 110 hp 1 1,200,000

2 Feed Conveyers 1 240,000

3 Vibrating Screen 25 hp 1 200,000

4 Delivery Conveyers (4)* 1 880,000

5 Pumps and motors 680,000

6 Erection 200,000

7 Support structure 600,000

Total 4,000,000

*There will be 4 conveyers to convey 4 sizes of crushed stones

Above machinery will give the sufficient production with a rated capacity of 2500 cubic feet of crushed stone per hour.

There are many local suppliers of stone crushing machinery working in Karachi and other cities who could be contacted for obtaining machinery; however, during the course of study for this pre-feasibility we have contacted the following local manufacturer and fabricator of crushing machinery:

Pak Engineering & Construction

37, 15th Street, Khayaban-e-Mujahid

Phase V, DHA, Karachi



44..44 VVEEHHIICCLLEESS FFOORR QQUUAARRRRYY//EEXXCCAAVVAATTIIOONN AANNDD TTRRAANNSSPPOORRTTAATTIIOONN

The proposed setup would require three to four vehicles (new machinery has beenconsidered for the proposed project) to carryout excavation/quarry operations and shifting of mined stone to the crushing site. Besides, dumping and loading vehicles for the transportation of finished product to the piling points as well as for delivery to the prospective customer (only for bulk supplies) would be a pre-requisite. Details of required vehicles have been provided in the following table:

S. No.

Name of Vehicle/Machine

Purpose of the Machine No. of Units Required/Proposed

Total Cost(Rs.)

1 Bulldozer Excavation 1 6,000,000

2 Shovel Loads Stone Loading 1 4,000,000

3 Dumper Material Transportation 1 (Preferably 2) 4,000,000

4 Other Tools & Equipment 40,000

Total 14,040,000*Machinery costs depend on model and may vary

During the discussions with the market experts and entrepreneurs, it was observed that, though the above machinery/vehicle could also be hired on rent, yet, the incremental cost difference between rented and purchased machinery would be very close over a long period of time. Therefore it would be preferred to acquire own machinery rather than obtaining rented.

44..55 PPLLAANNTT AANNDD MMAACCHHIINNEERRYY MMAAIINNTTEENNAANNCCEE

Machinery is expected to be serviced on an annual basis. During the projection period, maintenance expenses are estimated to be around 3% of the total cost of machine.Though, there would be no major overhauling required in presence of annual maintenance, yet, 3% provision for maintenance (which is around Rs. 550,000) is assumed to be sufficient to cover overhauling as well.

55.. LLAANNDD && BBUUIILLDDIINNGG RREEQQUUIIRREEMMEENNTT

55..11 SSIITTEE DDEEVVEELLOOPPMMEENNTT ((CCOONNSSIIDDEERREEDD OONN LLEEAASSEE))

The Stone Crushing project is estimated to require a total area of 200-250 acre. This area will be used for quarrying purpose as well as a total of 4 acre of the land would be used



for setting up the crushing unit. Heavy machinery and vehicles i.e. dumper, bulldozer, shovel loads etc. would be used which require open space for the movement as well as there will be frequent movement of heavy transportation and delivery vehicles. Moreover, the space would also be used for machinery installation, storage and vehicle parking and different services necessary for the project.

55..22 LLAANNDD && BBUUIILLDDIINNGG RREEQQUUIIRREEMMEENNTTSS FFOORR CCRRUUSSHHIINNGG FFAACCTTOORRYY

Land and building requirements for the crushing factory would be as follows:

DetailsSize/Area (Sq. Ft.)

Civil Works /Construction Cost/Sq. Ft.

Total Construction

Cost

Factory / Covered AreaStone Crushing Hall 5,000 300 1,500,000Factory Office 50 300 15,000Factory / Open SpaceStorage Area (Crushed Stone) - -

1 inch crush Not limited - -

¾ inch crush Not limited - -

½ inch crush Not limited - -

Stone Powder Not limited * - -

Storage Area (Raw Stone) Not limited - -Other Services (water plant, tool shop etc.) 50 300 15,000Total Covered Area 5100 1,530,000

Factory construction, land costs and the rental values are subjected to the site location, therefore could vary as the location would changeSource for Quarry Land Lease: Based on discussions with industry experts and entrepreneurs* Stone Powder will be piled in open space and be kept covered with tarpaulin to avoid any possibility of dust emission and health hazard.

The factory would be located at Nooriabad, Sindh. The reason for the selection is that utilities, water, electricity and skilled manpower are conveniently available. Likewise, its proximity to the target market, good transport and communication facilities, and being a business center of the region also account for its selection.

66.. HHUUMMAANN RREESSOOUURRCCEE RREEQQUUIIRREEMMEENNTT

Construction and allied industry is a labor intensive industry; therefore, a total 19 persons will be required to handle the production operations of a stone crushing unit. The business unit will work on one shift basis (8 hours daily). Technical staff with relevant experience will be required for operating production plant. The staff will be provided training by the plant & machinery supplier.



Total approximate manpower required for the business operations along with the respective salaries are given in the table below:

(Pak. Rs.)

Staff Title No of PersonsMonthly Salary

Annual Salary

1. Business Unit Manager/Owner

Production Staff (Quarry/Excavation Site)

2. Bulldozer Operator 1 10,000 120,000

3. Shovel Load Operator 1 10,000 120,000

4. Dumper Driver 2 16,000 192,000

5. Helper/Laborer 3 15,000 180,000

Production Staff (Crushing Factory)

6. Crushing Incharge /Plant Operator 1 8,000 96,000

7. Assistant Crushing Plant Operator 1 5,000 60,000

8. Factory Workers 8 40,000 480,000

Total Production Staff 17 104,000 1,248,000

General Administration/ Selling Staff

9. Office Assistant 1 5,000 60,000

10. Driver 1 5,000 60,000

Total G A /S Staff 2 10,000 120,000

TOTAL 19 114,000 1,368,000

6.1 Experience Requirement for the Staff

Machinery and vehicle operations involved at a quarry and crushing site are of technical nature; therefore it is proposed that Bulldozer Operator, Shovel Loads Operator and Drivers should have a minimum of one year experience of the same type of operations.For quarrying staff, it would also be necessary to have sufficient experience of chemical based rock/stone breaking operations.

One to two year of crushing experience on mechanized crushing machinery would be necessary for the person who will operate the stone crushing plant. It is also suggested



that preference should be given to literate persons so that they could understand the significance of undertaking health and safety measures.

77.. FFIINNAANNCCIIAALL AANNAALLYYSSIISS && KKEEYY AASSSSUUMMPPTTIIOONNSS

The project cost estimates for the proposed “Stone Crushing Business” have been formulated on the basis of discussions with industry stakeholders and experts. The projections cover the cost of land, machinery and equipment including office equipment, fixtures etc. Assumptions regarding machinery have been provided, however, the specific assumptions relating to individual cost components are given as under.

77..11 LLAANNDD && BBUUIILLDDIINNGG

Land for setting up the proposed stone crushing unit would be acquired on lease for a period of 30 years. Lease concession would be granted by the Mineral Development Authority of the concerned province. One time payment of Rs. 10,000 as initial charges will be payable with lease application (this amount has been included in preliminary expenses). In addition, a recurring amount of around Rs. 100,000 would also be payable on account of annual lease charges.

Construction and renovation of crushing site will cost around Rs. 800,000/- which has been assumed to depreciate at 10% per annum using diminishing balance method. Total initial outflow for acquisition of land on lease would be as follows:

Description CostLease Holding Period 30 YearsTotal Size of Land 200-250 AcreAnnual Lease Charges of Land 100,000Total 100,000

77..22 OOVVEERRAALLLL FFAACCTTOORRYY && OOFFFFIICCEE RREENNOOVVAATTIIOONN

To renovate the factory / office premises in Year 5 and Year 10, a cost would incur for which an amount equivalent to 5% of the total factory/office construction cost is estimated.

77..33 FFAACCTTOORRYY // OOFFFFIICCEE FFUURRNNIITTUURREE

A lump sum provision of Rs. 60,000 for procurement of office/factory furniture is assumed. This would include table, desk, chairs, and office stationery. The breakup of Factory Office Furniture & Fixtures is as follows:



Item Number Total Cost

Table & Chair for Owner 1 5,000

Tables & Chairs for Admin. Staff 1 3,000

Waiting Chairs 4 6,000

Curtains & Interior Decoration for office - 5,000

Chairs for Workers/Labor 6 5,000

Electrical Fittings & Lights - 30,000

Others - 6,000

Total 60,000

77..44 DDEEPPRREECCIIAATTIIOONN TTRREEAATTMMEENNTT

The treatment of depreciation would be on a diminishing balance method at the rate of 10% per annum on the following. The method is also expected to provide accurate tax treatment.

1. Plant & machinery2. Land & Building Construction and Renovation3. Vehicles4. Furniture and Fixtures etc.

77..55 UUTTIILLIITTIIEESS && FFUUEELL FFOORR HHEEAAVVYY VVEEHHIICCLLEE OOPPEERRAATTIIOONNSS

Stone crushing plant will be operated using electricity for production purposes; thiswould draw considerable amount of electricity. Heavy vehicles i.e. bulldozer, dumper, Shovel Loads, etc. would require huge quantity of fuel for which diesel will be used. The cost of the utilities including electricity, diesel/fuel (for heavy vehicle operations), telephone, and water is estimated to be around Rs. 6,500,000/- per annum approximatecost of utilities has been given below:

UtilityTotal Monthly

Cost (Rs.)Total Annual

Cost (Rs.)Annual %age

Increase

1. Electricity 26,000 310,000 5%

2. Gas or Furnace Oil, Lubricants etc. 5,000 60,000 3%

3. Diesel for Vehicles and Machinery 500,000 6,000,000 5%

4. Water 5,500 67,000 5%

5. Telephone 5,000 60,000 5%

Total 541,500 6,497,000



77..66 WWOORRKKIINNGG CCAAPPIITTAALL RREEQQUUIIRREEMMEENNTTSS

It is estimated that an additional amount of one million rupees (approximately) will be required as cash in hand to meet the working capital requirements. These provisions havebeen estimated based on the following assumptions for the proposed business.

Description Amount in Rs.

First Three Months Salaries (Production staff) 312,000

First Three Months Utilities Charges (Other then fuel/diesel) 124,500

Fuel Inventories (Diesel) - 15 Operational Days 343,000

First Three Months Misc. Expenses 15,000

Annual Quarry Lease Charges – for first year 100,000

Total 894,500

77..77 PPLLAANNTT && MMAACCHHIINNEERRYY IINNSSTTAALLLLAATTIIOONN

Plant and machinery installation and trial run expenses has been assumed to be around Rs. 100,000/-. It has been included in the plant and machinery cost.

77..88 VVEEHHIICCLLEE FFOORR SSUUPPPPOORRTT AANNDD MMAAIINNTTEENNAANNCCEE SSEERRVVIICCEESS

An additional light loading vehicle would be required for providing services for the maintenance, communication of machinery spare parts, labor etc. For this purpose a transportation vehicle has been proposed and an amount of Rs. 400,000 is assumed to be required to purchase the vehicle.

77..99 PPRREELLIIMMIINNAARRYY EEXXPPEENNSSEESS AANNDD CCOONNTTIINNGGEENNCCYY PPRROOVVIISSIIOONN

A lump sum provision of Rs. 300,000 (including lease application & processing charges)is assumed to cover all preliminary expenses like registration, documentation charges, etc. which will be amortized over the 5 year period.

77..1100 SSEELLLLIINNGG && DDIISSTTRRIIBBUUTTIIOONN EEXXPPEENNSSEESS ((OORRDDEERR BBOOOOKKIINNGG AAGGEENNTTSS))

For the purpose of this pre-feasibility, it has been assumed that the crusher would work in association with building material suppliers and will appoint 5 to 6 of them as booking



agents. These arrangements would entail some cost to the business for which an amount equivalent to 2% of the annual sales has been assumed which also covers the distribution cost of bulk supplies, entertained directly by the crusher.

77..1111 MMIISSCCEELLLLAANNEEOOUUSS EEXXPPEENNSSEESS

Miscellaneous expenses of running the business are assumed to be Rs. 5,000 per month. These expenses include various items like office stationery, daily consumables, traveling allowances etc. and are assumed to increase at a nominal rate of 10% per annum.

77..1122 FFUUEELL IINNVVEENNTTOORRYY -- DDIIEESSEELL

Diesel is the major cost factor of the stone crushing process and production cycle can not be completed without generous availability of diesel. It has been assumed that fuelinventory would be maintained for 15 days operations. Increase in diesel prices has been assumed 5% per annum.

77..1133 FFIINNIISSHHEEDD GGOOOODDSS IINNVVEENNTTOORRYY

The proposed setup is assumed to maintain a Finished Goods Inventory of 15 days of the total annual production.

77..1144 RREEVVEENNUUEE PPRROOJJEECCTTIIOONNSS

For the revenue projections, crushed stone is assumed to be produced with one, half and ¾ inch sizes. Initial price of the stone with one inch and ¾ inch is assumed to be Rs. 8 per cubic feet. Whereas, stone crushed in half inch size would be sold at Rs. 6 per cubic feet. Sales price for Stone powder is assumed to be Rs. 2/C.ft. Prices of all products will increase by 2% annually. Percentage distribution of the total production has been assumed as follows:

Product Name % age share in Total Production

1 inch crushes 25%

¾ inch crushes 25%

½ inch crushes 20%

Stone Powder 30%

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 single shift of 8 to 12 hours a day. It has been assumed that it will take some time for the business to reach the optimal capacity utilization point for the projected period. Therefore, the first year



production of crushed stone has been estimated with 70% capacity utilization. Annual increase of 3% in capacity utilization is assumed over the projection period. Allprojections are based on 8 working hrs a day with 22 days a month.

Based on our discussions with the industry experts and entrepreneurs it is assumed that the sales price will increase with a nominal rate of 5% on all product categories duringthe projected period.

77..1155 AACCCCOOUUNNTTSS RREECCEEIIVVAABBLLEESS

Considering the industry norm, particular to the construction sector and all of its allied industries, it has been assumed that 70% of the sales will be on cash. Whereas, remaining 30% sales will be on credit to the builders and construction contractors. A collection period of 60 days is assumed for credit sales.

These assumptions are based on our findings during the discussions with the industry experts and stakeholders. A provision for bad debts has been assumed equivalent to 2% of the annual credit sales.

77..1166 FFIINNAANNCCIIAALL CCHHAARRGGEESS

It is assumed that long-term financing for 5 years will be obtained in order to finance the project investment cost. This leasing facility would be required at a rate of 15% (including 1% insurance premium) per annum with 60 monthly installments over a period of five years. The installments are assumed to be paid at the end of every month.

77..1177 TTAAXXAATTIIOONN

The business is assumed to be run as a sole proprietorship; therefore, tax rates applicable on the income of an individual tax payer are used for income tax calculation of the business.

77..1188 CCOOSSTT OOFF CCAAPPIITTAALL

The cost of capital is explained in the following table:

Particulars RateRequired return on equity 20%Cost of finance 15%Weighted Average Cost of Capital 17.5%

The weighted average cost of capital is based on the debt/equity ratio of 50:50.



77..1199 OOWWNNEERR’’SS WWIITTHHDDRRAAWWAALL

It is assumed that the owner will draw funds from the business once the desired profitability is reached from the start of operations. The amount would depend on business sustainability and availability of funds for future growth.

77..2200 AANNNNEEXXUURREESS77.. 2200..11 PPrroojjeecctteedd IInnccoommee SSttaatteemmeenntt77.. 2200..22 PPrroojjeecctteedd BBaallaannccee SShheeeett77.. 2200..33 PPrroojjeecctteedd CCaasshh FFllooww SSttaatteemmeenntt



PROJECT INCOME STATEMENT

Projected Income Statement (Rs.) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Net (Adjusted Sales) 20,894,133

23,128,189

25,033,455

27,073,537

29,279,872

31,666,007

34,246,595

37,037,481

40,055,803

43,320,095

Cost of Sales 7,783,992

8,437,695

9,146,795

9,916,028

10,750,539

11,655,916

12,638,232

13,704,085

14,860,641

16,115,689

Fuel & Electricity Consumed During Production 6,415,992 6,938,895 7,504,415 8,116,025 8,777,481 9,492,846 10,266,513 11,103,234 12,008,147 12,986,811 Labor (Production Staff) 1,248,000 1,372,800 1,510,080 1,661,088 1,827,197 2,009,916 2,210,908 2,431,999 2,675,199 2,942,719 Other Utilities 120,000 126,000 132,300 138,915 145,861 153,154 160,811 168,852 177,295 186,159

Gross Profit 13,110,141

14,690,493

15,886,660

17,157,509

18,529,333

20,010,091

21,608,362

23,333,396

25,195,162

27,204,406

General Administrative & Selling Expenses

Salaries 120,000 132,000 145,200 159,720 175,692 193,261 212,587 233,846 257,231 282,954 Lease Charges of Land - Quarry /

Excavation 100,000 103,000 106,090 109,273 112,551 115,927 119,405 122,987 126,677 130,477 Factory/Office Miscellaneous

Expenses 60,000 66,000 72,600 79,860 87,846 96,631 106,294 116,923 128,615 141,477 Amortization of Preliminary Expenses 60,000 60,000 60,000 60,000 60,000 - - - - - Depreciation Expense 2,013,000 1,811,700 1,630,530 1,467,477 1,320,729 1,196,306 1,076,676 969,008 872,107 784,897 Maintenance Expense 544,200 544,200 544,200 544,200 544,200 544,200 544,200 544,200 544,200 544,200 Selling & Distribution 417,883 462,564 500,669 541,471 585,597 633,320 684,932 740,750 801,116 866,402

Subtotal 3,315,083

3,179,464

3,059,289

2,962,000

2,886,616

2,779,646

2,744,094

2,727,714

2,729,946

2,750,406

Operating Income 9,795,059

11,511,030

12,827,371

14,195,509

15,642,718

17,230,445

18,864,268

20,605,682

22,465,216

24,454,000

Financial Charges (15% Per Annum) 1,495,762 1,246,902 958,038 622,737 233,535 - - - - -

Earnings Before Taxes 8,299,297

10,264,127

11,869,333

13,572,772

15,409,183

17,230,445

18,864,268

20,605,682

22,465,216

24,454,000

Tax 2,777,254 3,464,945 4,026,767 4,622,970 5,265,714 5,903,156 6,474,994 7,084,489 7,735,326 8,431,400

Net Profit 5,522,043

6,799,183

7,842,566

8,949,802

10,143,469

11,327,289

12,389,274

13,521,193

14,729,890

16,022,600

Monthly Profit After Tax 460,170

566,599

653,547

745,817

845,289

943,941

1,032,440

1,126,766

1,227,491

1,335,217



PROJECTED BALANCE SHEET

Projected Balance Sheet (Rs.) Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10AssetsCurrent AssetsCash & Bank Balance 551,248 4,706,455 10,397,513 15,686,057 20,571,422 24,523,925 30,347,380 36,096,686 40,352,377 43,700,520 46,156,718 Fuel Inventory (Diesel) 343,125 267,333 289,121 312,684 338,168 365,728 395,535 427,771 462,635 500,339 541,117 Finished Goods Inventory 0 416,545 472,255 512,187 555,518 602,539 653,566 708,944 769,047 834,281 905,087 Accounts Receivable 0 1,051,013 1,156,409 1,251,673 1,353,677 1,463,994 1,583,300 1,712,330 1,851,874 2,002,790 2,166,005

Total Current Assets 894,373 6,441,346 12,315,299 17,762,601 22,818,785 26,956,186 32,979,781 38,945,731 43,435,933 47,037,930 49,768,927 Fixed AssetsPlant Machinery & Facility 18,140,000 16,326,000 14,693,400 13,224,060 11,901,654 10,711,489 9,640,340 8,676,306 7,808,675 7,027,808 6,325,027 Factory Construction 1,530,000 1,377,000 1,239,300 1,115,370 1,003,833 979,950 881,955 793,759 714,383 642,945 655,150 Furniture & Fixtures 60,000 54,000 48,600 43,740 39,366 35,429 31,886 28,698 25,828 23,245 20,921 Vehicle 400,000 360,000 324,000 291,600 262,440 236,196 212,576 191,319 172,187 154,968 139,471 Total Fixed Assets 20,130,000 18,117,000 16,305,300 14,674,770 13,207,293 11,963,064 10,766,757 9,690,082 8,721,073 7,848,966 7,140,569

Intangible Assets

Preliminary Expenses 300,000 240,000 180,000 120,000 60,000 -

-

-

-

-

-

Total Assets 21,324,373 24,798,346 28,800,599 32,557,371 36,086,078 38,919,249 43,746,539 48,635,813 52,157,006 54,886,896 56,909,496 Owner's Equity 10,662,187 15,684,230 21,483,412 27,325,979 33,275,781 38,919,249 43,746,539 48,635,813 52,157,006 54,886,896 56,909,496Long Term Liability 10,662,187 9,114,116 7,317,186 5,231,392 2,810,297 0 0 0 0 0 0Total Equity & Liabilities 21,324,373 24,798,346 28,800,599 32,557,371 36,086,078 38,919,249 43,746,539 48,635,813 52,157,006 54,886,896 56,909,496



PROJECTED CASH FLOW STATEMENT

Projected Statement of Cash Flows (Rs.) Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10Cash Flow From Operating Activities

Net Profit 0 5,522,043 6,799,183 7,842,566 8,949,802 10,143,469 11,327,289 12,389,274 13,521,193 14,729,890 16,022,600Add: Depreciation Expense 0 2,013,000 1,811,700 1,630,530 1,467,477 1,320,729 1,196,306 1,076,676 969,008 872,107 784,897

Amortization Expense 0 60,000 60,000 60,000 60,000 60,000 - - - - -(Increase) / decrease in

Receivables - (1,051,013) (105,397) (95,263) (102,004) (110,317) (119,307) (129,029) (139,544) (150,916) (163,215)(Increase) / decrease in

RM - Fuel Inventory - 75,792 (21,788) (23,563) (25,484) (27,561) (29,807) (32,236) (34,863) (37,705) (40,778)(Increase) / decrease in FG Inventory (416,545) (55,710) (39,932) (43,331) (47,021) (51,028) (55,378) (60,103) (65,234) (70,806)

Net Cash Flow From Operations 0 6,203,277 8,487,988 9,374,338 10,306,460 11,339,300 12,323,455 13,249,306 14,255,691 15,348,143 16,532,698 Cash Flow From Financing ActivitiesReceipt of Long Term Debt 10,662,187Repayment of Long Term Debt (1,548,070) (1,796,930) (2,085,794) (2,421,095) (2,810,297) - - - - -Owner's Equity 10,662,187 (500,000) (1,000,000) (2,000,000) (3,000,000) (4,500,000) (6,500,000) (7,500,000) (10,000,000) (12,000,000) (14,000,000)Net Cash Flow From Financing Activities 21,324,373 (2,048,070) (2,796,930) (4,085,794) (5,421,095) (7,310,297) (6,500,000) (7,500,000) (10,000,000) (12,000,000) (14,000,000)Cash Flow From Investing ActivitiesCapital Expenditure (20,070,000) (76,500) (76,500)Factory/Office Furniture (60,000)Preliminary Operating Expenses (300,000)Raw Material Inventory (15 Days) (343,125)Net Cash Flow From Investing Activities (20,773,125) 0 0 0 0 (76,500) 0 0 0 0 (76,500)NET CASH FLOW 551,248 4,155,207 5,691,058 5,288,544 4,885,365 3,952,503 5,823,455 5,749,306 4,255,691 3,348,143 2,456,198

Cash at the Beginning of the Period 0 551,248 4,706,455 10,397,513 15,686,057 20,571,422 24,523,925 30,347,380 36,096,686 40,352,377 43,700,520 Cash at the End of the Period 551,248 4,706,455 10,397,513 15,686,057 20,571,422 24,523,925 30,347,380 36,096,686 40,352,377 43,700,520 46,156,718

smeda stone crushing

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