Pre-feasibility study for the Development of a Mini Cement Plant in Colombia

INTERNATIONAL CENTRE FOR SCIENCE AND HIGH TECHNOLOGY

The opinions expressed in this publication do not necessarily reflect the views of the United Nations Industrial Development Organization (UNIDO) or the International Centre for Science and High Technology (ICS). Mention of the names of firms and commercial products does not imply endorsement by UNIDO or ICS. No use of this publication may be made for resale or for any other commercial purpose whatsoever without prior permission in writing from ICS.

Cover page insets include pictures of: Photo 1: Cement Plant 1 Photo 2: Cement Plant 2 Photo 3: Cement Plant 3

ICS-UNIDO is supported by the Italian Ministry of Foreign Affairs 2008 United Nations Industrial Development Organization and the International Centre for Science and High Technology, High Technology and New Materials International Centre for Science and High Technology ICS-UNIDO, AREA Science Park Padriciano 99, 34012 Trieste, Italy Tel.: +39-040-9228126 Fax: +39-040-9228122 E-mail: htnm@ics.trieste.it

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Prepared by Leonardo Rosas Marco Nardini Graziano Bertogli Alfonso Avila-Merino

INTERNATIONAL CENTRE FOR SCIENCE AND HIGH TECHNOLOGY Trieste, 2008

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Table of Contents Index of Tables Index of Figures Acronyms Executive Summary Chapter 1 Introduction 1.1 Introduction to the project 1.2 Justification for the project Chapter 2 Background and Ideas underlying the Project 2.1 Rural industrial development 2.2 Local manufacturing of cement 2.3 Available technology 2.4 Strategic policies supporting the project 2.5. Project introduction Chapter 3 Marketing Analysis and Marketing Idea 3.1 Product identification: 3.1.1 Chemical properties 3.1.2 Physical properties 3.2 The Colombian cement market 3.3 Public programmes related to housing demand 3.3.1 Housing solutions for rural communities 3.3.2 Stakeholders 3.3.3 Rules of the programme 3.3.4 Project definition 3.3.5 Housing solution projects 3.4 Demand 3.5 Target market 3.6. Sales programme Chapter 4 Raw Materials and Supplies 4.1 Mineral components list 4.2 Raw material costs 4.3 Raw materials extraction and preparation 4.4 Mining industry development in El Departamento del Meta 4.4.1 Identification of raw materials deposits 4.5 Raw materials list and costs 4.6 Utilities 4.7 Recommendations vii viii x x 1 1 1 3 3 3 4 5 5 7 7 9 9 9 11 11 11 11 12 12 12 15 15 16 16 17 17 18 19 30 31 32

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Chapter 5 Location, Site and Environmental Assessment 5.1 Physical geography 5.2 Demography 5.3 Economic sectors 5.4 Infrastructure 5.5 Plant location Chapter 6 Engineering and Technology 6.1 Cement manufacture 6.1.1 Quarrying 6.1.2 Raw materials preparation 6.1.3 Kiln operations 6.1.4 Cement milling 6.2 The Colombian technology 6.3 The Chinese technology 6.4 Selection of technology Chapter 7 Organisation and Overhead Costs Chapter 8 Human Resources 8.1 Workforce Chapter 9 Implementation Planning and Budgeting 9.1 Summary of first year investment budget Chapter 10 Financial Analysis 10.1 General aspects 10.2 Methodological analysis 10.3 Data input - Capital Structure Input 10.3.1 Fixed investment costs 10.3.2 Working capital 10.3.3 Total investment 10.3.4 Sources of finance 10.4 Production phase inputs 10.4.1 Production and sales 10.4.2 Raw materials costs 10.4.3 Overhead 10.4.4 Labour 10.4.5 Income Taxes 10.5. Analysis of Results 10.5.1Cash flow for financial planning and profit distribution 10.5.2 Net Income Statement 10.5.3 Discounted cash flows 10.6 Break-even Analysis 10.7 Sensitivity Analysis v

33 34 34 35 37 37 38 38 39 39 40 40 41 45 52 54 56 57 61 62 63 63 63 64 64 65 66 66 66 66 67 67 68 69 70 70 70 71 71 72

10.7.1 Price sensitivity 10.7.2 Production cost sensitivity 10.7.3 Investment cost sensitivity 10.8 Implications of the financial results References ANNEX 1 COMFAR III Output ANNEX 2. Request for cooperation from the Meta Department, Colombia

72 73 73 74 75 76 145

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Index of Tables Table 2.1: Swot analysis for the mini cement plant Table 3.1: Production of cement 2005 in Colombia Table 3.2: Cement deliveries in Colombia since 1986 Table 3.3: Per capita consumption since 1986 Table 3.4: Housing solution projects from 1999 to 2004 Table 3.5: Population census Table 3.6: Projected selling prices and production costs Table 3.7: Sales per year Table 4.1: Mineral components of Ordinary Portland Cement Table 4.2: Total raw materials costs Table 4.3: The Calizas de Servita - limestone deposit Table 4.4: La Esperanza Stream limestone deposit Table 4.5: La Cristalina (A) Stream limestone deposit Table 4.6: La Cristalina (B) Stream limestone deposit Table 4.7: Ro Nipure limestone deposit Table 4.8: Caney Alto La Soledad limestone Table 4.9: Caney Alto La Soledad limestone Table 4.10: Caney Alto La Reserva limestone deposit Table 4.11: Clay deposits Table 4.12: Total raw materials costs Table 4.13: Utilities for cement production Table 4.14: Utilities annual costs (US$) Table 6.1: Quotation for a 100 tons/day cement plant Table 6.2: Required area for production Table 6.3: Quotation for 300 tons/day cement plant Table 7.1 Maintenance materials Table 7.2 Maintenance materials Table 8.1: Personnel costs Table 8.2: Additional costs Table 8.3: Indirect staff costs Table 8.4: Yearly personnel expenditure Table 9.1: Time required for Colombian technology implementation Table 9.2: Time required for Chinese technology implementation Table 9.3: Investment costs Table 9.4: Cash flow Table 10.1: Production costs Table 10.2: Fixed investment costs Table 10.3: Net capital requirements and current assets Table 10.4: Investment costs Table 10.5: Sales per year Table 10.6: Production costs based on local raw materials Table 10.7: Maintenance costs Table 10.8: Factory overhead costs Table 10.9: Labour direct costs Table 10.10: Labour overhead costs Table 10.11: Break-even analysis Table 10.12: Price sensitivity analysis Table 10.13: Production cost sensitivity analysis Table 10.14: Investment cost sensitivity analysis vii

Index of Figures Figure 3.1. Production of cement in Colombia 2005 Figure 3.2: Cement deliveries in Colombia since 1986 Figure 3.3: Per capita consumption since 1986 Figure 3.4: Orinoquian Departamentos Figure 3.5: Estimated population Figure 3.6: Linear Population Growth Figure 5.1: Physical location of DM Figure 5.2: Demographic distribution in DM Figure 5.3: Economic sectors Figure 5.4: Mining production 2004 Figure 6.1: Portland cement manufacturing Figure 6.2: Mechanical equipment for raw material preparation Figure 6.3: Mechanical equipment for kiln operations Figure 6.4: Mechanical equipment for milling and packing operations Figure 6.5: Limestone crushing and conveying Figure 6.6: Raw materials storage and proportions Figure 6.7: Raw materials grinding and conveying Figure 6.8: Raw meal silo Figure 6.9: Vertical shaft kiln Figure 6.10: Clinker storage and cement proportion Figure 6.11: Cement grinding and conveying Figure 6.12: Cement packing and product storage Figure 8.1: Mini-cement plant organisational chart

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Acronyms ASTM AASHTO BA BID BTU CBMA DANE DM DNP FBM ICPC ICS IRR MNCs NPV OPC QA ROE SA SWOT t tpd UNIDO US$ VSK WACC American Society for Testing Materials American Association of State Highway and Transportation Officials Banco Agrario de Colombia Banco Interamericano de Desarrollo British Thermal Unit China Building Materials Academy Departamento Nacional de Estadistica Departamento del Meta Departamento Nacional de Planeacion Formato Basico Minero Instituto Colombiano de Productores de Cemento International Centre for Science and High Technology Internal Rate of Return Multinational Corporations Net Present Value Ordinary Portland Cement Quality Assurance Equity ratio Sociedad Anonima Strengths, Weaknesses, Opportunities and Threats ton (s) Thermal Design Power United Nations Industrial Development Organization United States Dollar Vertical Shaft Kiln Weighted Average Cost of Capital

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Executive Summary This pre-feasibility study consists of financial and technological analyses related to the construction of a small sized cement plant in Colombia, specifically in Departamento del Meta (DM). 1 The objective of the project is to provide Colombian institutions with tools for application in their activities and programmes to alleviate housing problems in a number of Colombian regions and areas, taking account of local conditions and the availability of raw materials, energy resources and potential markets. The project was initiated at the request of the DM within its programme for social housing focused on low-income people, which was seeking support from and cooperation with ICS-UNIDO. The local economic, social, technical and market conditions suggested that an evaluation should be made of the feasibility of applying mini cement plant technology to enable cement production at minimal costs for the local market and/or for housing programmes for low income groups. The current socioeconomic conditions and lack of housing development in the country as a whole do not enable access by the inhabitants of this geographic area to acceptable housing conditions. Currently, there is no single promoter of this initiative, but the institutions interested in carrying out and financing it include: the local government of DM, the Colombian Government, and various public and private investors. The technical sections of this report, i.e. Chapters 2 to 6, provide a clear explanation of the feasibility of creating a cement plant. Two types of technologies are compared: one from China, which became extremely competitive after an upgrade based on Indian technology developed at the end of the 1970s; and the other a technology based on Colombian know-how. The market analysis in Chapter 3 indicates that the Colombian cement industry currently is one of the largest producers in Latin America, the cement industry being a core sector and the backbone of infrastructure development in the country. The Colombian cement market is very small and very competitive: per capita consumption is estimated to be 127 Kg/year, which is four times lower than the average for developing countries. The international price of cement has increased dramatically due to increasing demand from India and China. Thus, the price of the cement is fixed by a few producers. Based on the population of Colombia (789,276) and per capita consumption of 127 Kg/year, estimated demand for cement is 100,238 tonnes/year. The marketing strategy will be minimal because the project has got an initial socio-economic goal. After the project is successfully running, a marketing strategy to access other markets might be implemented.

Departamento is the Colombians republic administrative division.

In terms of raw materials supply, there are two alternatives: (1) to buy them in the local Colombian market; (2) to extract the main raw materials (limestone and clay) from local deposits. For the first alternative, the costs are based on providers located in El Departamento de Boyac, approximately 200 Km from the city of Villavicencio, the main city in DM. Transportation costs for each raw material, including transportation from the mining deposits to the plant are estimated at $0.12/ton per Km. For the second alternative, it would be necessary to develop the mining industry in DM in order to provide (at least) the key raw materials needed for the production of cement: limestone and loamy clay. Four limestone deposits and several clay deposits have been identified in the area. Based on Colombian mining regulations, a mining concession is defined as a grant issued by the government for land or use rights. The concessionaire must provide the technical and economic information requested on the Formato Basico Minero (FBM) form, which is required by the mining authorities through Edict 1993, Sept. 6, 1992. A FBM must be submitted every three months to the mining authorities. According to INGEOMINAS, the Colombian mining authority, there are three stages involved in obtaining a concession contract: (1) obtaining the concession contract request form; (2) completing the form with the information requested; (3) submitting the completed form to INGEOMINAS. The process takes between three months and one year. There are several sources near to DM of the raw materials required to produce cement: (1) Calizas de Servita; (2) Region de MedinaLocalidad de San Antonio; (3) Region de MedinaRio Nipure; and (4) Region de RestrepoVereda Caney Alto. This feasibility study assumes that the plant will be located in DM: the rationale for this is that the plant should be close to the final market, thereby minimising on transportation costs. At the same time, there is no clear indication of the precise location of the industrial site or evidence of land purchase for the plant. The land could be purchased, or leased from an existing industrial facility. The recommended area for facilities based on the Colombian technology option is about 3,090 m2; the total investment costs do not include this item because the land needed for the construction of the plant could be provided by the DM authorities. DM includes the Orinoqua region, which represents 27% of the Colombian national territory. DM is an extensive territory (85,770 Km2) comprised of the Andean, Amazonian, and Orinoquian regions. Historically, due to its strategic geographic location, DM has been a leader at regional level. Recent petroleum and natural gas finds are being extracted from the regional sub-surface. In infrastructure terms, modernisation and construction of the new highway Bogota-Villavicencio is the main transportation development in Colombia since the mid 1990s. xi

Planned cement production is estimated at 100 tons/day of Portland cement with clinker production estimated at 60 tons/day. The recommended land area required for the total plant facilities is 10,000 m2. This includes: the mechanical and electrical production equipment, total buildings, total storage, raw materials facilities, and loading bays. The recommended area for the actual plant (as mentioned above) is about 3,090 m2. Five factors were investigated in the two technology options considered in order to select the most viable and most appropriate one a mini-cement plant in DM: (1) technical factors; (2) limitations of the market; (3) economic factors; (4) experience; and (5) environmental and sustainability factors. Technical factors: The main technical benefit is the use of dry process manufacturing based on Colombian technology. This process was developed in the 1970s and is the more efficient and environmental friendly option for cement production. The Colombian firm has focused on its engineering in developing this dryprocessing technique for small scale production of cement. The Chinese technology is based on Vertical Shaft Kiln (VSK) technology, whose technical performance is being debated in terms of its (in)efficiency, environmental impact, and heterogeneous quality of the final product. In VSK technology the feed is homogenised raw material in the form of nodules containing the required quantities of fuel, generally fine coke for combustion. These nodules are burnt in the sintering zone of the kiln and the air required for combustion is supplied from beneath through a rotary gate. A chimney is needed at the top of the kiln for emission of flue gases. Limitations of the market: The Chinese alternative is for 300 tons/day production, which involves more efficient channels of distribution in addition to a larger distribution area. Therefore, the Colombian alternative of 100 tons/day is better suited to the estimated size of the market. Economic factors: The dry-process consumes less thermal energy. The Colombian technology requires five times less land for the plant layout. The Colombian firm has successfully developed a totally automated mini-plant for dry-process cement manufacture, which requires fewer man hours per ton of cement produced. The mini-cement plant developed by the Colombian firm can be constructed locally, and with second-hand machinery if desired, which would be easily attainable and at low cost. Experience: The Colombian firm has designed and constructed several mini-cement plants. Its first project was Cementos del Oriente S.A., which is located in the industrial park of Sogamoso, Departamento de Boyac, Colombia. Personnel can be trained quickly to use the Colombian technology, which is comparatively simple.

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Environmental and sustainability factors: The dry process consumes less thermal energy. The wet process 2 has a higher environmental impact: higher water consumption, higher energy required for the process, and higher CO2 emissions due to the combustion required to remove the water. The organisational structure of the mini-cement plant shows the relationships among the key industrial operations. The organisation shows a line relationship between the cement-plant manager and the three key managers: (1) mining operations leader; (2) senior section leader; and (3) quality assurance leader. A human resource analysis of the staff required for plant start up and running is included in this report, based on the stated technical and financial margins. If all the inputs necessary are in place, it is expected that the total time for the implementation of the project from the date of signing the contract and issuing the letter of credit to full plant operation would be 18 months and would ultimately employ some 50 people. These estimates are based on use of the Colombian technology. For further information refer to Chapter 9. Chapter 10 provides complete financial and technical information based on 2006, for the feasibility of constructing the cement plant, and adopts an exhaustive approach that includes many aspects including socio-economic and human resources as well as technical and financial analyses.

In this process the raw materials are ground with water, thoroughly mixed and fed into the kiln in the form of slurry.

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Chapter 1 - Introduction 1.1 Introduction to the Project Based on the urgent need for industrial development in rural Colombia, it is proposed that a mini-cement plant be installed in DM. The projects objectives are: (1) local production of cement in order to satisfy the demand from small (and nearby) markets; (2) sustainable use of available (and local) raw materials to provide shelter and infrastructure in rural areas; and (3) to promote the development of the cement, mining and metalworking industries at rural level. Ordinary Portland Cement 3 (OPC) is one of the current most important building materials. Annual production of OPC in Colombia is about 7.8 million tons, making cement one of the most used materials in the country. Moreover, global production of OPC is likely to increase in the near future to satisfy demand from developing countries. 4 Pozzolana is a hydraulic active material of volcanic origin and includes sedimentary rocks such as radiolarite, diatomite, spongilite and sandy marlstone. Lime-pozzolana was used in the constructions put up by the ancient Romans. The technical definition of pozzolana is included in the ASTM Code: pozzolanas are siliceous or aluminous-siliceous materials which have little or no cementing value by themselves, but when finely ground and in the presence of water, they chemically react with calcium hydroxide at room temperature in order to form compounds with cementing properties. In practice, pozzolanas with a chemical composition that is constituted by 70% or more of the three main oxides (SiO2, Al2O3, Fe2O3) are preferred. 1.2 Justifications for the project The project was initiated at the request of DM, within its programme for social housing focused on low-income people (see Annex 2), which was seeking support from ICS-UNIDO. One of the main drivers of this project is the severe lack of longterm housing. Colombian citizens have difficulties in accessing loans to build safe, secure and economic housing. Government and private projects to tackle this either do not exist or, if they do, have very little impact. The ICS proposal aims to respond to DMs request and improve conditions of rural life in Colombia by developing a project to survey the technologies available for low level production of building materials. The mini-cement plant model can accommodate alternative technologies and has been used for industrial development in rural areas, mainly in China and India. Local manufacture of cement in mini-cement plants is only justified when a region is linked by poor transportation systems, which affects the final cost of the product, when the market is small, and when there are locally available raw materials, all of which apply to several parts of Colombia.
Portland cement was developed in the 19th century based on hydraulic-lime. Its name is derived from stone that was extracted on Portland Island, England. The patent for Portland cement was issued to Joseph Aspding in 1824. 4 Developing countries are facing enormous demand for shelter, infrastructure and services, and have increasingly overcrowded transportation systems, insufficient water supplies, deteriorating sanitation and environmental pollution.
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If the project can attract the required funding, it will contribute greatly to the development of housing in both rural and urban areas of Colombia. Further, if the model proves successful it could be replicated in other developing countries in Latin America, while the firm/cooperative could be extended to other regions of Latin America.

Chapter 2 Background and Ideas underlying the Project 2.1 Industrial development The establishment of a small-scale cement industry in a rural emerging area encompasses several issues: (1) use of sustainable local raw materials; (2) increased employment opportunities; and (3) production to satisfy local demand and provide the basis for low-cost housing solutions, 5 programmes and initiatives. The cement making process involves a primary industrial sector: mining and extraction of raw materials. Grade limestone, clay, gypsum, and other corrective materials (depending on the specific situation) are used to produce cement. Availability of these raw materials locally will help to correct regional imbalances in cement prices due to transportation costs and monopoly situations. Cement manufacture also belongs to the secondary sector of industry transformation of raw materials. It ranges from quarrying (combination of raw materials, which, when sized, blended, and processed, yield the required chemical composition), to pyroprocessing (the raw materials are submitted to a series of high temperature chemical reactions and undergo physical changes) after which, the raw materials are ground into a very fine, carefully-sized powder. In order to provide services to the cement production industry, the metalworking industry 6included within the tertiary sector of industryneeds to be developed. Cement kilns are the worlds largest pieces of moving industrial process equipment and involve very high temperatures. The metalworking industry in rural areas is significant in terms of the number of people it employs, its value and its contribution to economic growth. Industrial development data for Colombia show that about 50% of the national territory does not participate in the national economy. This situation needs to be rectified and new models that work to integrate economically all regions of the country are required. The mini-cement plant model is a comprehensive proposal, which could have positive impacts for developing countries in terms of providing low-cost building materials in order to satisfy local demand; creating employment opportunities and improving the quality of life in rural areas. 2.2 Local manufacturing of cement Why is cement needed in rural areas? Cement is used for various purposes and has many applications: (1) in irrigation projects, to channel water to the fields for irrigation, or to reservoirs to be stored for later use; (2) for bricks based on cement described as artificial stone made from cement and clay, used as a building material; and (3) for concrete roadways - one of the most modern paving methods is to use a concrete mix of Portland cement, gravel and sand, which can be used to develop transportation systems.
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Subsidios de Vivienda de Interes Social Rural is an initiative of the Colombian Government, which offers housing solutions to needy rural populations. 6 The metalworking industry contributes to goods that are classified as high technology products on the basis of the research and development (R&D) expenditure involved in their production.

Demand for cement in rural Colombia is satisfied by deliveries from large cement plants, normally located in the well-developed regions, to areas that are poorly linked by the national transportation system. This means that frequently transportation costs are higher than the costs of cement production. The mini-cement plant model provides the option to produce cement locally, using local raw materials, exploiting small markets and small limestone deposits thereby virtually eliminating transportation costs. Small (and limited) limestone deposits are not attractive to the traditional cement industry. It should be mentioned that the current transportation system in Colombia is considered undeveloped (based on several indicators), compared even to other countries at similar levels of development. Therefore, the high costs due to transportation are a significant factor in the emphasis on local manufacture of cement in rural areas. Physical and chemical testing of OPC are required to control cement specifications. 7 According to the ASTM 8 C 150 and AASHTO 9 M 85, the physical properties of cement are: fineness, soundness, consistency, setting time, compressive strength, heat of hydration, specific gravity, and loss of ignition. These chemical properties play a major role in controlling the properties of the concrete produced. The composition of the cement affects the permeability of concrete by controlling the rate of hydration. 2.3 Available technology The modern cement industry falls into three categories based on production capacity: (1) home-made industry 2 to 50 tons/day; (2) small-scale cement industry from 70 to 300 tons/day; and (3) large-scale industry over 300 tons/day. Large-scale cement production is the traditional way to satisfy demand in industrialised and emerging countries, and especially in Colombia. As large areas need to be covered, the most efficient channels of distribution are normally used. Large production plants need to be located near to large deposits of raw materials and cannot be established in hilly and remote regions due to infrastructural constraints. When the demand is relatively small, transportation costs are high, and when limited deposits of raw materials are available, small-scale cement production is the most feasible option. The available technology for small-scale plants performs well and has proved to be competitive in every respect. Several technological
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Laboratory equipment is included in the plant quotation for each technological option. The Colombian technology requires an investment of $318,300, which includes: (1) physical testing equipment; (2) chemical testing equipment; and (3) sample preparation equipment. The Chinese technology includes a single amount of $150,000. 8 ASTM International is an international standards organization that develops and publishes voluntary technical standards for a wide range of materials, products, systems, and services. ASTM International develops standards using a consensual process. 9 AASHTO, the American Association of State Highway and Transportation Officials, is a standards setting body that publishes specifications, test protocols and guidelines which are used in highway design and construction throughout the US. Despite its name, the association also represents air, rail, water, and other public transportation.

options have been designed, fabricated, and are currently operating around the world. 2.4 Strategic policies supporting the project The mini-cement plant model matches very well with the project scope proposed [1]. This reference, prepared by Departamento Nacional de Planeacion, 10 represents a sort of guideline for Colombia in the 15 years to 2001. There are three objectives that are congruent with the mini-cement plant approach: (1) to develop a model to consolidate sustainable economic growth; (2) to develop the infrastructure required to compete in international markets; (3) to serve society fairly. The first objective requires both the development and establishment of viable projects in regions that currently are excluded from the national economy. The mini-cement plant model will facilitate the development of three industrial sectors: mining, cement manufacturing, and metalworking. It can be achieved via underground exploration of 75% of the national territory. As already mentioned, the raw materials required to produce cement (limestone, rock, shale, clay, sand, iron ore, and gypsum) need to be available near to the cement plant. Therefore, the mini-cement plant model encourages the exploration of new deposits of raw materials. In terms of the second and third objectives, 3.9 million new shelters are planned to be built in the next 15 years to solve the current housing deficit. In brief, the mini-cement plant project will play a strategic role in terms of planned strategic infrastructure projects. 2.5. Project introduction Small scale capacity, mini cement plant technology was selected after assessment of the Colombian and Chinese technologies. The Colombian technology was found more appropriate for the general conditions in geographic area of DM. In order to continue to provide housing solutions within the Subsidio de Vivienda de Inters Social Rural programme, la Gobernacin del Meta may be a potential investor in the mini-cement plant project. This Colombian institution is responsible for the development of social housing initiatives in its district. It is responsible for at least 20% of total project costs. Through the mini-cement plant, the DM government will be able to increase the number of housing solutions within its jurisdiction. A SWOT 11 analysis was conducted related to: (1) internal factors; and (2) external factors. The first category describes the strengths and weakness of the project itself. The second category describes the opportunities and threats from the external environment.

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Departamento Nacional de Planeacion or DNP is the institution which proposes long-term goals and develops the strategies required to achieve them. 11 SWOT - Strengths, Weaknesses, Opportunities and Threats

Strengths Required raw materials for cement production are available. The size of the local demand matches very well with the minicement plant capacity. To reduce significantly the transportation costs. The cement industry is becoming accessible to small and medium entrepreneurs.

Weaknesses Mining industry needs to be developed in the region. The local humanresources are familiar only in agriculture activities. Metalworking knowledge and experience are not available in the region.

Opportunities The international cement prices are increasing due to the high demand from China and India. There are small and dispersed markets located in rural areas which cannot be satisfactorily attended due to lack of infrastructure and high costs of transportation. To promote the sustainable use of local raw materials in order to offer housing solutions in rural areas. Compared with the traditional cement technology, the minicement approach requires more human-resources. By the year 2019, 3.9 millions of new housing solutions will be provided. By the year 2019, new highways (21,000 Km) will be built. By the year 2019, the 75% of the national territory has to be geologically investigated.

Threats Three (3) big companies (multinational cooperations) control the national market. The market in urban areas is small and very competitive. The cement market is not controlled and regulated by the Colombian authorities. In Colombia, the knowledge of the underground conditions (and its raw materials) is very limited.

Table 2.1 SWOT analysis for the mini cement plant

Chapter 3 Marketing Analysis and Marketing Idea 3.1 Product Identification The term cement is generic and can be applied to many important inorganic and organic materials. But, OPC or blended OPC is a grey, finely ground combination of minerals. OPC provides the chemical bonds that hold all materials together forming a dense rocklike substance when cement is mixed with water, sand, gravel, etc. 12 OPC was patented in 1824 by Joseph Aspin. At that time, it consisted of clinker and gypsum. Today, different types of OPC are manufactured to meet the different physical and chemical requirements of specific situations, such as durability and high-early strength. OPC is among the most important building materials. Current estimations of cement manufacture in the world, according to Choate [2], are some 1.70 109 tons per year. It is a well specified product that is widely available and relatively cheap. When used according to technical and good practice codes, cement is a satisfactory product. The most common use of OPC is in the production of concrete as described above. As a construction material, concrete can be cast into almost any shape, and once hardened, becomes a structural (load bearing) element. When water is mixed with OPC, the product sets in a few hours and hardens over a period of weeks. The initial setting is caused by a reaction between the water, gypsum, and tricalcium aluminate, C3A. The later hardening (and development of cohesive strength) is due to the reaction of water and tricalcium silicate C3S. The hydration of dicalcium silicate, C2S, proceeds more slowly, increasing later-age strength. The most popular building material in Colombia is OPC. Production in the 2005 was estimated at 9.96 million tons (see Figure 3.1). Delivery of cement was estimated at 7.82 million tons in 2005 (see Figure 3.2).

Concrete solidifies and hardens after mixing and placement due to a chemical process known as hydration. The water reacts with the cement, which hardens, bonding the other components together and eventually creating a stone-like material.

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1 1 ,0 0 1 0 ,0 0 9 ,0 0 8 ,0 0 Mt / Year 7 ,0 0 6 ,0 0 5 ,0 0 4 ,0 0 3 ,0 0 1975 1980 1985 1990 Ye a r 1995 2000 2005 2010

Figure 3.1. Production of Cement 2005 in Colombia Source: ICPC, the Instituto Colombiano de Productores de Cemento, 2006 Colombia is one of the largest cement producers in Latin America, and this industry is a core sector and forms the backbone of the infrastructure development of the country.
9,00 8,50 8,00 7,50 Mt / Year 7,00 6,50 6,00 5,50 5,00 4,50 4,00 1985

1990

1995 Year

2000

2005

2010

Figure 3.2: Cement deliveries in Colombia since 1986 ICPC, the Instituto Colombiano de Productores de Cemento, 2006

3.1.1 Chemical properties OPC is characterised by its chemical composition which determines its physical properties and how it behaves. The main chemical constituents in a typical OPC are: (1) Tricalcium Silicate C3S; (2) Dicalcium SilicateC2S; (3) Tricalcium AluminateC3A; (4) Tetracalcium AluminoferriteC4AF; and (5) GypsumCSH2. When OPC is mixed with water, its chemical compound constituents undergo a series of chemical reactions that cause it to harden (or set) based on the addition of water to these basic chemical compounds. This chemical reaction with water is called hydration. Each of these reactions occurs at a different time and at a different rate. Together, they ensure that OPC hardens and gains in strength. 3.1.2 Physical properties For quality control purposes, OPCs are commonly characterised by their physical properties. Their physical properties can be used to classify and compare them. The most common US Portland physical tests are for: fineness; soundness; setting time; strength; specific gravity; heat of hydration; and loss on ignition. Fineness, or particle size, of OPC affects the hydration rate and thus the rate of strength gain. The smaller the particle size, the greater the surface area-to-volume ratio. Then, the more area available for water-cement interaction per unit volume. In OPC, soundness refers to the ability of a hardened cement paste to retain its volume after setting, without delayed destructive expansion. Setting tests are used to characterise how a particular cement paste sets. For construction purposes, the initial set must not be too fast and the final set must not be too delayed. In addition, setting times can give some indication of whether or not cement is undergoing normal hydration. Cement paste strength is typically defined in three ways: compressive, tensile and flexible. Since cement gains strength over time, the time when the strength test should be conducted must be specified. Typical times are 24 hours (for high early strength cement), 3 days, 7 days, 28 days, and 90 days. Regarding the other physical properties, specific gravity is normally used in mixture proportioning calculations. The specific gravity of OPC is generally around 3.15. The standard specific gravity test is: AASHTO T 133 and ASTM C 188 (Density of Hydraulic Cement). The heat of hydration is the heat generated when water and OPC react. Heat of hydration is mostly influenced by the proportion of C3S and C3A in the cement, but water-cement ratio, fineness and curing temperature also have an effect. Finally, loss on ignition is calculated by heating a cement sample to 9001,000 degrees C until a constant weight is obtained. The loss of ignition is then determined as the weight loss of the sample due to heating. 3.2 The Colombian cement market In general, the cement industry is characterised by production being concentrated in a few hands. Traditionally, multinational corporations (MNCs) control production and price at international level. Colombia is no exception; three MNCs control the market - Argos, Cemex, and Holcim. The largest producer, with 53% of the market, is Argos, which belongs to Sindicato Antioqueno de Colombia, followed by Cemex from Mexico and Holcim from Switzerland, which together account for the remaining 47%. 9

Based on ICPC data, Instituto Colombiano de Productores de Cemento (an association composed of the principal actors in the cement market in Colombia), the Colombian market size is 7-8 million tons/year. From the information in Figures 3.1 and 3.2, we can see that the market has increased slightly since 1986, while per capita consumption decreased between 1999 and 2004. The current challenge for the Colombian cement industry is that the market is not exhibiting growth.
240 220 Percapita Consumption 200 180 160 140 120 100 1985

1990

1995 Year

2000

2005

2010

Figure 3.3: Per capita consumption since 1986 Source: DANE, (2005) In Colombia, the cement market is very small and, therefore, very competitive. Per capita consumption, estimated at 127 Kg/year, is four times lower than the average for developing countries. This is the main reason why Colombian cement producers work at below installed capacity. First we look at developments in 2005. A new (and small) cement producer (Cementos Andino) entered the market, taking 6% of the total market. Consequently, a major price war erupted in Colombia: the price of a 50Kg pack of cement 13 went from US$9.54 equivalent to 21,000 pesos to US$3.41 equivalent to 7,500 pesos, in the space of ten months. However, this reduction was not uniform across the country because of the differing transportation and distribution costs. As a result, the new competitor was put out of the market;

The current price of a 50Kg pack of cement to the public without taxes (in Colombia 16%) is estimated to be $8.50. The national and local level prices are almost the same. However, at the international level, the cement price in each country varies according to the offer-demand relationship.

13

10

Cementos Andino was bought by the Argos group. This event marked both the end of the marketing war and the recovery of internal prices. Indirectly, this price war facilitated a significant growth in demand. The amount of cement delivered in 2005 was 36% higher than in 2004. However, consumption of 7.8 million tons registered in 1995 has not been repeated. Now, the market is stable and prices are increasing. At the same time, in 2005, the international cement price increased dramatically due to increasing demand from India and China. Therefore, it can be seen that the price of cement in Colombia is fixed in a monopolistic way by the three major producers, based on their interests, and is not related to world demand. 3.3 Public programmes related to housing demand 3.3.1 Housing solutions for rural communities The Subsidio de Vivienda de Inters Social programme aims to support the Colombian Government in its effort to provide housing solutions for poor populations in rural areas, by assigning subsidies. The programme has national coverage and applies to areas that are defined as rural. 3.3.2 Stakeholders The Republic of Colombia was granted a loan from the BID (Banco Interamericano de Desarrollo). The Colombian institution responsible for the distribution of funds within the programme is El Ministerio de Agricultura y Desarrollo Rural. Responsibility for approving projects for subsidies belongs to El Banco Agrario de Colombia (BA), which also advises the other stakeholders on the formulation of projects. The proposer is the judicial institution that organises the projects and presents them to BA. The institutions eligible to act as proposer are national institutions (such as the authorities from the DM) which are responsible for the development of housing initiatives in their districts. Private institutions can also be project proposers; however, their projects must be related to the development of social housing solutions. Finally, there is the rural community which is the beneficiary of the subsidies. Rural communities have to work with proposers to satisfy the requirements of the projects. 3.3.3 Rules of the programme The subsidy is essentially funding to support three kinds of solutions: (1) house improvements; (2) constructions on own land; and (3) new house construction. The amount of the subsidy cannot be higher than 70% of the final price of the solution. As already mentioned, El Ministerio de Agricultura y Desarrollo Rural distributes all the monies. 60% of the funds go to the Departamentos; the remaining 40% goes to other initiatives related to rural development. The proposer must provide the equivalent of 20% of the total project cost, in the form of money or investments such as designs, construction supervision, management, environmental assessment and so on.

11

 The rural community, the beneficiary of the subsidy, must also make a contribution. 10% of the total project cost must be provided by community participation. 3.3.4 Project definition A housing solution project for rural communities is defined as a set of between 5 and 60 solutions. These solutions are related to the programme rules already mentioned, i.e. house improvement; construction on own land; and new house construction. 3.3.5 Housing solution projects Based on the information available on projects executed between 1999 and 2004, 61,101 families have been beneficiaries of the programme, including 1,399 families in DM which have been provided with housing solutions. Table 3.1 presents the housing solution projects from 1999 to 2004.
1999 No. Families in Colombia Programme Costs US$ No. Families in DM Programme Costs US$ 0 1,100,896 311,623 386,098 199,085 787,578 2,785,280 0 581 149 184 109 376 1,399 2,950,538 20,917,44 4 23,260,403 18,745,000 16,156,502 30,313,139 112,343,026 2,175 12,345 12,582 9,650 9,370 14,979 61,101 2000 2001 2002 2003 2004 Total

Table 3.1: Housing solution projects from 1999 to 2004 Source: DANE, (2005) 3.4 Demand In order to estimate the demand for production from a mini-cement plant located in DM, it is necessary to consider the whole area that will be affected, which includes La Orinoquaalso known as Llanos Orientaleswhich covers the northeast plains of Colombia. The Orinoqua extension is 310,000 Km2 and includes seven Departamentos: Arauca, Casanare, Guana, Guaviare, Meta, Vichada, and Caquet. Caqueta is not part of Orinoqua, but is located close to the proposed project location. Figure 3.4 shows the distribution of Departamentos.

12

Figure 3.4: The Orinoquian Departamentos In this analysis, demand is estimated based on per capita consumption in Colombia, 127 Kg/year. According to Censo [4], the population of DM (see Table 3.2) is 789,276. Based on current population and per capita consumption, annual demand for cement in the Orinoquian area is estimated to be 100,238 tons: 789,276 * 0.127 = 100,238 tones The mini-cement plant technology should produce around 86 tons/day. If installed capacity were 853 tons/day, the project could satisfy 13% of the total local market; if installed capacity were 3,004 tons/day, 46% of the market would be satisfied. It is estimated that the population will show linear growth (see Figure 3.5). A linear regression with the parameters y = ax +b can be used to model population growth in the area of interest. The parameters a and b can be calculated. The variable x represents the number of years after 1973. The variable y represents the estimated population in thousands.

Figure 3.5 Estimated population

13

1973 Arauca Caquet Casanare Guana Guaviare Meta Vichada Total 46,605 180,372 89,186 6,918 14,171 261,863 12,215 611,330

1985

1993

2005 208,605 404,896 282,452 30,232 81,411 789,276 55,158 1,852,030

89,972 185,882 264,507 367,898 147,472 211,329 12,345 28,478 47,073 97,602 474,046 618,427 18,702 36,138 1,054,117 1,545,754 Table 3.2: Population census, Source: DANE, (2005)

Table 3.2 presents the selling prices and production costs for an eight year period of production.

Total Population in the Orinoqua

2.000.000

1.800.000

1.600.000

1.400.000 Population

1.200.000

1.000.000

800.000

600.000

400.000 1970

1975

1980

1985

1990 Year

1995

2000

2005

2010

Figure 3.6: Linear Population Growth.

Year 1 2 3 4 5 6 7 8 Sell Price ($ / ton) $ 147.00 $ 147.00 $ 162.00 $ 170.00 $ 179.00 $ 188.00 $ 197.00 $ 207.00 Production Cost (US$ / ton) $ 63.00 $ 63.00 $ 69.75 $ 73.24 $ 76.90 $ 80.75 $ 84.79 $ 89.03

Table 3.3: Projected selling prices and production costs

14

3.5 Target Market The limited size of the cement market in Colombia and its very competitive environment (mainly in urban areas) should not hide the fact that there are very small and segmented markets in the rural areas of the country that are not satisfactorily covered. Currently, rural demand for cement is met by deliveries from the cement distributors. The access to these markets is limited by: (1) the characteristics of cement and its high vulnerability to humidity and other weather conditions, which mean that it cannot be stored for more than 30 days; (2) lack of physical infrastructure for transportation in much of the national territory; and (3) the high transportation costs generated by the current infrastructure status. The unmet needs in these small markets can be seen in the huge housing deficit in Colombia. According to Choate [3], the current deficit in urban areas is 1.5 million units and 700,000 in rural areas without considering the population living alongside high risk areas. 3.6. Sales programme The main cement plant should produce 86 tons/day for a working month of 22 days representing total monthly production of 1,892 tons of cement and annual production of 22,704 tons. Based on a 50kg pack of cement costing US$8, this yields a selling price of US$160 per ton, on which the following table is based (see Table 3.3).
Year 2 3 4 5 6 7 8 9 10 11 Sales revenue US$ 3,632,640 3,632,640 3,632,640 3,632,640 3,632,640 3,632,640 3,632,640 3,632,640 3,632,640 3,632,640

Table 3.4. Sales per year

15

Chapter 4 Raw Materials and Supplies Cement is made up of a mix of raw materialsconsisting mainly of limestone (71%) and combinations of cement rock (16%), shale, clay, sand, or iron. Cement plants are usually located near to the sources of these materials. Currently, the science and technology of OPC are well understood with the result that the process operates at near optimum efficiency. Cement is a well-specified product, which, when used in accordance with recommended good practice, produces satisfactory results. The first step in the manufacturing process of cement involves quarrying 14 the raw materials, which in combination and when sized, blended, and processed yield the exact chemical composition required. These raw materials undergo a series of high temperature chemical reactions and physical changes after which they are ground into a very fine powder. The raw materials are quarried, crushed and, for economy, are usually transported to a nearby cement plant. They are proportioned to the correct chemical composition and ground to a fine consistency. Small quantities of iron ore, alumina, and other minerals are often added to adjust the raw materials mix. 4.1 Mineral components list The industry frequently reports the composition of cement as a percentage of the initial mineral composition and not as a percentage of the final compounds formed. The mineral composition of Portland cement falls within the range of: 60% to 67% lime (CaO). 15 The behaviour of the various types of cement depends on the mix of the final components. In order to produce Portland cement in Colombia, the ICPC has established mineral standards, 16 which are presented in Table 4.1.

Mineral Component CaO SiO2 Al2O3 Fe2O3 MgO

Generic Term Calcium Oxide Silicon Oxide Aluminium Oxide Ferric Oxide Magnesium oxide

% Content 60-67 17-25 3.0-8.0 0.5-6.0 0-7.0

Table 4.1: Mineral components of OPC

A typical limestone/cement rock quarrying process for producing crushed and broken stone includes: (1) removal of the overburden; (2) blasting of the limestone deposit; (3) loading and transporting of the blasted limestone to the crushing plant; and (4) crushing to reduce stone to about 125 mm in primary crushers, then to roughly 10 mm to 19 mm in secondary crushers. 15 After pyro-processing (a high temperature process necessary for the reactions and phase changes) the CaCO2 is transformed into CaO. Normally, the industry reports the initial mineral composition as: 19% to 25% silica (Si); 3% to 8% alumina; and 0.3% to 6% iron oxide together with 1% to 3% sulphur trioxide, derived mainly from the added gypsum 0.5% to 5%. 16 The mineral standards define the range of limits for each mineral component.

14

16

The most important raw material for cement is limestone. Limestone is a sedimentary rock consisting chiefly of calcium carbonate, primarily in the form of the mineral calcite and with or without magnesium carbonate. Common minor constituents include silica, feldspar, clays, pyrites and siderite. 4.2 Raw material costs There are two sources of the raw materials required to produce clinker and cement from the mini-cement plant: (1) buying the required raw materials in the local Colombian market; and (2)extracting the main raw materials (limestone and clay) from local deposits. For the first alternative, a list with the current cost per ton of each raw material is given in Table 4.2. The costs are based on the costs for providers located in El Departamento de Boyac, approximately 200Km from the city of Villavicencio. The transportation cost of the raw materials from the mining deposits to the plant is estimated at $0.12/ton*Km. The total cost of each raw material including transportation is presented in Table 4.2.
US$/ton (minus transport) $ 55.00 $ 8.18 $ 5.45 $ 31.82 $ 9.09 $ 23.00 US$/ton (plus transport) $ 79.00 $ 32.18 $ 29.45 $ 55.82 $ 33.09 $ 47.00

Clinker Production Cement Production

Coal Limestone Loamy clay Iron Ore Pozzolana Gypsum

Table 4.2: Total raw materials costs For the second alternative, it will be necessary to develop the mining industry in DM in order that (at least) the key raw materials (limestone and loamy clay) to produce cement can be produced (see section 4.3). 4.3 Raw materials extraction and preparation Open cast mining refers to a method of extracting rock or minerals from the earth through their removal from an open pit or burrow. The term is used to differentiate this type of mining from extraction methods that require tunnelling into the earth. Open pit mines are suitable for where deposits of commercially useful minerals or rock are near the surface; that is, where the overburden (surface covering the valuable deposit) is relatively thin. Open pit mines are typically progressively enlarged until the mineral resource is exhausted. Underground mining methods are used to extract the material when the minerals are deep below the surface, where the overburden is deep and where the minerals occur as veins in hard rock. The raw materials are proportioned to the correct chemical composition and ground to a fine consistency. Small quantities of iron ore, alumina, and other minerals may be added to adjust the raw materials mixture. In cement production, grinding and milling are electrically driven processes. Raw meal grinding equipment includes: ball mills, tube mills, compound mills, ring roll mills, and impact mills.

17

Iron ores are rocks and minerals from which metallic iron can be economically extracted. The ores are usually rich in iron oxides and vary in colour from dark grey to rusty red. Iron ore is the raw material used to make pig iron, which is one of the main raw materials of steel. 98% of the iron mined goes to make steel. However, iron oxide in small quantities is also required by the cement industry. Two different processes (dry and wet) are used to grind the raw materials. In the dry process, the raw materials are proportioned, ground to a powder, blended and fed to the kiln in a dry state. In the wet process, slurry is produced by adding water to appropriate proportions of the raw materials. The finely ground raw material, known as raw meal, is fed into the kiln and pyroprocessing begins. Pyroprocessing is the operational step that provides the energy and environmental conditions required for the reactions and phase changes. The kilns are divided into two groups (dry and wet processes) depending on how the raw materials are prepared. Finally, red-hot clinker is discharged from the bottom of the kiln and transferred to various types of collars to recover thermal energy and lower the temperature of the clinker until it can be handled. The cooled clinker is combined with approximately 3%-6% of gypsum and ground/milled to a very fine grey powder the cement. The fineness is an important property of the cement and affects the rate of hydration: the finer the milled cement, the more surface area is available for hydration. The greater the area for hydration, the greater strength and speed of heat generation. Gypsum acts to control the setting time of the concrete. 17 Setting is estimated to be about 45 minutes after the gypsum is added. Setting and hardening of hydraulic cements are the result of formation of water-containing compounds, formed as a result of reactions between the cements components and water. The reaction and the products are referred to respectively as hydration and hydrates or hydrate phases. A stiffening occurs as a result of the immediate reactions, very slight initially, but increasing over time. After a certain level, this point is referred to as the start of setting. The successive further consolidation is called setting, after which the hardening phase begins. The compressive strength of the material then increases steadily over a period ranging from a few days in the case of ultra rapid-hardening cements, to several years in the case of ordinary cements. 4.4 Mining industry development in DM A mining concession is defined as a grant or right to use issued by the government based on technical and economic information supplied on the FBM, which has to be submitted to the mining authorities at three monthly intervals. Resolution 0145 of 2002 from the Unidad de Planeacion Minero-Energetica, sets the prices for mineral extraction of non-renewable raw materials at: limestone ($5,897.00/ton) and clay ($7,417.00).

Concrete is a dense rocklike substance made by mixing Portland cement, water, sand, gravel, and other materials.

17

18

4.4.1 Identification of raw materials deposits Close by Villavicencio, the main city of DM, there are four limestone deposits which have been tested and a detailed chemical analysis conducted. More than 121 samples were analysed in the laboratory. The limestone deposits are: (1) Calizas de Servita; (2) Region de MedinaLocalidad de San Antonio; (3) Region de MedinaRo Nipure; and (4) Region de RestrepoVereda Caney Alto. There are also several clay deposits. Calizas de Servit According to Herrera and Morales [5], the area studied covered 975,000 m2 within a rectangle of 1,500m*650m, corresponding to the Las Delicias concession. The limestone deposit is located in the Servita hills, 15Km from Villavicencio. The reserves were estimated to be equivalent to 170,795 tons. Six boreholes were made for the recovery of samples for chemical testing. The results of the chemical tests, which were performed by the Laboratorio Qumico Nacional, are presented in Table 3.3. The chemical testing revealed that the limestone had high silica content. The Calizas de Servita limestone deposit is characterised as: Fe2O3 (1-4%); CaO (60-80%); MgCO3 (2.5%); with a silica content averaging 30%.

Table 4.3: The Calizas de Servita limestone deposit Based on the area covered by Herrera and Morales [5], potential limestone reserves are estimated to be 262,500 tons. This could be enough to enable the establishment of a very small cement industry which would not qualify as a minicement project. Therefore, additional site investigations, covering a wider area, are required. The extraction could be done by open pit operations, the most economical way of quarrying. Moreover, as the deposit is located adjacent to the main highway (BogotaVillavicencio), access is very convenient.

19

Regin de MedinaLocalidad de San Antonio The area of San Antonio is located in Medina, in Cundinamarca. The area is characterised by its hilly topography: steep slopes and lack of access ways. According to Morales [6], the limestone deposit is located (12Km strike-line from the town of Restrepo) on land belonging to Jesus Cajamarca. The deposit was divided for sampling into two sites: La Esperanza stream and La Cristalina stream. From the La Esperanza stream, 18 samples were analysed, see Table 4.4. The thickness of the deposit was estimated to be about 10m. From the La Cristalina stream, 38 samples were analysed. See Tables 4.5 and 4.6. The thickness of the deposit is estimated to be about 37m.

20

Sa m p le N o. M oistu re (% ) L os ses (% ) In so lub ility (% ) 105 C in H C L 45 ,0 0 18 ,4 5 17 ,1 3 20 ,5 8 33 ,7 8 41 ,9 3 40 ,1 8 34 ,8 0 47 ,2 6 20 ,8 8 32 ,7 5 60 ,2 6 41 ,3 3 29 ,2 2 44 ,8 4 34 ,7 8 36 ,2 0 49 ,5 1 3,00 3,35 2,70 2,40 2,95 4,65 2 8,79 3 4,41 2 5,66 3 1,91 3 0,04 2 3,78 4,25 1 7,52 2,05 3 2,42 1,70 4 2,27 0 ,7 5 1 ,6 9 1 ,8 0 0 ,8 7 3 ,8 4 3 ,4 8 2 ,4 1 3 ,7 7 1 ,8 2 4,70 2 5,64 0 ,9 4 2,80 3 3,26 1 ,2 9 4,25 2 9,80 1 ,0 6 0 ,6 0 0 ,6 0 0 ,6 0 0 ,2 2 0 ,6 0 0 ,6 0 0 ,6 0 0 ,6 0 0 ,6 0 0 ,6 0 0 ,6 0 0 ,6 0 2,15 2 9,80 1 ,2 6 0 ,6 0 2,35 3 4,65 1 ,5 7 0 ,6 0 1,95 4 2,27 1 ,0 4 0 ,6 0 75,48 61,88 53,21 53,21 59,40 45,79 75,48 61,46 31,29 51,41 61,45 45,82 56,98 53,64 42,46 2,40 4 2,62 1 ,8 4 0 ,6 0 76,1 1 2,25 4 2,27 1 ,0 8 0 ,6 0 75,48 2,90 2 8,41 0 ,7 0 0 ,3 0 50,73 1 ,4 7 2 ,2 6 3 ,8 4 1 ,1 7 3 ,2 8 2 ,6 5 2 ,2 2 2 ,7 0 1 ,9 7 1 ,5 7 3 ,5 3 3 ,7 6 1 ,8 2 8 ,0 3 7 ,2 7 5 ,0 4 7 ,8 8 3 ,8 0 O xide s of A l, Fe .P 0 ,1 1 0 ,37 0 ,17 0 ,13 0 ,13 0 ,15 0 ,18 0 ,20 0 ,25 0 ,1 1 0 ,13 0 ,22 0 ,16 0 ,14 0 ,15 0 ,09 0 ,10 0 ,12 21 ,1 8 26 ,6 8 27 ,8 2 23 ,2 2 39 ,3 0 23 ,9 0 15 ,6 6 28 ,7 6 34 ,1 5 21 ,0 1 27 ,5 4 24 ,3 5 24 ,5 2 27 ,3 2 33 ,7 6 35 ,6 3 35 ,4 7 22 ,6 3
0

%R O 2 3

%C aO

%M g O

% P O 2 5

%C aC O %M g C O 3 3

10 5- 1 000 C

1-A

2-A

3-A

4-A

5-A

6-A

7-A

8-A

9-A

Table 4.4: La Esperanza Stream limestone deposit

The Regin de MedinaLocalidad de San Antonio limestone deposit is characterised as: CaO (50 - 70%); MgO (3-8%); and high silica content (25%-35%). Initial extraction of this deposit can be done by open pit operations, after removing a thick overburden. Later, underground mining may become necessary if the deposit is found to be layered.

21

Sample No. Moisture (%) Losses (%) Insolubility (%) % R2O3 0 0 105 C 105 - 1000 C in HCL Oxides of Al, Fe. P 25,26 24,72 27,80 33,16 28,02 33,67 31,90 39,52 31,30 34,58 27,66 25,26 24,72 27,80 33,16 28,02 33,67 31,90 39,52 27,65 37,70 39,73 41,51 34,10 22,95 33,69 20,70 25,74 8,67 27,80 20,68 35,42 39,73 41,51 34,10 22,95 33,69 20,70 25,74 8,67 34,75 12,92 3,60 3,40 2,90 2,95 3,95 3,45 2,15 2,40 2,10 1,65 2,60 3,60 3,40 2,90 2,95 3,95 3,45 2,15 2,40 3,15 2,40 26,28 25,34 33,79 37,10 30,66 38,80 38,17 45,83 34,42 39,42 30,66 26,28 25,34 33,79 37,10 30,66 38,80 38,17 45,83 31,29 43,81 4,75 4,36 1,06 3,56 3,32 3,05 1,78 3,33 4,06 3,46 3,32 4,75 4,36 1,06 3,56 3,32 3,05 1,78 3,33 2,86 2,89 0,13 0,07 0,60 0,60 0,60 0,60 0,60 0,60 0,60 0,60 0,60 0,13 0,07 0,60 0,60 0,60 0,60 0,60 0,60 0,60 0,60 46,93 45,25 60,34 66,25 54,75 69,28 68,17 81,84 61,46 70,40 55,32 46,93 45,25 60,34 66,25 54,75 69,28 68,17 81,84 55,87 78,23 9,93 9,34 2,22 7,45 6,94 6,38 3,72 6,99 8,49 7,24 6,96 9,93 9,34 2,22 7,45 6,94 6,38 3,72 6,99 5,99 6,05

% CaO

% MgO

%P2O5

% CaCO3 % MgCO3

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

0,18 0,23 0,18 0,07 0,12 0,10 0,08 0,06 0,11 0,07 0,15 0,18 0,23 0,18 0,07 0,12 0,10 0,08 0,06 0,08 0,05

Table 4.5: La Cristalina (A) Stream Limestone Deposit

22

S a m p leN o . M o is tu re(% ) L o s s e s(% ) In s o lu b ility(% ) 1 0 5C inH C L 1 8 ,2 6 3 2 ,3 3 1 5 ,3 5 1 9 ,9 8 1 8 ,9 0 3 7 ,0 3 2 6 ,9 0 3 0 ,3 1 3 1 ,4 5 2 4 ,2 3 1 4 ,7 0 3 9 ,9 5 3 1 ,4 8 3 0 ,9 2 2 8 ,9 0 2 1 ,1 7 3 3 ,3 5 2 ,6 0 2 ,1 0 2 ,5 0 3 ,4 5 3 ,4 5 2 ,6 5 3 ,4 5 2 ,6 5 3 ,0 0 2 ,7 5 3 3 ,4 8 3 2 ,8 5 3 8 ,3 0 4 0 ,9 3 3 0 ,1 6 3 4 ,5 4 3 2 ,5 4 3 3 ,1 7 3 7 ,5 5 3 1 ,2 9 2 ,1 0 3 7 ,8 6 3 ,1 5 3 0 ,3 5 2 ,4 6 1 ,5 8 3 ,1 1 3 ,0 3 1 ,9 8 4 ,0 3 1 ,1 0 2 ,0 7 3 ,6 9 3 ,6 7 3 ,9 5 3 ,7 3 2 ,6 0 4 1 ,3 0 2 ,1 1 3 ,1 5 4 0 ,6 8 2 ,3 5 3 ,5 5 4 1 ,9 3 2 ,9 5 0 ,6 0 0 ,6 0 0 ,6 0 0 ,6 0 0 ,6 0 0 ,6 0 0 ,6 0 0 ,3 0 0 ,6 0 0 ,6 0 0 ,1 0 0 ,6 0 0 ,6 0 0 ,6 0 0 ,6 0 3 ,6 0 3 3 ,1 7 2 ,1 6 0 ,6 0 3 ,0 5 4 1 ,3 0 2 ,2 7 0 ,1 1 7 3 ,7 2 5 9 ,2 3 7 4 ,8 7 7 2 ,6 4 7 3 ,7 5 5 4 ,2 0 6 7 ,6 1 5 9 ,7 9 5 8 ,6 6 6 8 ,3 9 7 3 ,0 9 5 3 ,8 5 6 1 ,6 8 5 8 ,1 1 5 9 ,2 3 6 7 ,0 5 5 5 ,8 7 O x id e so fA l, F e .P 3 1 3 2 3 3 3 4 3 5 3 6 3 7 3 8 3 9 4 0 4 1 4 2 4 3 4 4 4 5 4 6 4 7 0 ,1 0 2 8 ,6 7 0 ,0 6 3 3 ,7 0 0 ,0 9 3 0 ,5 7 0 ,0 8 3 0 ,0 1 0 ,1 7 2 9 ,2 8 0 ,1 7 2 5 ,8 0 0 ,0 9 3 6 ,6 0 0 ,1 0 3 2 ,5 2 0 ,0 8 2 9 ,4 2 0 ,1 0 2 9 ,4 7 0 ,5 5 3 0 ,7 8 0 ,0 8 2 6 ,7 2 0 ,0 6 3 4 ,7 8 0 ,0 9 3 3 ,7 3 0 ,0 4 3 6 ,1 5 0 ,0 7 2 8 ,4 3 0 ,0 3 3 4 ,9 4

0

% R O 2 3

%C a O

% M g O

% P O 2 5

% C a C O % M g C O 3 3

1 0 5- 1 0 0 0C

4 ,7 5 4 ,5 2 6 ,1 7 4 ,9 1 4 ,4 2 5 ,1 5 3 ,3 0 6 ,5 0 6 ,3 3 4 ,1 4 8 ,4 3 2 ,3 0 4 ,3 3 7 ,7 1 7 ,6 7 8 ,2 7 7 ,8 0

Table 4.6: La Cristalina(B) Stream Limestone Deposit

The Regin de MedinaRo Nipure According to Morales [6], this deposit is located in the county of Medina, Cundinamarca, 6Km North West of Cumaral, DM. The area is characterised by its hilly topography and steep slopes. Access is very difficult; there are very few passable ways. The land on which the deposit is located belongs to Otoniel Novoa [6]. Only five samples, see Tables 4.7, could be taken for analysis due to the thick vegetation which made access extremely difficult. It was, therefore, not possible to determine the extent of the deposit.

23

% C a O% M g O% P O C a C O M g C O 2 5 % 3 % 3

0 ,2 3 7 6 , 7 5 0 , 6 0 0 ,1 1 4 2 ,9 8

0 ,4 6

0 ,4 2

1 ,2 5

8 4 , 4 8

8 7 , 7 3

8 6 , 1 9

0 , 6 0

0 , 6 0

0 , 6 0

0 ,2 2

0 ,2 0

0 ,6 0

4 7 ,3 1

4 8 ,2 7

4 9 ,1 3

5 2 ,1 0 7 0 , 1 0 4 1 , 0 2 5 ,7 2 0 , 4 0

0 ,2 7

0 , 6 0

9 3 , 0 4

0 ,5 6

S a m p l eN o . M o i s t u r e( % ) L o s s e s( % ) In s o l u b i li t y( % )

1 0 5-1 0 0 0C

3 7 , 7 8

3 9 , 2 0

1 0 5C

3 8 , 5 4

0 , 1 7

0 , 1 0

0 , 0 7

The Regin de MedinaRo Nipure limestone deposit is characterised as having a very high calcium CaCO3 (76-93%) content; low magnesium MgCO3 (0.25-1.25%) content; and high silica content (average 30%). Therefore, the quality of the material satisfies all requirements for production of good quality cement. However, further site investigations are required to determine the extent and thickness of the limestone deposit. 24

0 , 1 2

3 3 , 9 1

Table 4.7: Ro Nipure Limestone Deposit

O x i d e so fA l,F e .P

% R O 2 3

0 , 3 2

i nH C L

0 , 8 7

0 , 3 4 1 1 , 9 7

1 3 , 5 0

1 0 , 8 1

2 2 , 3 6

0 , 4 1

The Region de RestrepoVereda Caney Alto According to Morales [6], the area under study is located in the county of Restrepo, Meta. The main site is called Vereda Caney Alto, and is located near (5Km N) to the town of Restrepo. The limestone deposits are at the La Soledad and La Reserva sites. Forty-three samples from La Soledad were analysed (see Tables 4.8 and 4.9) and 26 samples from La Reserva were analysed (see Table 4.10). The thickness at these sites was estimated at 20m. The estimated reserves can be calculated at around 2,500,000 tonnes [6], which is sufficient for the requirements of a minicement plant. Mining could be open pit, perhaps after removal of the overburden. The quality of these limestone deposits meets all the minerals requirements. The Region de RestrepoVereda Caney Alto limestone deposits are characterised as: CaO (25-56%); Al2O3 (0-6%); Fe2O3 (3-4%); MgO (0-15%); and high silica content (30-35%).

25

Sample No. Moisture (%) Losses (%) Insolubility (%) 105 0C 105 - 1000 0C in HCL 51 0,12 27,48 36,84 52 0,09 34,19 21,18 53 0,14 31,64 27,60 54 0,17 14,44 65,32 55 0,13 29,03 32,77 56 0,18 17,51 36,01 57 0,12 35,57 14,24 58 0,10 29,70 28,96 59 0,26 25,23 40,01 60 0,19 30,00 29,54 61 0,15 35,93 18,63 62 0,11 37,02 14,81 63 0,26 35,91 15,40 64 0,20 36,30 14,61 65 0,18 31,34 26,20 66 0,17 17,71 58,44 67 0,12 22,47 47,78 68 0,24 21,14 50,93 69 0,13 30,93 29,11 70 0,22 36,54 15,46 71 0,09 38,65 11,27 72 0,14 39,00 10,26 34,51 43,61 39,45 15,82 36,44 31,80 44,15 39,36 28,47 32,54 39,42 41,30 39,37 40,61 35,22 19,40 26,28 23,47 36,30 46,00 44,74 44,74 0,08 0,16 0,58 3,72 0,85 3,50 2,66 0,46 2,31 3,25 4,11 4,32 4,36 4,12 3,19 1,82 1,30 2,26 1,84 0,45 3,08 3,51 0,60 0,60 0,60 0,60 0,60 0,60 0,60 0,60 0,60 0,60 0,60 0,60 0,60 0,60 0,60 0,60 0,60 0,60 0,60 0,60 0,60 0,60 61,63 77,87 70,45 28,25 65,07 56,79 78,84 70,29 50,84 58,11 70,40 73,75 70,30 72,52 62,89 34,64 46,93 41,91 64,82 82,14 79,90 79,90 0,17 0,33 1,21 7,78 1,78 7,32 5,56 0,96 4,83 6,80 8,59 9,03 9,12 8,62 6,68 3,79 2,78 4,72 3,85 0,95 6,44 7,34

% R2 O3 Oxides of Al, Fe. P 0,62 0,69 0,36 0,39 0,63 0,83 1,00 1,09 3,45 3,90 1,50 2,05 4,40 3,85 3,60 2,15 1,70 1,60 1,50 1,25 1,95 2,20

% CaO

% MgO

%P2O 5

% CaCO 3 % MgCO 3

Table 4.8: Caney Alto La Soledad Limestone

26

Sample No. Moisture (%) Losses (%) Insolubility (%) 105 0C 105 - 1000 0C in HCL 34,87 23,90 23,01 29,65 36,76 22,60 26,42 36,02 32,69 27,06 8,74 26,82 34,19 32,89 27,32 22,72 26,20 20,52 29,91 34,72 28,66 19,59 45,36 45,11 30,71 15,74 43,56 37,67 16,57 23,00 34,72 71,64 35,14 20,01 22,78 33,84 41,85 34,16 49,71 27,30 17,98 30,27 2,75 2,65 3,00 2,45 2,40 7,05 3,05 2,95 2,20 2,52 6,85 4,66 2,35 2,38 2,40 5,56 4,80 1,82 2,81 2,65 2,04 38,80 25,03 26,28 34,41 40,05 22,84 29,72 40,05 41,25 34,31 10,65 31,32 43,30 41,65 34,54 27,98 33,32 26,11 36,65 43,89 33,32 3,70 2,64 2,17 2,33 4,73 4,21 2,70 4,10 0,22 0,92 1,62 1,77 1,20 1,62 0,77 1,28 3,15 5,55 0,60 0,60 0,60 0,60 0,60 0,60 0,60 0,60 0,60 0,60 0,60 0,60 0,60 0,60 0,60 0,60 0,60 0,60 0,60 0,60 0,60 69,28 44,70 46,93 61,45 51,52 40,70 52,97 71,52 73,66 61,26 19,01 55,93 77,32 74,37 61,67 49,96 59,50 46,62 65,44 78,37 59,50 7,74 5,52 4,53 4,88 9,89 8,87 5,67 8,56 0,46 1,92 3,38 3,72 2,50 3,38 1,61 2,67 6,58 11,60

% R2 O3 Oxides of Al, Fe. P

% CaO

% MgO

%P2O 5

% CaCO 3 % MgCO 3

73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93

0,10 0,20 0,22 0,22 0,13 0,14 0,20 0,16 0,16 0,12 0,36 0,11 0,08 0,10 0,10 0,12 0,25 0,13 0,12 0,33 0,14

Table 4.9: Caney Alto La Soledad Limestone

27

Sample No. Moisture (%) Losses (%) 105 C in HCL 39,30 26,03 20,58 13,14 11,95 46,53 34,19 2,14 1,95 4,60 2,47 45,53 46,42 25,99 34,30 2,97 2,77 2,04 1,71 0,60 0,60 0,60 0,60 80,76 82,89 46,41 61,25 1,37 2,70 2,79 31,08 38,42 42,41 3,45 2,27 0,16 0,60 0,60 0,60 55,50 68,60 75,73 Oxides of Al, Fe. P 7,19 4,74 0,33 6,21 5,79 4,26 3,57 0,12 0,13 0,11 0,17 0,18 0,16 0,11 36,01 36,71 20,66 27,19 24,66 30,43 33,57
0

Insolubility (%)

% R2O3

% CaO

% MgO

%P2O5

% CaCO3 % MgCO3

105 - 1000 C

94 95 96

97 98 99 100

Table 4.10: Caney Alto La Reserva Limestone Deposit

28

Clays The biggest clay deposit is at Vereda Caney Alto on land belonging to Pablo Silva [6]. This deposit has a considerable extension and is some 2.50m thick. Samples EAC-13 and EAC-14 were analysed. According to Morales [6], there is also a clay deposit at the Vereda Miralindo site, which is located in the county of Restrepo, Meta. The land belongs to Gregorio Martnez. A sample, EAC-9, was analysed. In addition, alongside the road running between Restrepo-Villavicencio, at a place called Hacienda La Camelia, there is another clay deposit [6] from which samples EAC-10 and EAC-11 were analysed. Another deposit exists at the Vereda Caney Medio site, county of Restrepo [6], on land known as El Porvenir, belonging to Rosendo Rojas, which provided sample EAC-12, which was analysed. The results of the clay deposit analyses are presented in Table 4.11.

Table 4.11: Clay deposit analyses 4.5 Raw materials list and costs In calculating the raw materials costs, in this study we consider only the following: Limestone Loamy clay Iron ore Pozzolana Gypsum Getups The first three are part of the clinker production stage; the second three are the inputs to the clinker for the final production of cement. Table 4.12 presents the quantities required per ton of cement, their unit costs in US$ and the total annual cost for each category.

29

Raw Materials Clinker Production Limestone Loamy Clay Iron Ore Cement Production Pozzolana Gypsum Getups Total raw material

UN Ton. Ton. Ton.

Amount per ton 0.955 0.086 0.032

Actual amount used 1806.72 162.31 60.91

Cost/unit (US$) 8.18 5.45 31.82

Total monthly Cost (US$) 14,778.96 884.58 1,938.06 17,601.61 4,019.81 2,040.55 8,135.17 14,195.53 31,797.14

Total annual cost (US$) 17,7347.54 10,615.01 23,256.78 211,219.32 48,237.71 24,486.65 97,622.00 170,346.35 381,565.68

Ton. Ton. Unit

0.234 0.047 18.695

442.22 88.72 35370.29

9.09 23 0.23

Table 4.12: Total raw materials costs It should be noted that the costs in Table 4.12 do not take account of the origin of the raw materials, i.e. transportation costs are not included. The costs in this report are based on the raw materials being available at the production site. 4.6 Utilities The plant will exploit three main sources of energy: water, coal and electricity. The energy requirements for the two stages of production - clinker and cement - are reported in Table 4.13, along with unit costs and total annual costs.
Energy/Water Clinker Production Energy Industrial Water Coal Cement Production Energy Industrial Water Unit Kw. m3 Ton. Kw. m3 37.39 0.47 0.079 56.08 0.09 70739.89 884.45 148.55 106110.18 176.75 Cost/unit (US$) 0.12 0.55 55 0.12 0.55 Total monthly costs (US$) 8488.79 486.45 8170.47 12733.22 97.21 Total annual cost (US$) 101865.45 5837.35 98045.63 152798.66 1166.56

Table 4.13: Utilities for production of cement

30

Table 4.14 presents the overall annual costs for utilities.

Industrial water Utilities 2 3 4 5 6 7 8 9 10 11

US$

Coal US$ 98,045.75 98,045.75 98,045.75 98,045.75 98,045.75 98,045.75 98,045.75 98,045.75 98,045.75 98,045.75

Energy US$ 254,664.11 254,664.11 254,664.11 254,664.11 254,664.11 254,664.11 254,664.11 254,664.11 254,664.11 254,664.11

Total US$ 359,713.77 359,713.77 359,713.77 359,713.77 359,713.77 359,713.77 359,713.77 359,713.77 359,713.77 359,713.77

7,003.91 7,003.91 7,003.91 7,003.91 7,003.91 7,003.91 7,003.91 7,003.91 7,003.91 7,003.91

Table 4.14: Utilities annual costs (US$) 4.7 Recommendations In order to increase the viability of the mini-cement plant project, the mining industry in DM needs to be developed. It is clear that there are numerous raw materials deposits in the area. In terms of their quality and accessibility, the limestone deposits are within the range required for cement production. The high silica content can be controlled by mixing techniques. However, access to these deposits will need to be developed. Chemical testing produced a precise identification of the mineral components of the limestone and clay deposits. However, for a detailed mining-economic assessment, a detailed site investigation would be required to quantify the continuity and thickness of the layers. Transportation costs have been estimated at US$0.12/ton/km, based on information from the mining industry. This cost is low and has been confirmed by private transportation companies.

31

Chapter 5 Location, Site and Environmental Assessment DM acts as the doorway to the Orinoqua region, one of the three DM regions. It covers 27% of the national territory with an area of 85,770Km2.Historically, due to its strategic geographical location, DM has been one of the leading regions in Colombia (see Figure 5.1).

Figure 5.1: Physical location of DM

32

5.1 Physical geography The Andean region is located in the west part of the country and is characterised by the Cordillera de los Andes, which in turn is divided into three cordilleras: Occidental, Central, and Oriental. The Cordillera de los Andes reaches altitudes of over 4,000m above sea level. The Orinoquian region, also known as La Planicie, covers 310,000Km2 and includes six Departamentos: Casanare, Meta, Guaviare, Guana, Vichada, and Arauca. Four natural subregions can be identified: Piedemonte Llanero, Llanuras del Meta, Llanuras del Guaviare, Pantanos del Arauca, and Serrana de la Macarena. The region is generally fairly flat; there are no areas more than 200m above sea level. The Amazonian region, which is even bigger than the Orinoquian region, covers 348,588Km2, which corresponds to 29% of the national territory. It includes six Departamentos [8]: Putumayo, Caqueta, Guaviare (20% of which is in the Orinoquian region), Vaupes, Guana (40% of which is in the Orinoquian region), and Amazonas. Eight natural sub regions can be identified: Piedemonte Amazonico, Llanuras del Caqueta, Llanuras del Inrida, Llanuras del Guaviare, Amazona Meridional, Llanuras del Putumayo, Serrana del Chibiriquete, and Trapecio Amazonico. 5.2 Demography The population of DM is 789,276 according to DANE (Departamento Nacional de Estadstica) [7] and it is distributed across 29 counties where the city of Villavicencio is located. See Figure 5.2. The reference was prepared by DANE and Banco de la Republica. DANE is the Colombian organisation responsible for planning, processing, analysing, and publishing official data; Banco de la Republica is the central bank of Colombia. The city of Villavicencio is the most important town in the Orinoquian region. Villavicencio is also called La Puerta del Llano due to its strategic location and economic importance. The city is at 467m altitude, and covers 1,267Km2, with a population of 384,131. The population of DM is divided 64.5% urban and 35.5% rural. There are two towns with over 40,000 inhabitants - Acacias and Granada; and three with between 20,000 and 40,000 inhabitants - Puerto Lopez, Puerto Gaitan, and San Martn. There are 12 towns with between 10,000 and 20,000 inhabitants and 11 with less than 10,000 inhabitants.

33

Figure 5.2: Demographic distribution in DM 5.3 Economic sectors DM is fast becoming one of the most dynamic Departamentos in Colombia. Its economic development is based on agriculture, mining, industrial development, electricity and gas, construction, trade, transportation, finance, and services [7]. Figure 5.3 shows the participation of each economic sector for the first half of 2004.

34

S ervic es Financing Transportation Trade Cons truction E lec tricity and Gas Indus trial M anufac turing M ining A gric ulture 0,00 10,00 20,00 30,00 40,00 50,00 60,00

Figure 5.3: Economic sectors Traditionally, agriculture and cattle were the main economic activities. Agriculture is based on rice, African palm, and cacao, more than 875,000 ha is given over to grazing for domestic cattle.

Salt

Gas

Oil

5000

10000

15000

20000

25000

Figure 5.4: Mining production in 2004 In recent years, petroleum and natural gas have begun to be extracted. Petroleum is extracted in four areas [7]: Area Apiay, Area Suria, Area Castilla, and Area Chichimene. In 2004, a total of 16,483 tonnes (1,000 of barrels) was extracted.

35

In the same period, 2,350 tonnes (1,000 ft3) and 7,660 tonnes of gas and salt were extracted. 5.4 Infrastructure The highway transportation system covers 7,393Km across a total area of over 87,500Km2 [7]. According to the Colombian highway technical classification system, 911Km are first category (Nacionales); 3,633Km are second category (Departamentales); and 2,849Km are third category (Municipales o Vecinales) roads. In terms of international technical standards, much of the highway transportation system is not acceptable. The modernisation and construction of the new Bogota-Villavicencio highway is the main transportation development in Colombia in the last decade. DM has a number of main rivers which means that in this region navigation is another means of transportation. The El Meta river extends over 1,142Km, of which 730Km are navigable [8]. The principal ports are located in Puerto Lopez and Puerto Gaitan. The Ariari river has its principal ports in Puerto Rico and Puerto Lleras. Vanguardia airport, located in the city of Villavicencio and operating at 60% of capacity, serves the Orinoquian and Amazonian regions [7]. In addition, there are 11 regional terminals that can accommodate small aircraft. 5.5 Proposed plant location It is planned that the plant will be located in DM, which is close to the market, will benefit the local population, and will reduce transport costs. Its precise siting has not been decided nor has there been any land purchase. It will be necessary for the project to begin with the purchase of land or leasing of it from an existing industrial facility. The recommended area for a plant based on the Colombian technology option is some 3,090m2, note that the investment costs reported in Chapter 6 do not include this item. 18

18

It is also assumed that the cost of the cement is included.

36

Chapter 6 Engineering and Technology Cement is generally understood as a binder, a substance that sets and hardens independently, and can bind together other materials. The name is derived from the Roman term opus caementitium, which described masonry that resembled concrete, which was made from crushed rock with burnt lime as a binder [8]. Modern hydraulic cements began to be developed at the beginning of the Industrial Revolution [8] (around 1700), driven by the need: (1) for hydraulic renders for finishing brick buildings in wet climates; (2) for hydraulic mortars for masonry constructions that would be subjected to seawater, e.g. in harbour works, etc.; (3) for the development of strong concrete. Portland cement is the most common type of cement, generally used for the production of concrete. It consists of clinker and gypsum. There are different types of Portland cement manufactured to meet different physical and chemical requirements, such as durability and high-early strength, and for specific purposes. 6.1 Manufacture of cement The first step in the cement manufacturing process is the quarrying of the raw materials whose combination, when sized, blended, and processed, yields the required chemical composition. These raw materials are subjected to a series of high temperature chemical reactions and undergo physical changes after which they are ground into a very fine, precisely sized powder.

Figure 6.1: Portland cement manufacture

37

6.1.1 Quarrying The raw materials used to produce cement are primarily limestone, clay, shale, and silica sand. These materials are quarried, crushed, and transported to the nearest cement plant. A typical limestone/cement rock quarrying process for producing crushed and broken stone includes: (1) removal of the overburden; (2) blasting of the limestone deposit; (3) loading and transporting the blasted limestone to the crushing plant; and (4) crushing in primary crushers to reduce stone to about 125mm, then to roughly 10-19mm in secondary crushers. 6.1.2 Raw materials preparation The raw materials are proportioned to the correct chemical composition and ground to a fine consistency. Small quantities of iron ore, alumina and other minerals may be added to adjust the raw materials mix. Dry and wet process methods can be used to grind the raw materials. In the dry-process, raw materials are proportioned, ground to a powder, blended and fed to the kiln in a dry state. In the wet process, 19 slurry is produced by adding water to the properly proportioned raw materials. Grinding and milling are electrically driven processes. The raw meal grinding equipment consists of ball mills, tube mills, compound mills, ring roll mills and impact mills. 6.1.3 Kiln operation Cement kilns are the largest pieces of moving industrial process equipment, and also one of highest temperature ones. The finely ground raw material, raw meal is fed into the kilns. Pyroprocessing provides the energy and environmental conditions necessary for the reactions and phase changes. A 1,870C flame heats the mixture to 1,500C. The high temperature pyroprocessing causes the raw meal to react and form complex mineral compounds. These compounds exit the kiln as a hard nodular material called clinker. This operation is the most energy consuming in the manufacture of cement. The annual energy requirement for cement production in the world is about 446,684 109 Btu. Kiln operations can be dry or wet processes depending on how the raw materials are prepared. Wet-process kilns are fed with slurry with a moisture content of 30%-40%. The wet-process takes longer as the water in the raw material feed must be evaporated off, which requires an additional 33% of energy compared to the dry process. Dry-process kilns are fed with dry powdered raw materials. There are three main types of dry-process kilns: no pre-heater, pre-heater and precalciner kilns. Most dry process plants involve preheating the finely ground raw material before it is fed into the kiln.

The Chinese technology uses the wet system and a VSK. This is the main difference between the two technologies.

19

38

The red-hot clinker is discharged from the bottom of the kiln and transferred to various coolers to recover thermal energy and lower the temperature of the clinker until it can be handled. The clinker is cooled by air circulation and recirculation. The hot air recovered from the cooling process is recycled back to the kiln or pre-heater system to enable the thermal energy to be recovered. 6.1.4 Cement milling The cooled clinker is combined with 3-6% gypsum and ground down to a fine grey powder. The gypsum controls the setting time of the concrete. The resulting fine grey powder is cement. The desired setting quality of the finished product is achieved by the addition of 2-8%, but typically 5% of calcium sulphate (usually gypsum or anhydrite) to the clinker after which the mixture is pulverised. The cement powder is now ready for use, and will react to the addition of water. Fineness is an important property of cement and affects the rate of hydration. The finer the milled cement, the more surface area is available for hydration. The greater this area the greater early strength and the more rapid will be the generation of heat.

6.2 The Colombian technology Colombian technology is used for production runs of 100 tons/day of Portland cement. Clinker production from this technology is estimated to be 60 tons/day. SIME Ingenieros Ltda believes that it can supply the latest technology, capable of producing cement that will be competitive in terms of costs and quality. It complies with ASTM standards. SIME Ingenieros Ltda, claims to be able to design and build cement plants with the capacity to produce around 100 tons/day. They can also convert wet (1,000Kg) and VSK processes to dry processes. The dry process system, based on the latest modern technology, uses preheated towers.
Item 1 2 3 4 5 6 7 8 9 10 TOTAL VALUE Description Raw crushing and grinding section Blending and storage section Clinker fabrication section Cement grinding section Crushing and grinding section coal Cement packing section Auxiliary equipment Electrical Equipment Laboratory Equipment Erection supervision charges Price (US$) 439,807 406,576 1,791,433 1,122,597 301,533 119,435 98,222 707,300 318,300 219,130 5,524,333

Table 6.1: Quotation for a 100 tons/day cement plant

39

SIME Ingenieros Ltdas proposal includes the set of equipment necessary to finish the product, i.e. ducting, structures, drives, accessories and laboratory and electrical systems. The laboratory costs are the same, regardless of the capacity of the cement plant. This equipment is required to guarantee a high quality product. Two quotations were obtained for a plant based on the Colombian technology, one in 2006 and one in March 2007. Table 6.1 presents the 2007 prices. The land requirement for a cement plant is 10,000m2. It includes: the mechanical and electrical production equipment, all buildings, store rooms, raw materials patio, and loading court. The recommended area for plant facilities is about 3,090m2 (see Table 6.2).
Area (m2) 600 150 40 200 100 1.000 1.000 3.090

Facility Administration Offices Building Laboratory Building Control Room Building Spare Warehouse Building Electric Substation Building Clinker Storage Room Cement Storage Room TOTAL

Table 6.2. Required area for production

40

Figure 6.2: Mechanical equipment for raw materials preparation

41

Figure 6.3: Mechanical equipment for kiln operations

SIME INGENIEROS Ltda

Figure 6.4: Mechanical equipment for milling and packing operations

42

6.3 The Chinese technology According to the China Building Materials Academy (CBMA), the production process involves eight operations: (1) limestone crushing, pre-blending and storage; (2) clay crushing; (3) raw materials preparation; (4) raw meal; (5) clinker burning system; (6) transportation and storage for clinker, gypsum and mixture; (7) clinker grinding, storage and transportation; and (8) cement packing. It is important to note that storage is part of the process, but we do not include it within the costs. CBMA which was founded in 1950 is the largest research organisation in China in the field of building materials and inorganic non-metallic materials, homogenising and storage.
Item 1 Description Mechanical Equipment Raw crushing and grinding section Blending and storage section Clinker fabrication section Cement grinding section Crushing and grinding section coal Cement packing section Auxiliary equipment 2 3 4 5 6 7 8 Electrical Equipment Instrumentation Laboratory Equipment Water System Abrasive Mediums for the Grinding system (for two years) Refractory Materials (for two years) Engineering Design Process design Electrical design Automation control and detection system Water supply and drainage system Erection supervision TOTAL VALUE Price US$ 2,500,000 700,000 800,000 150,000 100,000 50,000 50,000 200,000 200,000 US$ 4,750,000

Table 6.3: Quotation for a 300 tons/day cement plant For the first operation (see Figure 6.2), limestone with a lump size of less than 450mm, is carried directly into the plant by truck and fed into a double-rotor impact crusher through an apron feeder. The crushed limestone (less than 25mm in size) is transported into the pre-blending store through the belt conveyors. The pre-blending store has two areas for alternate limestone stacking and reclaiming. Electromagnetic vibrating feeders and belt conveyors are installed underneath the store. Pre-blended limestone is transported into the limestone silos. For the second operation (see Figure 6.5), the clay is taken by truck into the plant and fed into an impact clay crusher CJ600*400 with a capacity of 10 tons/hour before being transported into the two clay silos on a belt conveyor. The third operation (see Figure 6.4), raw materials grinding, is a closed-circuit system comprising a 2.4*8m diameter raw mill and a 2m diameter cyclone separator. Based on the feed moisture being less than 5% and the lump size less than 25mm, production capacity will be 22tons/hour. The limestone, clay, iron 43

ore, gypsum and coal are discharged from their respective silos, weighed by electronic belt weigher according to the required rating and delivered on a belt conveyor into the raw mill for grinding. The waste gas from the raw mill is cleaned by a CXBC bag filter. The raw materials grinding system is equipped with a continuous sampler, CaOFe2O3 analyser and electronic belt weighers at the bottom of the materials silo, which constitutes the off-line raw meal quality control system. For the fourth operation (see Figure 6.5), the raw meal from the raw mill is transported into a 10m homogenising silo through an air-lift, expansion bin, air slide and distributor on the roof of the silo. The homogenising silo is a multi-flow silo. There are a number of materials discharging channels at the bottom of the silo. When the discharging channels are aerated, the raw meal in them is discharged, through multi-flow discharge into the silo. During the discharge of the raw meal, gravitational and radial blending of raw meal occurs. This enables better homogenisation such that the homogenised raw meal meets the requirement for clinker burning. The air for the silo air-activation unit is supplied by two roots blowers. For the fifth operation (see Figure 2.6), the homogenised raw meal is discharged from the continuous multi-flow silo through a bucket elevator, storage feed bin, double-tube screw conveyor and pre-applied water nodulising equipment into the mechanised shaft kiln. Then the pelletised raw meal enters the shaft kiln for clinker burning. The burned clinker leaving the kiln is cooled in a B400 chainbucket conveyor and then delivered to the silos. The waste gas from the shaft kiln goes into a glass bag dust collector for cleaning, and is then emitted into the atmosphere. For the sixth operation (see Figure 6.7), the burner clinker is transported into two clinker silos by a chain bucket and a rotary conveyor. The storage capacity of the two silos is 2,500 tons. The gypsum and admixture of less than 30mm lump size, are transported into the silos separately by an electromagnetic vibrating feeder and a bucket elevator. The gypsum and admixture are mixed in the appropriate proportions by an electronic belt weigher and transported to the cement mill on a belt conveyor. The seventh operation (see Figure 6.8) involves a closed-circuit cement grinding system consisting of a 2.4*8m cement mill and 2m cyclone separator. The mill load control system, including electric ear loading control unit and electric automatic-adjusted belt weigher, controls the quantity of clinker, gypsum and admixture discharged. The cement mill output is 14 tons/hour. The waste gas from the cement mill is cleaned by a CXBC bag filter and emitted into the atmosphere. The cement is transported into the cement silos on a screw conveyor and bucket elevator. There are three cement silos with a total storage capacity of 4,500 tons, roughly 14 days cement production. The cement is either transported to the cement packing shop on an over-flow screw conveyor and air slide which is beneath the silos, or loaded by a bulk loader for shipping in bulk. In the eighth operation (see Figure 2.9), the cement from the silo is transported into a BGY-2J 2-spout stationary packer in the cement packing shop, on a bucket

44

elevator, via a vibrating screen, screw conveyor and storage bin. The packing output is 30 tons/hour. The area occupied by the cement plant is about 50,000m2 for the Chinese technology compared to 10,000m2 for the Colombian technology. The cost of 1ha (10,000m2) of land in the DM area is about US$7,500.

Figure 6.5: Limestone crushing and conveying

45

Figure 6.6: Raw materials storage and proportion

Figure 6.7: Raw materials grinding and conveying

46

Figure 6.8: Raw meal silo

Figure 6.9: Vertical shaft kiln

47

Figure 6.10: Clinker storage and cement proportion

Figure 6.11: Cement grinding and conveying

48

Figure 6.12: Cement packing and product storage 6.4 Selection of technology In the selection of the Colombian technology, five factors were considered: (1) technical factors; (2) limitations of the market; (3) economic factors; (4) experience; and (5) environmental and sustainability issues. Technical factors The main technical benefit is the dry process for manufacturing. The dry process was developed in the 1970s and is the more efficient and environmentally-friendly option for cement production. SIME Ingenieros Ltda has focused on developing the dry processing technique for the production of cement in small quantities. The Chinese proposal is based on VSK technology whose technical performance is now being questioned based on its environmental impact and variable quality of final product. The feed for the VSK method is homogenised raw material in the form of nodules containing the required quantity of fuel, generally fine coke, for combustion. These nodules are burnt in the sintering zone of the kiln and the air required for combustion is supplied from beneath through a rotary gate. A chimney is required for emission of flue gases. Limitations of the market: The Chinese alternative is for 300 tons/day, which requires more efficient channels of distribution plus a larger distribution area. The Colombian tons/day plant is in better accord with the estimated size of the market.

49

Economic factors: The dry process consumes less thermal energy. The Colombian technology plant layout requires only a fifth of the land area required for the Chinese solution. SIME Ingenieros Ltda has successfully developed a totally automated miniplant for dry-process cement manufacture that requires fewer man hours per ton produced. The mini-cement plant developed by the Colombian company can be constructed locally using second hand machinery if desired, which would be obtainable at low cost. Experience: SIME Ingenieros Ltda has designed and constructed several mini-cement projects. The first was Cementos del Oriente SA, located in Sogamoso Industrial Park, Departamento de Boyac, Colombia. Training of personnel to use the Colombian technology will be quicker. Environmental and sustainability factors: The dry-process consumes less energy. The wet process in which the raw materials are ground with water, mixed and fed into the kiln in the form of slurry, has a higher environmental impact: higher water consumption, more energy required to complete the process, and higher CO2 emissions due to the combustion required to remove the water.

50

Chapter 7 Organisation and Overhead Costs A maintenance programme is essential for the proper working of the processing line. Table 7.1 presents the programme for maintenance of clinker and cement plants, calculated based on monthly production of 1,892 tonnes of cement.
Maintenance Materials Clinker Production Maintenance of the Kiln Mechanical Maintenance Electrical Maintenance Diesel Oil Grease Paint Transient Products Cement Production Maintenance Grinding Section Mechanical Maintenance Electrical Maintenance Gas Oil Grease Paint Transient Products TOTAL Maintenance Materials UN Unit Unit Unit Unit Unit Unit Unit Unit Vr / Ton 0.7 0.18 0.09 0.14 0.09 0.09 0.4 0.09 Tons/Month 1892 1892 1892 1892 1892 1892 1892 1892 Total Monthly Costs (US$) 1324.4 340.56 170.28 264.88 170.28 170.28 756.8 170.28 3367.76 605.44 170.28 94.6 1381.16 151.36 151.36 151.36 94.6 2800.16 6167.92 Total (US$) 15892.8 4086.72 2043.36 3178.56 2043.36 2043.36 9081.6 2043.36 40413.12 7265.28 2043.36 1135.2 16573.92 1816.32 1816.32 1816.32 1135.2 33601.92 74015.04

Unit Unit Unit Unit Unit Unit Unit Unit

0.32 0.09 0.05 0.73 0.08 0.08 0.08 0.05

1892 1892 1892 1892 1892 1892 1892 1892

Table 7.1 Maintenance materials

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The new factory will utilise external services for administrative and factory related requirements. Table 7.2 details these items.
Cost / Unit (US$) 455 227 455 216 Tons / Month 1892 1892 1892 1892 1892 Total Costs (US$) 455 227 455 864 2001 Total monthly Costs 681.12 681.12 170.28 132.44 170.28 1835.24 Total annual cost (US$) 5460 2724 5460 10368 24012 total costs 8173.44 8173.44 2043.36 1589.28 2043.36 22022.88

Additional Contracts Fiscal Advisor Lawyers Environmental Testing Security TOTAL Additional Contracts Other Fixed Costs Clinker Section Rent Grinding Section Rent Drinking Water Offices' Light Phone TOTAL Other Fixed Costs

UN Men Men Men Men

Amount 1 1 1 4

UN Month Month Month Month Month

Vr / Ton 0.36 0.36 0.09 0.07 0.09

Table 7.2 Maintenance materials It should be noted that within the additional contract item services are itemised, but these costs cannot be included within human resources costs. These items are directly related not to the industrial activity but to the external services.

52

Chapter 8 Human Resources The organisational chart depicted in Figure 8.1 shows the structure of the minicement plant organisation and the relationships between key operations. There is a linear relationship between the cement-plant manager and the three key leaders: (1) mining operations leader; (2) senior section leader; and (3) quality assurance leader. The manufacturing sections include: raw material preparation; (2) kiln operations; (3) cement milling; and (4) cement packing. The manufacturing sections have lateral relationships which all work on the same hierarchical level and all report to the Senior Section Leader. The raw materials are proportioned to the correct chemical composition and ground to a fine consistency. Small quantities of iron ore, alumina, and other minerals may be added to adjust the raw material mixture. The cement kiln operation (or pyroprocessing) is the step that provides the energy and environmental conditions necessary for the reactions and phase changes. This operation dominates the energy consumption and environmental impacts associated with the manufacture of cement. The high temperature in pyroprocessing causes the raw meal to react and form complex mineral compounds. These compounds exit the kiln as a hard nodular material called clinker. For the cement milling operation, cooled clinker is combined with approximately 3-6% gypsum and ground/milled into an extremely fine grey powder. This fine grey powder is cement. Gypsum is used to control the setting time of concrete. Cement packing is the process in which cement is put into, normally, 50Kg packs to make it easier for transportation and to protect it. Finally, Quality Assurance (QA) is the activity of providing the necessary evidence to assure all concerned, that the quality-related activities are performed effectively. It includes the regulation of the quality of raw materials, services related to production and management, and inspection processes.

53

Figure 8.1: Mini-cement plant organisational chart 8.1 Workforce The workforce is comprised of 55 technical workers and 12 administrative staff (managers and secretaries). The processing line operates on 1 shift/day. Table 8.1 presents the employment at each stage of cement production

54

Staff Costs Clinker Production Kiln Operators Chemical Technicians Site Operators Electricians Mechanics Loader Operators Cement Production Grinding Manager Chemical Technicians Site Operators Electricians Mechanics Loader Operators Total

Amount 5 4 12 4 5 2

Cost/Month (US$) 455 455 218 364 364 227

Monthly costs (US$) 2275 1820 2616 1456 1820 454

Taxes (US$) 80% 1820 1456 2092.8 1164.8 1456 363.2

Total monthly Costs (US$) 4,095.00 3,276.00 4,708.80 2,620.80 3,276.00 817.20 18,793.80 2,289.60 655.20 5,886.00 655.20 655.20 408.60 10,549.80 29,343.60

Annual cost per unit (US$) 9828 9828 4,708.8 7,862.4 7,862.4 4,903.2

Total annual cost (US$) 49140 39312 56,505.6 31,449.6 3,9312 9,806.4 225,525.60 27,475.2 7,862.4 70,632 7,862.4 7,862.4 4,903.2 126,597.6 244,319.40

4 1 15 1 1 1 55

318 364 218 364 364 227

1272 364 3270 364 364 227

1017.6 291.2 2616 291.2 291.2 181.6

6,868.8 7,862.4 4,708.8 7,862.4 7,862.4 4,903.2

Table 8.1: Personnel costs Table 8.2 shows the staff costs for the services related to the various activities and Table 8.3 shows the indirect staff costs.
Total monthly Costs 227 3,420 3,647 3,420 7,067 total annual cost 2,724 41,040 43,764 41,040 84,804

Additional Contracts Clinker Production Environment Impact control Loader Service Cement Production Loader Service Total Additional Contracts

Cost/Unit 227 114

114

Table 8.2: Additional costs (US$)

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Indirect Personnel Costs General Manager Technical Manager Administration Manager Chemical Engineer Electromechanical Engineer Process Engineer Salesmen Purchasing Officers Accountants Secretary Deliverymen Cleaners Total

Amount 1 1 1 1 1 1 1 1 1 2 1 1 13

Costs/Month 1,818 1,364 1,136 909 909 909 455 455 455 227 218 218

Total Costs (US$) 1,818 1,364 1,136 909 909 909 455 455 455 454 218 218

Taxes (US$) 80% 1,454.4 1,091.2 908.8 727.2 727.2 727.2 364 364 364 363.2 174.4 174.4

Total monthly Costs (US$) 3,272.40 2,455.20 2,044.80 1,636.20 1,636.20 1,636.20 819.00 819.00 819.00 817.20 392.40 392.40 16,740.00

total annual cost (US$) 39,268.8 29,462.4 24,537.6 19,634.4 19,634.4 19,634.4 9828 9828 9828 9,806.4 4,708.8 4,708.8 200,880

Table 8.3: Indirect staff costs

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Table 8.4 present the annual expenditure for the proposed project, related to the workforce.
Labour Labour Direct Costs Clinker Kiln Operators Chemical Technicians Site Operators Electricians Mechanics Loader Operators Cement Grinding Manager Chemical Technicians Site Operators Electricians Mechanics Loader Operators Additional Contracts Total Labour Overhead Costs General Manager Technical Manager Administration Manager Chemical Engineer Electromechanical Engineer Process Engineer Salesmen Purchasing Officer Accountant Secretary Deliverymen Cleaners Total Additional Labour Overhead Costs Uniforms Temporary technicians in laboratory Temporary production workers (US$) 49,140.00 39,312.00 56,505.60 31,449.60 39,312.00 9,806.40 27,475.20 7,862.40 70,632.00 7,862.40 7,862.40 4,903.20 84,804.00 436,927.20

39,268.80 29,462.40 24,537.60 19,634.40 19,634.40 19,634.40 9,828.00 9,828.00 9,828.00 9,806.40 4,708.80 4,708.80 200,880.00

15,180.00 56,160.00 7,371.00 78,711.00 279,591.00 716,518.20

Total Labour Overhead Costs Total Labour Cost

Table 8.4: Annual expenditure on personnel

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Chapter 9 Implementation Planning and Budgeting The total time for implementation of the project based on either the Colombian or the Chinese technology, from date of signing the contract and issuing the letter of credit, would be 18 months (Tables 9.1 and 9.2)

Table 9.1: Required time for Colombian technology implementation

Table 9.2: Required time for Chinese technology implementation In the present analysis, for reasons of simplification we have assumed 12 months of construction costs, in order to keep the span of investment expenditure within the first year.

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9.1

Summary of year 1 investment budget

A total fixed investment of US$5,524,333 has been allocated for the first year. The investment in fixed assets, working capital and preproduction expenditure for the initial planning period (first three years of activity, including start of production) US$5,711,489.54, is detailed in Table 9.3:
INVESTMENT COSTS (US$) Total fixed investment costs Total pre-production expenditures Increase in net working capital TOTAL Construction 1 (US$) 5,305,203.00 219,130.00 0 5,524,333.00 Production 2 (US$) 0 0 183,660.55 183,660.55 Production 3 (US$) 0 0 3,495.98 3,495.98

Table 9.3: Investment costs No specific assumptions have been made about financing of the investment project: thus, the cash flow cumulative balance for the first years shows negative values (Table 9.4).
Year>>> TOTAL CASH INFLOW Inflow funds Inflow operation Other income TOTAL CASH OUTFLOW Increase in fixed assets Increase in current assets Operating costs Marketing costs Income (corporate) tax Financial costs Loan repayment Dividends Equity capital refund SURPLUS (DEFICIT) CUMULATIVE CASH BALANCE 1 0 0 0 0 5,524,333.00 5,524,333.00 0 0 0 0 0 0 0 0 -5,524,333.00 -5,524,333.00 2 3 3,699,180.60 3,632,640.00 66,540.60 0 3,632,640.00 3,632,640.00 0 0 2,346,214.47 2,099,509.30 0 0 250,201.15 -1,380.51 1,577,862.34 1,577,862.34 0 0 518,150.98 518,150.98 0 0 0 4,876.49 0 0 0 0 1,352,966.13 1,533,130.70 -4,171,366.87 -2,638,236.17 Table 9.4: Cash flow (US$) 4 3,632,750.41 110.41101 3,632,640.00 0 2,096,013.32 0 0 1,577,862.34 0 518,150.98 0 0 0 0 1,536,737.10 -1,101,499.07 5 3,632,640.00 0 3,632,640.00 0 2,096,013.32 0 0 1,577,862.34 0 518,150.98 0 0 0 0 1,536,626.68 435,127.61

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Chapter 10 Financial Analysis 10.1 General aspects The financial analysis was conducted to evaluate the UNIDO ICS project related to the implementation of mini-cement plant technology in the DM region of Colombia. The financial analysis uses the methodology recommended in the UNIDO Manual for the Preparation of Industrial Feasibility Studies. It uses the COMFAR III package for the financial and economic calculations. It takes account of the project input costs and output prices, risks and uncertainties in order to clarify the business plan, based on: 1) analysis of the estimated costs for the project, based on the information gathered by the UNIDO ICS; 2) the financial analysis, including the flow of financial resources and the projected financial net benefits. COMFAR III printouts are provided in the Appendices. All financial calculations and results are in US dollars. 10.2 Methodological analysis The financial and economic evaluation was conducted using the methodology recommended by UNIDO combined with standard capital budgeting procedures and provides forecast cash flows for the project over a planning horizon of 10 years. In determining the rate of discount to be applied, an appropriate level of funding that takes account of the weighted average cost of capital (WACC) needs to be established; a generic 15% discount was applied. COMFAR III software was used to evaluate future cash flow from the projected, based on present values, discounted at capital cost. The following assumptions were made: i) that 100% of production is sold over the whole life of the project; ii) that the level of income tax is 35% over the life of the project; iii) there is no sales tax. The price assumed for each unit sold is assumed to be net of tax, i.e. the income is only liable for income tax on the net profit; iv) the base model does not include inflation, i.e. does not predict profitability in relation to the general economic context. The calculations are based on US$ cash flows for product sales and payments, discounting all nominal cash flows at the nominal discount rate; Sensitivity analysis was performed on this base case. Different scenarios were proposed to test the different hypotheses of costs and prices. Prices as well as production and invested costs are forecast to be between 10% and 20% less than

60

the base case prices. The resulting net present values and internal rates of return demonstrate the projects value and risks. 10.3 Data input - Capital structure input The sections below describe the input data on the capital structure used in the COMFAR III calculations, derived from ICS data. 10.3.1 Fixed investment costs Initial investment costs are defined as the sum of fixed assets (fixed investment costs plus pre-production expenditures) and current assets (net working capital). These costs are estimated for the construction phase (the first year of the planning period). The overall fixed investment cost is estimated at US$ 5.524.333 included in "Plant machinery and equipment (Table 10.1).
Item 1 2 3 4 5 6 7 8 9 10 TOTAL Description Raw crushing and grinding section Blending and storage section Clinker fabrication section Cement grinding section Crushing and grinding section coal Cement packing section Auxiliary equipment Electrical Equipment Laboratory Equipment Erection supervision charges price (US$) 439.807 406.576 1.791.433 1.122.597 301.533 119.435 98.222 707.300 318.300 219.130 5.524.333

Table 10.1: Production costs If we include the cost of land purchase the summary of the investment is as in Table 10.2.
FIXED INVESTMENT COSTS Land purchase Site preparation and development Civil works, structures and buildings Plant machinery and equipment Raw crushing and grinding section Blending and storage section Clinker fabrication section Cement grinding section Crushing and grinding section coal Cement packing section Auxiliary and service plant equipment Auxiliary equipment Electrical Equipment Laboratory Equipment Environmental protection Contingencies TOTAL Total construction 0 0 0 4,181,381.00 439,807.00 406,576.00 1,791,433.00 1,122,597.00 301,533.00 119,435.00 1,123,822.00 98,222.00 707,300.00 318,300.00 0 0 5,305,203.00 Table 10.2: Fixed investment costs (US$)

61

10.3.2 Working capital Net working capital requirements have been calculated according to the expected minimum days of coverage determined for the project. The cost of the raw materials stock and the stock of finished product is calculated on the basis of 15 days coverage; the accounts receivables are estimated over 30 days, as are accounts payable. A relatively conservative figure for the cash-in-hand part of the working capital was estimated, equivalent to 5 days, to give the possibility for short term requirements to be filled.
NET WORKING CAPITAL REQUIREMENTS Total inventory Raw materials Limestone Loamy Clay Iron Ore Pozzolana Gypsum Getups Utilities Finished product Accounts receivable Cash-in-hand CURRENT ASSETS Accounts payable Raw materials Limestone Loamy Clay Iron Ore Pozzolana Gypsum Getups Utilities Energy CURRENT LIABILITIES TOTAL INCREASE IN NET WORKING CAPITAL 3 4 105,713.11 105,713.11 31,798.37 31,798.37 14,780.11 14,780.11 886.7804 886.7804 1,926.51 1,926.51 4,024.40 4,024.40 2,045.25 2,045.25 8,135.32 8,135.32 8,170.48 8,170.48 65,744.26 65,744.26 131,488.53 131,488.53 11,619.00 11,619.00 248,820.64 248,820.64 61,664.11 61,774.52 31,687.96 31,798.37 14,728.79 14,780.11 883.701301 886.7804 1,919.82 1,926.51 4,010.42 4,024.40 2,038.15 2,045.25 8,107.07 8,135.32 8,754.14 8,754.14 21,222.01 21,222.01 61,664.11 61,774.52 187,156.54 187,046.13 3,495.98 -110.41101 Table 10.3: Net capital requirements and current assets (US$) 2 107,038.05 33,123.30 15,395.95 923.729583 2,006.78 4,192.08 2,130.47 8,474.29 8,170.48 65,744.26 131,488.53 11,674.58 250,201.15 66,540.60 35,883.58 16,678.95 1,000.71 2,174.01 4,541.42 2,308.01 9,180.48 9,435.01 21,222.01 66,540.60 183,660.55 183,660.55 5 105,713.11 31,798.37 14,780.11 886.7804 1,926.51 4,024.40 2,045.25 8,135.32 8,170.48 65,744.26 131,488.53 11,619.00 248,820.64 61,774.52 31,798.37 14,780.11 886.7804 1,926.51 4,024.40 2,045.25 8,135.32 8,754.14 21,222.01 61,774.52 187,046.13 0

Net investment in working capital is about 5% of total sales (steady level) and about 0.03 times the total fixed investment.

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10.3.3 Total investment It is assumed that the entire initial investment is composed of capital expenditure and the required initial net working capital (Table 10.4).
INVESTMENT COSTS (US$) Total fixed investment costs Total pre-production expenditures Increase in net working capital TOTAL Production 2 0 0 183,660.55 183,660.55 Table 10.4: Investment costs (US$) Construction 1 5,305,203.00 219,130.00 0 5,524,333.00 Production 3 0 0 3,495.98 3,495.98

10.3.4 Sources of finance There is no consideration of financial insurance for the total investment (see Chapter 9).

10.4 Production phase inputs 10.4.1 Production and sales We assumed a market sales price of US$8 for a 50Kg cement pack (see Chapter 3); we therefore use a selling price of US$160/ton to calculate annual turnover (Table 10.5).
Year 2 3 4 5 6 7 8 9 10 11 Sales revenue (US$) 3,632,640 3,632,640 3,632,640 3,632,640 3,632,640 3,632,640 3,632,640 3,632,640 3,632,640 3,632,640

Table 10.5: Sales per year

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10.4.2 Raw materials costs Production costs are calculated based on the raw material being locally sourced (Table 10.6).
Raw materials Limestone Loamy Clay Iron Ore Pozzolana Gypsum Getups Total 6 177,361.38 10,641.36 23,118.12 48,292.77 24,543.02 97,623.79 381,580.45 Table 10.6: Production costs for locally sourced raw materials (US$) 2 177,361.38 10,641.36 23,118.12 48,292.77 24,543.02 97,623.79 381,580.45 3 177,361.38 10,641.36 23,118.12 48,292.77 24,543.02 97,623.79 381,580.45 4 177,361.38 10,641.36 23,118.12 48,292.77 24,543.02 97,623.79 381,580.45 5 177,361.38 10,641.36 23,118.12 48,292.77 24,543.02 97,623.79 381,580.45 7 177,361.38 10,641.36 23,118.12 48,292.77 24,543.02 97,623.79 381,580.45 8 177,361.38 10,641.36 23,118.12 48,292.77 24,543.02 97,623.79 381,580.45

10.4.3 Overheads Additional general expenditure, e.g. factory costs and administration costs, and maintenance, are grouped together under indirect costs overheads; no particular assumptions had been made in the data provided (Tables 10.7 and 10.8).
Maintenance Maintenance of the kiln Mechanical Maintenance Electrical Maintenance Diesel Oil Grease Paint Several transient products Clinker Maintenance Grinding section Mechanical Maintenance Electrical Maintenance Gas Oil Grease Paint Several transient products Cement Total maintenance 4 15,892.80 4,086.72 2,043.36 3,178.56 2,043.36 2,043.36 9,081.60 2,043.36 40,413.12 7,265.28 2,043.36 1,135.20 16,573.92 1,816.32 1,816.32 1,816.32 1,135.20 33,601.92 74,015.04 Table 10.7: Maintenance costs (US$) 2 15,892.80 4,086.72 2,043.36 3,178.56 2,043.36 2,043.36 9,081.60 2,043.36 40,413.12 7,265.28 2,043.36 1,135.20 16,573.92 1,816.32 1,816.32 1,816.32 1,135.20 33,601.92 74,015.04 3 15,892.80 4,086.72 2,043.36 3,178.56 2,043.36 2,043.36 9,081.60 2,043.36 40,413.12 7,265.28 2,043.36 1,135.20 16,573.92 1,816.32 1,816.32 1,816.32 1,135.20 33,601.92 74,015.04 5 15,892.80 4,086.72 2,043.36 3,178.56 2,043.36 2,043.36 9,081.60 2,043.36 40,413.12 7,265.28 2,043.36 1,135.20 16,573.92 1,816.32 1,816.32 1,816.32 1,135.20 33,601.92 74,015.04 6 15,892.80 4,086.72 2,043.36 3,178.56 2,043.36 2,043.36 9,081.60 2,043.36 40,413.12 7,265.28 2,043.36 1,135.20 16,573.92 1,816.32 1,816.32 1,816.32 1,135.20 33,601.92 74,015.04 7 15,892.80 4,086.72 2,043.36 3,178.56 2,043.36 2,043.36 9,081.60 2,043.36 40,413.12 7,265.28 2,043.36 1,135.20 16,573.92 1,816.32 1,816.32 1,816.32 1,135.20 33,601.92 74,015.04

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Factory overhead costs additional contracts Fiscal advisor Lawyer advisor Environment: testing Security Total other fixed costs Clinker Section Rent Grinding Section Rent Drinking Water Offices' Light Phone Total Total Factory overhead costs

2 5,460.00 2,724.00 5,460.00 10,368.00 24,012.00 8,173.44 8,173.44 2,043.36 1,589.28 2,043.36 22,022.88 46,034.88

3 5,460.00 2,724.00 5,460.00 10,368.00 24,012.00 8,173.44 8,173.44 2,043.36 1,589.28 2,043.36 22,022.88 46,034.88

4 5,460.00 2,724.00 5,460.00 10,368.00 24,012.00

5 5,460.00 2,724.00 5,460.00 10,368.00 24,012.00

6 5,460.00 2,724.00 5,460.00 10,368.00 24,012.00 8,173.44 8,173.44 2,043.36 1,589.28 2,043.36 22,022.88 46,034.88

7 5,460.00 2,724.00 5,460.00 10,368.00 24,012.00 8,173.44 8,173.44 2,043.36 1,589.28 2,043.36 22,022.88 46,034.88

8,173.44 8,173.44 8,173.44 8,173.44 2,043.36 2,043.36 1,589.28 1,589.28 2,043.36 2,043.36 22,022.88 22,022.88 46,034.88 46,034.88 Table 10.8: Factory overhead costs (US$)

10.4.4 Labour The workforce costs for the two companies are calculated on the basis of the working hours involved in the production of each material. Only the total cost of labour per product is reported (Tables 10.9 and 10.10).
Labour direct costs (US$ Clinker Kiln Operators Chemical Technicians Site Operators Electricians Mechanics Loader Operators Cement Grinding Manager Chemical Technicians Site Operators Electricians Mechanics Loader Operators additional contracts Total 2 49,140.00 39,312.00 56,505.60 31,449.60 39,312.00 9,806.40 27,475.20 7,862.40 70,632.00 7,862.40 7,862.40 4,903.20 84,804.00 436,927.20 3 49,140.00 39,312.00 56,505.60 31,449.60 39,312.00 9,806.40 27,475.20 7,862.40 70,632.00 7,862.40 7,862.40 4,903.20 84,804.00 436,927.20 4 49,140.00 39,312.00 56,505.60 31,449.60 39,312.00 9,806.40 5 49,140.00 39,312.00 56,505.60 31,449.60 39,312.00 9,806.40 6 49,140.00 39,312.00 56,505.60 31,449.60 39,312.00 9,806.40 27,475.20 7,862.40 70,632.00 7,862.40 7,862.40 4,903.20 84,804.00 436,927.20 7 49,140.00 39,312.00 56,505.60 31,449.60 39,312.00 9,806.40 27,475.20 7,862.40 70,632.00 7,862.40 7,862.40 4,903.20 84,804.00 436,927.20

27,475.20 27,475.20 7,862.40 7,862.40 70,632.00 70,632.00 7,862.40 7,862.40 7,862.40 7,862.40 4,903.20 4,903.20 84,804.00 84,804.00 436,927.20 436,927.20 Table 10.9: Labour direct costs (US$)

65

Labour overhead costs (US$) General Manager Technical Manager Administration Manager Chemical Engineer Electromechanical Engineer Process Engineer Sales person Purchases person Accounting person Secretary Delivery person Cleaning person Total

4 5 39,268.80 39,268.80 29,462.40 29,462.40 24,537.60 24,537.60 19,634.40 19,634.40 19,634.40 19,634.40 19,634.40 19,634.40 9,828.00 9,828.00 9,828.00 9,828.00 9,828.00 9,828.00 9,806.40 9,806.40 4,708.80 4,708.80 4,708.80 4,708.80 200,880.00 200,880.00 Table 10.10: Labour overhead costs (US$)

2 39,268.80 29,462.40 24,537.60 19,634.40 19,634.40 19,634.40 9,828.00 9,828.00 9,828.00 9,806.40 4,708.80 4,708.80 200,880.00

3 39,268.80 29,462.40 24,537.60 19,634.40 19,634.40 19,634.40 9,828.00 9,828.00 9,828.00 9,806.40 4,708.80 4,708.80 200,880.00

6 39,268.80 29,462.40 24,537.60 19,634.40 19,634.40 19,634.40 9,828.00 9,828.00 9,828.00 9,806.40 4,708.80 4,708.80 200,880.00

7 39,268.80 29,462.40 24,537.60 19,634.40 19,634.40 19,634.40 9,828.00 9,828.00 9,828.00 9,806.40 4,708.80 4,708.80 200,880.00

10.4.5 Income taxes Income tax at 35% will be applied to the gross profit.

66

10.5. Analysis of results 10.5.1 Cash flow for financial planning and profit distribution Cash flow was evaluated on a yearly basis. The first year shows a negative value of US$5,524,333.00: i.e. the total fixed investment not covered by any inflow of funds. The company starts producing in the first year of operations. A further injection of capital will be needed at the beginning of each subsequent year to match the increased capital requirement (US$183,660.55).The final year shows a surplus (US$1,352,966.13), but the cumulated cash flow is still negative (minus US$4,171,366.87) due to the lack of investment coverage. In the third year the cash flow surplus grows reaching a steady value of US$1,536,737.10; therefore, the short term lack of liquidity is covered by the cumulated cash. The average forecast cash flow is around US$1.5 million, providing the company with a good cash inflow from its operation. Dividend distributions are a matter for corporate finance policy; the present analysis does not consider dividend payments. Therefore, the entire surplus is cumulated over the years of the investment planning horizon. The total cumulated cash increases from minus US$4,171,366.87 in year 2 to US$ 9,578,192.22 in year 10. 10.5.2 Net income statement The net income statement schedule shows a constant trend of sales of US$3,632,640.00 from the first year of production. This stability (analysis in real terms) assumes total sales remain in a steady state. The variable margin is about 56.5%, while the gross profit from operations increases from 40.7% of the revenues to about 49% from year 7 onwards. Net profit is positive from the first year (US$962,280.38); in this financial appraisal we assume an average depreciation rate of 10%. The net profit to equity ratio cannot be calculated, due to the absence of financial coverage of the investment As far as the return on investment is concerned, the COMFAR III printouts show that it is positive from the first year, at 16.8% and it increases to 17.3%.

10.5.3 Discounted cash flows The financial evaluation assumes a basic reference configuration for the investment project, defined by the cost estimation summarised in the above paragraphs. This base version does not include inflation. The printouts are included in the appendices. 67

Discounted cash flow over total investment Given the general assumptions made, the net present value (NPV) for the project, calculated at 15% of the discount rate, is positive (US$2,046,035.69); the internal rate of return over total investment is 23.95%, which is a 9% spread over the required discount rate; the NPV ratio is 0.36. The payback period is seven years in discounted terms, i.e. the plant must be in operation for seven years for the initial investment to be recovered. Discounted cash flow over total equity invested The NPV calculated for the equity invested is about US$774,290.69, discounted at 20%. The associated internal rate of return (over total equity) is calculated as equal to the internal rate of return from the project at 23.95%. 10.6 Break-even analysis A break-even analysis was performed on the base case. Costs were allocated according to their variable and direct cost contributions. All raw materials, factory supplies, and other costs were considered as variables. Other costs, including personnel costs, were considered as direct costs. Break-even for the project operation was determined to be when it reached 28% of its operating capacity in a steady state (Table 10.11).

68

Sales revenue Variable costs Variable margin Variable margin ratio (%) Including cost of finance Fixed costs Financial costs Break-even sales value Break-even ratio (%) Fixed costs coverage ratio Excluding cost of finance Fixed costs Break-even sales value Break-even ratio (%) Fixed costs coverage ratio

2 3,632,640 1,577,862 2,054,778 56.56 574,346 1,015,386 27.95 3.58 574,346 1,015,386 27.95 3.58

3 3,632,640 1,577,862 2,054,778 56.56 574,346 1,015,386 27.95 3.58 574,346 1,015,386 27.95 3.58

4 3,632,640 1,577,862 2,054,778 56.56 574,346 1,015,386 27.95 3.58 574,346 1,015,386 27.95 3.58

5 3,632,640 1,577,862 2,054,778 56.56 574,346 1,015,386 27.95 3.58 574,346 1,015,386 27.95 3.58

6 3,632,640 1,577,862 2,054,778 56.56 574,346 1,015,386 27.95 3.58 574,346 1,015,386 27.95 3.58

Table 10.11: Break-even analysis (US$) 10.7 Sensitivity analysis Sensitivity analysis was performed on: market price of the product production costs investment costs. 10.7.1 Price sensitivity If we assume a reduction in output prices of 10% and 20%, NPV continues to decrease to a value below zero (Table 10.12). Price reduction base case - 10 % - 20 % NPV at 15% (US$) 2.624.668,19 860,996.00 -324,043.66 IRR 20 (%) 23,95 17.87 13.49

Table 10.12 Price sensitivity analysis The result of the analysis shows agreement with the outcome of the net income statement and the predicted price level is reasonably profitable. The level of sales predicted permits a good economic return from the project, and provides some flexibility. If a permanent decrease (higher than 18%) in the market value should
IRR is the discount rate which makes the net present value of revenue flows equal to zero or the investment equal to the present value of revenue flows. To calculate IRR often requires the use of Present Value (PV) tables which are available in most business management textbooks.
20

69

occur, the project will produce negative returns. However, for it to affect the NPV projections, this price reduction would need to be sustained over the whole life of the project. 10.7.2 Production cost sensitivity Production Cost base case +10 % +20 % NPV at 15% (US$) 2.624.668,19 1,519,701.42 993,367.15 IRR (%) 23.95 21.70 19.43

Table 10.13: Production cost sensitivity analysis In the case of an increase in production costs, additional project flexibility is required with respect to the previous case of price sensitivity. The overall NPV remains positive if the production cost increase is permanent and higher than (about) 20%. For the NPV to be affected, the increase would need to be permanent with no feed back possible to compensate for the increased costs through increased prices. In sum, the likelihood of failure for this project are reduced if we consider the production costs. 10.7.3 Investment cost sensitivity

Investment base case +10 % +20 %

NPV at 15% (US$) 2.624.668,19 1,591,933.84 1,137,831.99

IRR (%) 23,95 21.43 19.28

Table 10.14: Investment cost sensitivity analysis Table 10.14 shows that an increase in the total investment cost does not affect the overall rate of return. A more than 20% increase in the investment cost can result in a positive NPV.

70

10.8 Implications of the financial results The financial evaluation assumed a basic reference configuration for the investment project, defined by the cost estimations summarised above. This base version does not include inflation. The main implications are: i) given the general assumptions made in relation to the project, the NPV, calculated at 15% of the discount rate over a 10 year planning horizon, is positive (US$2,624,668,19), thus confirming that this project could be profitable for an investor; the turning point in the cumulating NPV occurs at seven years (in discounted terms); ii) the internal rate of return is positive (23.95%) which represents a calculated 36% spread over the required discount rate; iii) the net income statement starts to show positive net profits from year 1, while the cumulative cash flow balance requires no additional inflow after a certain level of overdraft. The net profit results in the level of run of site (ROS) after the first year are 26.4%. The operating margin is positive from year 1, and reaches about 56% of sales at the full capacity reference year; iv) a break even analysis was performed on this base case. Costs were allocated according to their variable and direct cost contributions. The project operation is forecast to break even at 29% of its operating capacity at a steady state (maturity); v) the sensitivity analysis shows that only consistent and permanent variations in the main parameters (less than 20% in sales price, more than 20% in production costs, more than 20% in investment costs) would affect the positive values for the NPV and internal rate of return criteria.

71

References [1] Resumen Ejecutivo: Propuesta de Discusion. Vision Colombia 2019, II Centenario, 2005. [2] William T. Choate; Prepared under contract for U.S. Department Energy Efficiency and Renewable Energy; Energy and Emission Reduction Opportunities for the Cement Industry, December 2003. [3] Resumen Ejecutivo: Propuesta de Discusion. Vision Colombia 2019, II Centenario, 2005. [4] Censo 2005, DANE, Departamento Administrativo Nacional de Estadstica, 2005. [5] Herrera M., and Morales J.E., Estudio sobre las Calizas Cristalinas de Servita (Meta), Informe 1466, Ministero de Minas y Petroleos Servicio Geologico Nacional, 1964. [6] Morales J., Informe Preliminar sobre Calizas en los Municipios de Restrepo (Meta) y Medina (Cundinamarca), Informe 1470, Ministero de Minas y Petroleos Servicio Geologico Nacional, 1964. [7] DANE and Banco de la Republica., Informe de Coyuntura Economica Regional Departamento del Meta, March 2005. [8] DANE., Censo 2005. [9] UNIDO, Manual for Preparation of Industrial and Feasibility Studies, UNIDO: Vienna, 1991.

72

ANNEX 1

COMFAR III OUTPUT

73

COMFAR III Expert

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SUMMARY SHEET
Project title: Date and time: Project classification: Construction phase: Length: Production phase: Length: Accounting currency: Units: Local currency: Exchange rate: mini cement plant for the Departamento del Meta 19/06/07 New project 1/1 - 12/1 1 years 1/2 - 12/11 10 periods Us Dollar (USD) Absolute Local currency (LC) 1.0000 USD = 1.0000 LC

INVESTMENT COSTS Total construction 5,305,203.00 219,130.00 219,130.00 0.00 0.00 5,524,333.00 Total production 0.00 0.00 0.00 0.00 187,046.13 187,046.13 Total investment 5,305,203.00 219,130.00 219,130.00 0.00 187,046.13 5,711,379.13

Total fixed investment costs Total pre-production expenditures Pre-production expenditures (net of interest) Interest Increase in net working capital TOTAL INVESTMENT COSTS

SOURCES OF FINANCE Total construction 5,524,333.00 0.00 5,524,333.00 0.00 0.00 0.00 Total production 0.00 0.00 0.00 0.00 0.00 0.00 Total inflow 5,524,333.00 0.00 5,524,333.00 0.00 0.00 0.00

Total equity capital Foreign Local Total long-term loans Foreign Local

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SUMMARY SHEET
Total short-term loans Foreign Local Accounts payable TOTAL SOURCES OF FINANCE 0.00 0.00 0.00 0.00 5,524,333.00 0.00 0.00 0.00 66,651.01 66,651.01 0.00 0.00 0.00 66,651.01 5,590,984.01

INCOME AND COSTS, OPERATIONS First year 2 3,632,640.00 1,577,862.34 0.00 1,577,862.34 574,346.30 0.00 2,152,208.64 0.00 2,152,208.64 0.00 1,480,431.36 0.00 0.00 0.00 1,480,431.36 0.00 1,480,431.36 518,150.98 962,280.38 Reference year 2 3,632,640.00 1,577,862.34 0.00 1,577,862.34 574,346.30 0.00 2,152,208.64 0.00 2,152,208.64 0.00 1,480,431.36 0.00 0.00 0.00 1,480,431.36 0.00 1,480,431.36 518,150.98 962,280.38 Last year 11 3,632,640.00 1,577,862.34 0.00 1,577,862.34 530,520.30 0.00 2,108,382.64 0.00 2,108,382.64 0.00 1,524,257.36 0.00 0.00 0.00 1,524,257.36 0.00 1,524,257.36 533,490.08 990,767.28

SALES REVENUE Factory costs Administrative overhead costs OPERATING COSTS Depreciation Financial costs TOTAL PRODUCTION COSTS Marketing costs COSTS OF PRODUCTS Interest on short-term deposits GROSS PROFIT FROM OPERATIONS Extraordinary income Extraordinary loss Depreciation allowances GROSS PROFIT Investment allowances TAXABLE PROFIT Income (corporate) tax NET PROFIT

RATIOS Net Present Value of Total Capital Invested Internal rate of return on investment (IRR) Modified IRR on investment at 15.00 % 23.95 % 23.95 % 2,046,035.69

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SUMMARY SHEET
Net Present Value of Total Equity Capital Invested Internal rate of return on equity (IRRE) Modified IRRE on equity at 20.00 % 23.95 % 23.95 % 774,290.69

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FIXED INVESTMENT COSTS - TOTAL

Us Dollar Total construction 0.00 0.00 0.00 4,181,381.00 439,807.00 406,576.00 1,791,433.00 1,122,597.00 301,533.00 119,435.00 1,123,822.00 98,222.00 707,300.00 318,300.00 0.00 0.00 0.00 5,305,203.00 0.00 Total production 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Construction 1 0.00 0.00 0.00 4,181,381.00 439,807.00 406,576.00 1,791,433.00 1,122,597.00 301,533.00 119,435.00 1,123,822.00 98,222.00 707,300.00 318,300.00 0.00 0.00 0.00 5,305,203.00 0.00 Production 2 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Production 3 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Production 4 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Production 5 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Production 6 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Land purchase Site preparation and development Civil works, structures and buildings Plant machinery and equipment Raw crushing and grinding section Blending and storage section Clinker fabrication section Cement grinding section Crushing and grinding section coal Cement packing section Auxiliary and service plant equipment Auxiliary equipment Electrical Equipment Laboratory Equipment Environmental protection Incorporated fixed assets (project overheads) Contingencies TOTAL FIXED INVESTMENT COSTS Foreign share (%)

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FIXED INVESTMENT COSTS - TOTAL

Us Dollar Production 7 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Production 8 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Production 9 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Production 10 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Production 11 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Land purchase Site preparation and development Civil works, structures and buildings Plant machinery and equipment Raw crushing and grinding section Blending and storage section Clinker fabrication section Cement grinding section Crushing and grinding section coal Cement packing section Auxiliary and service plant equipment Auxiliary equipment Electrical Equipment Laboratory Equipment Environmental protection Incorporated fixed assets (project overheads) Contingencies TOTAL FIXED INVESTMENT COSTS Foreign share (%)

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NET WORKING CAPITAL REQUIREMENTS - TOTAL

Us Dollar Coefficient of turnover 0.00 0.00
12.00 12.00 12.00 12.00 12.00 12.00

Total inventory Raw materials

Limestone Loamy Clay Iron Ore Puzolan Gypsum Getups

Construction 1 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00

Production 2 107,038.05 33,123.30

15,395.95 923.73 2,006.78 4,192.08 2,130.47 8,474.29

Production 3 105,713.11 31,798.37

14,780.11 886.78 1,926.51 4,024.40 2,045.25 8,135.32

Production 4 105,713.11 31,798.37

14,780.11 886.78 1,926.51 4,024.40 2,045.25 8,135.32

Production 5 105,713.11 31,798.37

14,780.11 886.78 1,926.51 4,024.40 2,045.25 8,135.32

Production 6 105,713.11 31,798.37

14,780.11 886.78 1,926.51 4,024.40 2,045.25 8,135.32

Production 7 105,713.11 31,798.37

14,780.11 886.78 1,926.51 4,024.40 2,045.25 8,135.32

Factory supplies Utilities Energy Spare parts consumed Work in progress Finished product Accounts receivable Cash-in-hand CURRENT ASSETS Accounts payable Raw materials
Limestone Loamy Clay Iron Ore Puzolan Gypsum Getups

0.00 0.00 0.00 0.00 0.00 24.00 0.00 72.00 0.00 0.00 0.00
12.00 12.00 12.00 12.00 12.00 12.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00 0.00

0.00 8,170.48 0.00 0.00 0.00 65,744.26 131,488.53 11,674.58 250,201.15 66,540.60 35,883.58
16,678.95 1,000.71 2,174.01 4,541.42 2,308.01 9,180.48

0.00 8,170.48 0.00 0.00 0.00 65,744.26 131,488.53 11,619.00 248,820.64 61,664.11 31,687.96
14,728.79 883.70 1,919.82 4,010.42 2,038.15 8,107.07

0.00 8,170.48 0.00 0.00 0.00 65,744.26 131,488.53 11,619.00 248,820.64 61,774.52 31,798.37
14,780.11 886.78 1,926.51 4,024.40 2,045.25 8,135.32

0.00 8,170.48 0.00 0.00 0.00 65,744.26 131,488.53 11,619.00 248,820.64 61,774.52 31,798.37
14,780.11 886.78 1,926.51 4,024.40 2,045.25 8,135.32

0.00 8,170.48 0.00 0.00 0.00 65,744.26 131,488.53 11,619.00 248,820.64 61,774.52 31,798.37
14,780.11 886.78 1,926.51 4,024.40 2,045.25 8,135.32

0.00 8,170.48 0.00 0.00 0.00 65,744.26 131,488.53 11,619.00 248,820.64 61,774.52 31,798.37
14,780.11 886.78 1,926.51 4,024.40 2,045.25 8,135.32

Factory supplies Utilities Energy Spare parts consumed Repair, maintenance, material Royalties Labour Labour overhead costs (taxes etc.) Factory overhead costs
E107 - Construction - Automatic equity generated due to lack of funds!

0.00 0.00 12.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 9,435.01 21,222.01 0.00 0.00 0.00 0.00 0.00 0.00

0.00 8,754.14 21,222.01 0.00 0.00 0.00 0.00 0.00 0.00

0.00 8,754.14 21,222.01 0.00 0.00 0.00 0.00 0.00 0.00

0.00 8,754.14 21,222.01 0.00 0.00 0.00 0.00 0.00 0.00

0.00 8,754.14 21,222.01 0.00 0.00 0.00 0.00 0.00 0.00

0.00 8,754.14 21,222.01 0.00 0.00 0.00 0.00 0.00 0.00

COMFAR III Expert

ICS-UNIDO, ITALY

NET WORKING CAPITAL REQUIREMENTS - TOTAL

Us Dollar Production 8 105,713.11 31,798.37
14,780.11 886.78 1,926.51 4,024.40 2,045.25 8,135.32

Total inventory Raw materials

Limestone Loamy Clay Iron Ore Puzolan Gypsum Getups

Production 9 105,713.11 31,798.37

14,780.11 886.78 1,926.51 4,024.40 2,045.25 8,135.32

Production 10 105,713.11 31,798.37

14,780.11 886.78 1,926.51 4,024.40 2,045.25 8,135.32

Production 11 105,713.11 31,798.37

14,780.11 886.78 1,926.51 4,024.40 2,045.25 8,135.32

Factory supplies Utilities Energy Spare parts consumed Work in progress Finished product Accounts receivable Cash-in-hand CURRENT ASSETS Accounts payable Raw materials
Limestone Loamy Clay Iron Ore Puzolan Gypsum Getups

0.00 8,170.48 0.00 0.00 0.00 65,744.26 131,488.53 11,619.00 248,820.64 61,774.52 31,798.37
14,780.11 886.78 1,926.51 4,024.40 2,045.25 8,135.32

0.00 8,170.48 0.00 0.00 0.00 65,744.26 131,488.53 11,619.00 248,820.64 61,774.52 31,798.37
14,780.11 886.78 1,926.51 4,024.40 2,045.25 8,135.32

0.00 8,170.48 0.00 0.00 0.00 65,744.26 131,488.53 11,619.00 248,820.64 61,774.52 31,798.37
14,780.11 886.78 1,926.51 4,024.40 2,045.25 8,135.32

0.00 8,170.48 0.00 0.00 0.00 65,744.26 131,488.53 11,619.00 248,820.64 61,774.52 31,798.37
14,780.11 886.78 1,926.51 4,024.40 2,045.25 8,135.32

Factory supplies Utilities Energy Spare parts consumed Repair, maintenance, material Royalties Labour Labour overhead costs (taxes etc.) Factory overhead costs
E107 - Construction - Automatic equity generated due to lack of funds!

0.00 8,754.14 21,222.01 0.00 0.00 0.00 0.00 0.00 0.00

0.00 8,754.14 21,222.01 0.00 0.00 0.00 0.00 0.00 0.00

0.00 8,754.14 21,222.01 0.00 0.00 0.00 0.00 0.00 0.00

0.00 8,754.14 21,222.01 0.00 0.00 0.00 0.00 0.00 0.00

COMFAR III Expert

ICS-UNIDO, ITALY

NET WORKING CAPITAL REQUIREMENTS - TOTAL

Us Dollar Coefficient of turnover 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Construction 1 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Production 2 0.00 0.00 0.00 66,540.60 183,660.55 183,660.55 0.00 Production 3 0.00 0.00 0.00 61,664.11 187,156.54 3,495.98 0.00 Production 4 0.00 0.00 0.00 61,774.52 187,046.13 -110.41 0.00 Production 5 0.00 0.00 0.00 61,774.52 187,046.13 0.00 0.00 Production 6 0.00 0.00 0.00 61,774.52 187,046.13 0.00 0.00 Production 7 0.00 0.00 0.00 61,774.52 187,046.13 0.00 0.00

Administrative costs Leasing costs Direct marketing costs CURRENT LIABILITIES TOTAL NET WORKING CAPITAL REQUIREMENTS INCREASE IN NET WORKING CAPITAL Foreign share (%)

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NET WORKING CAPITAL REQUIREMENTS - TOTAL

Us Dollar Production 8 0.00 0.00 0.00 61,774.52 187,046.13 0.00 0.00 Production 9 0.00 0.00 0.00 61,774.52 187,046.13 0.00 0.00 Production 10 0.00 0.00 0.00 61,774.52 187,046.13 0.00 0.00 Production 11 0.00 0.00 0.00 61,774.52 187,046.13 0.00 0.00

Administrative costs Leasing costs Direct marketing costs CURRENT LIABILITIES TOTAL NET WORKING CAPITAL REQUIREMENTS INCREASE IN NET WORKING CAPITAL Foreign share (%)

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INVESTMENT COSTS - TOTAL

Us Dollar Total construction 5,305,203.00 219,130.00 0.00 5,524,333.00 0.00 Total production 0.00 0.00 187,046.13 187,046.13 0.00 Construction 1 5,305,203.00 219,130.00 0.00 5,524,333.00 0.00 Production 2 0.00 0.00 183,660.55 183,660.55 0.00 Production 3 0.00 0.00 3,495.98 3,495.98 0.00 Production 4 0.00 0.00 -110.41 -110.41 0.00 Production 5 0.00 0.00 0.00 0.00 0.00 Production 6 0.00 0.00 0.00 0.00 0.00 Production 7 0.00 0.00 0.00 0.00 0.00

Total fixed investment costs Total pre-production expenditures Increase in net working capital TOTAL INVESTMENT COSTS Foreign share (%)

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INVESTMENT COSTS - TOTAL

Us Dollar Production 8 0.00 0.00 0.00 0.00 0.00 Production 9 0.00 0.00 0.00 0.00 0.00 Production 10 0.00 0.00 0.00 0.00 0.00 Production 11 0.00 0.00 0.00 0.00 0.00

Total fixed investment costs Total pre-production expenditures Increase in net working capital TOTAL INVESTMENT COSTS Foreign share (%)

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ANNUAL COSTS OF PRODUCTS - TOTAL

Us Dollar Production 2 0.00 397,479.64 184,751.44 11,084.76 24,081.38 50,304.97 25,565.65 101,691.45 0.00 105,049.66 7,003.91 98,045.75 254,664.11 0.00 77,099.00 42,097.00
16,555.00 4,257.00 2,128.50 3,311.00 2,128.50 2,128.50 9,460.00 2,128.50

Capacity utilization (%) Raw materials Limestone Loamy Clay Iron Ore Puzolan Gypsum Getups Factory supplies Utilities Industrial Water Coal Energy Spare parts consumed Repair, maintenance, material clinker
Maintenance of the kiln Mechanical Maintenance Electrical Maintenance Diesel Oil Grease Paint Several transient products

Production 3 0.00 381,580.45 177,361.38 10,641.36 23,118.12 48,292.77 24,543.02 97,623.79 0.00 105,049.66 7,003.91 98,045.75 254,664.11 0.00 74,015.04 40,413.12
15,892.80 4,086.72 2,043.36 3,178.56 2,043.36 2,043.36 9,081.60 2,043.36

Production 4 0.00 381,580.45 177,361.38 10,641.36 23,118.12 48,292.77 24,543.02 97,623.79 0.00 105,049.66 7,003.91 98,045.75 254,664.11 0.00 74,015.04 40,413.12
15,892.80 4,086.72 2,043.36 3,178.56 2,043.36 2,043.36 9,081.60 2,043.36

Production 5 0.00 381,580.45 177,361.38 10,641.36 23,118.12 48,292.77 24,543.02 97,623.79 0.00 105,049.66 7,003.91 98,045.75 254,664.11 0.00 74,015.04 40,413.12
15,892.80 4,086.72 2,043.36 3,178.56 2,043.36 2,043.36 9,081.60 2,043.36

Production 6 0.00 381,580.45 177,361.38 10,641.36 23,118.12 48,292.77 24,543.02 97,623.79 0.00 105,049.66 7,003.91 98,045.75 254,664.11 0.00 74,015.04 40,413.12
15,892.80 4,086.72 2,043.36 3,178.56 2,043.36 2,043.36 9,081.60 2,043.36

Production 7 0.00 381,580.45 177,361.38 10,641.36 23,118.12 48,292.77 24,543.02 97,623.79 0.00 105,049.66 7,003.91 98,045.75 254,664.11 0.00 74,015.04 40,413.12
15,892.80 4,086.72 2,043.36 3,178.56 2,043.36 2,043.36 9,081.60 2,043.36

Production 8 0.00 381,580.45 177,361.38 10,641.36 23,118.12 48,292.77 24,543.02 97,623.79 0.00 105,049.66 7,003.91 98,045.75 254,664.11 0.00 74,015.04 40,413.12
15,892.80 4,086.72 2,043.36 3,178.56 2,043.36 2,043.36 9,081.60 2,043.36

Production 9 0.00 381,580.45 177,361.38 10,641.36 23,118.12 48,292.77 24,543.02 97,623.79 0.00 105,049.66 7,003.91 98,045.75 254,664.11 0.00 74,015.04 40,413.12
15,892.80 4,086.72 2,043.36 3,178.56 2,043.36 2,043.36 9,081.60 2,043.36

Production 10 0.00 381,580.45 177,361.38 10,641.36 23,118.12 48,292.77 24,543.02 97,623.79 0.00 105,049.66 7,003.91 98,045.75 254,664.11 0.00 74,015.04 40,413.12
15,892.80 4,086.72 2,043.36 3,178.56 2,043.36 2,043.36 9,081.60 2,043.36

cement
Maintenance Grinding section Mechanical Maintenance Electrical Maintenance Gas Oil Grease Paint Several transient products

35,002.00
7,568.00 2,128.50 1,182.50 17,264.50 1,892.00 1,892.00 1,892.00 1,182.50

33,601.92
7,265.28 2,043.36 1,135.20 16,573.92 1,816.32 1,816.32 1,816.32 1,135.20

33,601.92
7,265.28 2,043.36 1,135.20 16,573.92 1,816.32 1,816.32 1,816.32 1,135.20

33,601.92
7,265.28 2,043.36 1,135.20 16,573.92 1,816.32 1,816.32 1,816.32 1,135.20

33,601.92
7,265.28 2,043.36 1,135.20 16,573.92 1,816.32 1,816.32 1,816.32 1,135.20

33,601.92
7,265.28 2,043.36 1,135.20 16,573.92 1,816.32 1,816.32 1,816.32 1,135.20

33,601.92
7,265.28 2,043.36 1,135.20 16,573.92 1,816.32 1,816.32 1,816.32 1,135.20

33,601.92
7,265.28 2,043.36 1,135.20 16,573.92 1,816.32 1,816.32 1,816.32 1,135.20

33,601.92
7,265.28 2,043.36 1,135.20 16,573.92 1,816.32 1,816.32 1,816.32 1,135.20

Royalties

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

ANNUAL COSTS OF PRODUCTS - TOTAL

Us Dollar Production 11 0.00 381,580.45 177,361.38 10,641.36 23,118.12 48,292.77 24,543.02 97,623.79 0.00 105,049.66 7,003.91 98,045.75 254,664.11 0.00 74,015.04 40,413.12
15,892.80 4,086.72 2,043.36 3,178.56 2,043.36 2,043.36 9,081.60 2,043.36

Capacity utilization (%) Raw materials Limestone Loamy Clay Iron Ore Puzolan Gypsum Getups Factory supplies Utilities Industrial Water Coal Energy Spare parts consumed Repair, maintenance, material clinker
Maintenance of the kiln Mechanical Maintenance Electrical Maintenance Diesel Oil Grease Paint Several transient products

cement
Maintenance Grinding section Mechanical Maintenance Electrical Maintenance Gas Oil Grease Paint Several transient products

33,601.92
7,265.28 2,043.36 1,135.20 16,573.92 1,816.32 1,816.32 1,816.32 1,135.20

Royalties

0.00

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

ANNUAL COSTS OF PRODUCTS - TOTAL

Us Dollar Production 2 436,927.20 49,140.00 39,312.00 56,505.60 31,449.60 39,312.00 9,806.40 27,475.20 7,862.40 70,632.00 7,862.40 7,862.40 4,903.20 84,804.00 279,591.00 39,268.80 29,462.40 24,537.60 19,634.40 19,634.40 19,634.40 9,828.00 9,828.00 9,828.00 9,806.40 4,708.80 4,708.80 78,711.00
15,180.00 56,160.00 7,371.00

Labour Kiln Operators Chemical Technitians Site Operators Electricians Mechanics Loader Operators Grinding Manager Chemical Technitians Site Operators Electricians Mechanics Loader Operators additional contracts Labour overhead costs (taxes etc.) General Manager Technical Manager Administration Manager Chemical Engineer Electromechanical Engineer Process Engineer Sales person Purchases person Accounting person Secretary Delivery person Cleaning person Labour overhead costs
Uniforms to the personnel Transient Laboratory transient Production

Production 3 436,927.20 49,140.00 39,312.00 56,505.60 31,449.60 39,312.00 9,806.40 27,475.20 7,862.40 70,632.00 7,862.40 7,862.40 4,903.20 84,804.00 279,591.00 39,268.80 29,462.40 24,537.60 19,634.40 19,634.40 19,634.40 9,828.00 9,828.00 9,828.00 9,806.40 4,708.80 4,708.80 78,711.00
15,180.00 56,160.00 7,371.00

Production 4 436,927.20 49,140.00 39,312.00 56,505.60 31,449.60 39,312.00 9,806.40 27,475.20 7,862.40 70,632.00 7,862.40 7,862.40 4,903.20 84,804.00 279,591.00 39,268.80 29,462.40 24,537.60 19,634.40 19,634.40 19,634.40 9,828.00 9,828.00 9,828.00 9,806.40 4,708.80 4,708.80 78,711.00
15,180.00 56,160.00 7,371.00

Production 5 436,927.20 49,140.00 39,312.00 56,505.60 31,449.60 39,312.00 9,806.40 27,475.20 7,862.40 70,632.00 7,862.40 7,862.40 4,903.20 84,804.00 279,591.00 39,268.80 29,462.40 24,537.60 19,634.40 19,634.40 19,634.40 9,828.00 9,828.00 9,828.00 9,806.40 4,708.80 4,708.80 78,711.00
15,180.00 56,160.00 7,371.00

Production 6 436,927.20 49,140.00 39,312.00 56,505.60 31,449.60 39,312.00 9,806.40 27,475.20 7,862.40 70,632.00 7,862.40 7,862.40 4,903.20 84,804.00 279,591.00 39,268.80 29,462.40 24,537.60 19,634.40 19,634.40 19,634.40 9,828.00 9,828.00 9,828.00 9,806.40 4,708.80 4,708.80 78,711.00
15,180.00 56,160.00 7,371.00

Production 7 436,927.20 49,140.00 39,312.00 56,505.60 31,449.60 39,312.00 9,806.40 27,475.20 7,862.40 70,632.00 7,862.40 7,862.40 4,903.20 84,804.00 279,591.00 39,268.80 29,462.40 24,537.60 19,634.40 19,634.40 19,634.40 9,828.00 9,828.00 9,828.00 9,806.40 4,708.80 4,708.80 78,711.00
15,180.00 56,160.00 7,371.00

Production 8 436,927.20 49,140.00 39,312.00 56,505.60 31,449.60 39,312.00 9,806.40 27,475.20 7,862.40 70,632.00 7,862.40 7,862.40 4,903.20 84,804.00 279,591.00 39,268.80 29,462.40 24,537.60 19,634.40 19,634.40 19,634.40 9,828.00 9,828.00 9,828.00 9,806.40 4,708.80 4,708.80 78,711.00
15,180.00 56,160.00 7,371.00

Production 9 436,927.20 49,140.00 39,312.00 56,505.60 31,449.60 39,312.00 9,806.40 27,475.20 7,862.40 70,632.00 7,862.40 7,862.40 4,903.20 84,804.00 279,591.00 39,268.80 29,462.40 24,537.60 19,634.40 19,634.40 19,634.40 9,828.00 9,828.00 9,828.00 9,806.40 4,708.80 4,708.80 78,711.00
15,180.00 56,160.00 7,371.00

Production 10 436,927.20 49,140.00 39,312.00 56,505.60 31,449.60 39,312.00 9,806.40 27,475.20 7,862.40 70,632.00 7,862.40 7,862.40 4,903.20 84,804.00 279,591.00 39,268.80 29,462.40 24,537.60 19,634.40 19,634.40 19,634.40 9,828.00 9,828.00 9,828.00 9,806.40 4,708.80 4,708.80 78,711.00
15,180.00 56,160.00 7,371.00

Factory overhead costs additional contracts other fixed costs

46,952.50 24,012.00 22,940.50

46,034.88 24,012.00 22,022.88

46,034.88 24,012.00 22,022.88

46,034.88 24,012.00 22,022.88

46,034.88 24,012.00 22,022.88

46,034.88 24,012.00 22,022.88

46,034.88 24,012.00 22,022.88

46,034.88 24,012.00 22,022.88

46,034.88 24,012.00 22,022.88

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

ANNUAL COSTS OF PRODUCTS - TOTAL

Us Dollar Production 11 436,927.20 49,140.00 39,312.00 56,505.60 31,449.60 39,312.00 9,806.40 27,475.20 7,862.40 70,632.00 7,862.40 7,862.40 4,903.20 84,804.00 279,591.00 39,268.80 29,462.40 24,537.60 19,634.40 19,634.40 19,634.40 9,828.00 9,828.00 9,828.00 9,806.40 4,708.80 4,708.80 78,711.00
15,180.00 56,160.00 7,371.00

Labour Kiln Operators Chemical Technitians Site Operators Electricians Mechanics Loader Operators Grinding Manager Chemical Technitians Site Operators Electricians Mechanics Loader Operators additional contracts Labour overhead costs (taxes etc.) General Manager Technical Manager Administration Manager Chemical Engineer Electromechanical Engineer Process Engineer Sales person Purchases person Accounting person Secretary Delivery person Cleaning person Labour overhead costs
Uniforms to the personnel Transient Laboratory transient Production

Factory overhead costs additional contracts other fixed costs

46,034.88 24,012.00 22,022.88

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

ANNUAL COSTS OF PRODUCTS - TOTAL

Us Dollar Production 2 1,597,763.10 0.00 1,597,763.10 574,346.30 0.00 2,172,109.40 0.00 2,172,109.40 0.00 73.56 Production 3 1,577,862.34 0.00 1,577,862.34 574,346.30 0.00 2,152,208.64 0.00 2,152,208.64 0.00 73.31 Production 4 1,577,862.34 0.00 1,577,862.34 574,346.30 0.00 2,152,208.64 0.00 2,152,208.64 0.00 73.31 Production 5 1,577,862.34 0.00 1,577,862.34 574,346.30 0.00 2,152,208.64 0.00 2,152,208.64 0.00 73.31 Production 6 1,577,862.34 0.00 1,577,862.34 574,346.30 0.00 2,152,208.64 0.00 2,152,208.64 0.00 73.31 Production 7 1,577,862.34 0.00 1,577,862.34 530,520.30 0.00 2,108,382.64 0.00 2,108,382.64 0.00 74.84 Production 8 1,577,862.34 0.00 1,577,862.34 530,520.30 0.00 2,108,382.64 0.00 2,108,382.64 0.00 74.84 Production 9 1,577,862.34 0.00 1,577,862.34 530,520.30 0.00 2,108,382.64 0.00 2,108,382.64 0.00 74.84 Production 10 1,577,862.34 0.00 1,577,862.34 530,520.30 0.00 2,108,382.64 0.00 2,108,382.64 0.00 74.84

FACTORY COSTS Administrative costs OPERATING COSTS Depreciation Financial costs TOTAL PRODUCTION COSTS Direct marketing costs COSTS OF PRODUCTS Foreign share (%) Variable share (%)

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

ANNUAL COSTS OF PRODUCTS - TOTAL

Us Dollar Production 11 1,577,862.34 0.00 1,577,862.34 530,520.30 0.00 2,108,382.64 0.00 2,108,382.64 0.00 74.84

FACTORY COSTS Administrative costs OPERATING COSTS Depreciation Financial costs TOTAL PRODUCTION COSTS Direct marketing costs COSTS OF PRODUCTS Foreign share (%) Variable share (%)

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

CASH FLOW FOR FINANCIAL PLANNING - TOTAL

Us Dollar Construction 1 0.00 0.00 0.00 0.00 5,524,333.00 5,524,333.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -5,524,333.00 -5,524,333.00 0.00 -5,524,333.00 0.00 -5,524,333.00 0.00 Production 2 3,699,180.60 66,540.60 3,632,640.00 0.00 2,346,214.47 0.00 250,201.15 1,577,862.34 0.00 518,150.98 0.00 0.00 0.00 0.00 1,352,966.13 -4,171,366.87 0.00 1,352,966.13 0.00 -4,171,366.87 66,540.60 Production 3 3,632,640.00 0.00 3,632,640.00 0.00 2,099,509.30 0.00 -1,380.51 1,577,862.34 0.00 518,150.98 0.00 4,876.49 0.00 0.00 1,533,130.70 -2,638,236.17 0.00 1,533,130.70 0.00 -2,638,236.17 -4,876.49 Production 4 3,632,750.41 110.41 3,632,640.00 0.00 2,096,013.32 0.00 0.00 1,577,862.34 0.00 518,150.98 0.00 0.00 0.00 0.00 1,536,737.10 -1,101,499.07 0.00 1,536,737.10 0.00 -1,101,499.07 110.41 Production 5 3,632,640.00 0.00 3,632,640.00 0.00 2,096,013.32 0.00 0.00 1,577,862.34 0.00 518,150.98 0.00 0.00 0.00 0.00 1,536,626.68 435,127.61 0.00 1,536,626.68 0.00 435,127.61 0.00 Production 6 3,632,640.00 0.00 3,632,640.00 0.00 2,096,013.32 0.00 0.00 1,577,862.34 0.00 518,150.98 0.00 0.00 0.00 0.00 1,536,626.68 1,971,754.30 0.00 1,536,626.68 0.00 1,971,754.30 0.00 Production 7 3,632,640.00 0.00 3,632,640.00 0.00 2,111,352.42 0.00 0.00 1,577,862.34 0.00 533,490.08 0.00 0.00 0.00 0.00 1,521,287.58 3,493,041.88 0.00 1,521,287.58 0.00 3,493,041.88 0.00 Production 8 3,632,640.00 0.00 3,632,640.00 0.00 2,111,352.42 0.00 0.00 1,577,862.34 0.00 533,490.08 0.00 0.00 0.00 0.00 1,521,287.58 5,014,329.47 0.00 1,521,287.58 0.00 5,014,329.47 0.00 Production 9 3,632,640.00 0.00 3,632,640.00 0.00 2,111,352.42 0.00 0.00 1,577,862.34 0.00 533,490.08 0.00 0.00 0.00 0.00 1,521,287.58 6,535,617.05 0.00 1,521,287.58 0.00 6,535,617.05 0.00

TOTAL CASH INFLOW Inflow funds Inflow operation Other income TOTAL CASH OUTFLOW Increase in fixed assets Increase in current assets Operating costs Marketing costs Income (corporate) tax Financial costs Loan repayment Dividends Equity capital refund SURPLUS (DEFICIT) CUMULATIVE CASH BALANCE Foreign surplus (deficit) Local surplus (deficit) Foreign cumulative cash balance Local cumulative cash balance Net flow of funds

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

CASH FLOW FOR FINANCIAL PLANNING - TOTAL

Us Dollar Production 10 3,632,640.00 0.00 3,632,640.00 0.00 2,111,352.42 0.00 0.00 1,577,862.34 0.00 533,490.08 0.00 0.00 0.00 0.00 1,521,287.58 8,056,904.64 0.00 1,521,287.58 0.00 8,056,904.64 0.00 Production 11 3,632,640.00 0.00 3,632,640.00 0.00 2,111,352.42 0.00 0.00 1,577,862.34 0.00 533,490.08 0.00 0.00 0.00 0.00 1,521,287.58 9,578,192.22 0.00 1,521,287.58 0.00 9,578,192.22 0.00 Scrap 12 248,820.64 0.00 0.00 248,820.64 61,774.52 0.00 0.00 0.00 0.00 0.00 0.00 61,774.52 0.00 0.00 187,046.13 9,765,238.35 0.00 187,046.13 0.00 9,765,238.35 -61,774.52

TOTAL CASH INFLOW Inflow funds Inflow operation Other income TOTAL CASH OUTFLOW Increase in fixed assets Increase in current assets Operating costs Marketing costs Income (corporate) tax Financial costs Loan repayment Dividends Equity capital refund SURPLUS (DEFICIT) CUMULATIVE CASH BALANCE Foreign surplus (deficit) Local surplus (deficit) Foreign cumulative cash balance Local cumulative cash balance Net flow of funds

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

Cash Flow for Financial Planning (Us Dollar)

2000000

1000000

-1000000 A m o u n t

-2000000

-3000000

-4000000

-5000000

-6000000 1 2 3 4 5 6 7 8 9 10 11 Scrap

Foreign

Local

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

1 2 3 4 5 6 7 8 9 10 11 Scrap

Foreign 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Local -5,524,333.00 1,352,966.13 1,533,130.70 1,536,737.10 1,536,626.68 1,536,626.68 1,521,287.58 1,521,287.58 1,521,287.58 1,521,287.58 1,521,287.58 187,046.13

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

Accumulated Cash Flow for Financial Planning (Us Dollar)

10000000

8000000

6000000

4000000 A m o u n t

2000000

-2000000

-4000000

-6000000 1 2 3 4 5 6 7 8 9 10 11 Scrap

Foreign

Local

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

1 2 3 4 5 6 7 8 9 10 11 Scrap

Foreign 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Local -5,524,333.00 -4,171,366.87 -2,638,236.17 -1,101,499.07 435,127.61 1,971,754.30 3,493,041.88 5,014,329.47 6,535,617.05 8,056,904.64 9,578,192.22 9,765,238.35

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

DISCOUNTED CASH FLOW - TOTAL CAPITAL INVESTED

Us Dollar Construction 1 0.00 0.00 0.00 5,524,333.00 5,524,333.00 0.00 0.00 0.00 0.00 -5,524,333.00 -5,524,333.00 -5,524,333.00 -5,524,333.00 at 15.00 % 23.95 % 23.95 % at 0.00 % at 15.00 % 0.36 Production 2 3,632,640.00 3,632,640.00 0.00 2,279,673.87 0.00 183,660.55 1,577,862.34 0.00 518,150.98 1,352,966.13 -4,171,366.87 1,176,492.29 -4,347,840.71 2,046,035.69 Production 3 3,632,640.00 3,632,640.00 0.00 2,099,509.30 0.00 3,495.98 1,577,862.34 0.00 518,150.98 1,533,130.70 -2,638,236.17 1,159,267.07 -3,188,573.64 Production 4 3,632,640.00 3,632,640.00 0.00 2,095,902.90 0.00 -110.41 1,577,862.34 0.00 518,150.98 1,536,737.10 -1,101,499.07 1,010,429.59 -2,178,144.06 Production 5 3,632,640.00 3,632,640.00 0.00 2,096,013.32 0.00 0.00 1,577,862.34 0.00 518,150.98 1,536,626.68 435,127.61 878,571.29 -1,299,572.76 Production 6 3,632,640.00 3,632,640.00 0.00 2,096,013.32 0.00 0.00 1,577,862.34 0.00 518,150.98 1,536,626.68 1,971,754.30 763,975.04 -535,597.72 Production 7 3,632,640.00 3,632,640.00 0.00 2,111,352.42 0.00 0.00 1,577,862.34 0.00 533,490.08 1,521,287.58 3,493,041.88 657,694.60 122,096.88 Production 8 3,632,640.00 3,632,640.00 0.00 2,111,352.42 0.00 0.00 1,577,862.34 0.00 533,490.08 1,521,287.58 5,014,329.47 571,908.35 694,005.23

TOTAL CASH INFLOW Inflow operation Other income TOTAL CASH OUTFLOW Increase in fixed assets Increase in net working capital Operating costs Marketing costs Income (corporate) tax NET CASH FLOW CUMULATIVE NET CASH FLOW Net present value Cumulative net present value NET PRESENT VALUE INTERNAL RATE OF RETURN MODIFIED INTERNAL RATE OF RETURN NORMAL PAYBACK DYNAMIC PAYBACK NPV RATIO

4 years 6 years

=5 =7

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

DISCOUNTED CASH FLOW - TOTAL CAPITAL INVESTED

Us Dollar Production 9 3,632,640.00 3,632,640.00 0.00 2,111,352.42 0.00 0.00 1,577,862.34 0.00 533,490.08 1,521,287.58 6,535,617.05 497,311.61 1,191,316.84 Production 10 3,632,640.00 3,632,640.00 0.00 2,111,352.42 0.00 0.00 1,577,862.34 0.00 533,490.08 1,521,287.58 8,056,904.64 432,444.88 1,623,761.72 Production 11 3,632,640.00 3,632,640.00 0.00 2,111,352.42 0.00 0.00 1,577,862.34 0.00 533,490.08 1,521,287.58 9,578,192.22 376,039.02 1,999,800.74 Scrap 12 187,046.13 0.00 187,046.13 0.00 0.00 0.00 0.00 0.00 0.00 187,046.13 9,765,238.35 46,234.94 2,046,035.69

TOTAL CASH INFLOW Inflow operation Other income TOTAL CASH OUTFLOW Increase in fixed assets Increase in net working capital Operating costs Marketing costs Income (corporate) tax NET CASH FLOW CUMULATIVE NET CASH FLOW Net present value Cumulative net present value NET PRESENT VALUE INTERNAL RATE OF RETURN MODIFIED INTERNAL RATE OF RETURN NORMAL PAYBACK DYNAMIC PAYBACK NPV RATIO

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

Net Present Value of Total Capital Invested (Us Dollar)

10000000

8000000

6000000

4000000

2000000 N P V

-2000000

-4000000

-6000000 0 10 20 30 40 50 60 70 80 90 100

Discounting rate (%) Net present value

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

Discounting rate (%) 0.00 % 10.00 % 20.00 % 30.00 % 40.00 % 50.00 % 60.00 % 70.00 % 80.00 % 90.00 % 100.00 %

Net present value 9,765,238.35 3,783,811.86 774,290.69 -913,580.64 -1,947,842.92 -2,628,600.23 -3,103,211.99 -3,449,770.50 -3,712,460.15 -3,917,726.00 -4,082,179.10

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

Sensitivity of IRR (Us Dollar)

35

30

25

20 I R R

15

10

0 -20 -15 -10 -5 0 Variation (%) Sales revenue Increase in fixed assets Operating costs 5 10 15 20

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

Variation (%) -20.00 % -16.00 % -12.00 % -8.00 % -4.00 % 0.00 % 4.00 % 8.00 % 12.00 % 16.00 % 20.00 %

Sales revenue 14.35 % 16.45 % 18.45 % 20.36 % 22.19 % 23.95 % 25.64 % 27.28 % 28.87 % 30.41 % 31.91 %

Increase in Operating fixed assets costs 32.83 % 33.33 % 30.75 % 31.46 % 28.85 % 29.59 % 27.09 % 27.72 % 25.46 % 25.84 % 23.95 % 23.95 % 22.53 % 22.04 % 21.21 % 20.12 % 19.97 % 18.17 % 18.80 % 16.21 % 17.69 % 14.21 %

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

Cumulative Net Cash Flow - Normal Payback (Us Dollar)

10000000

8000000

6000000

4000000 A m o u n t

2000000

-2000000

-4000000

-6000000 1 2 3 4 5 6 7 8 9 10 11 Scrap

Cumulative net cash flow

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

1 2 3 4 5 6 7 8 9 10 11 Scrap

Cumulative net cash flow -5,524,333.00 -4,171,366.87 -2,638,236.17 -1,101,499.07 435,127.61 1,971,754.30 3,493,041.88 5,014,329.47 6,535,617.05 8,056,904.64 9,578,192.22 9,765,238.35

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

Cumulative Net Present Value - Dynamic Payback (Us Dollar)

3000000

2000000

1000000

A m o u n t

-1000000

-2000000

-3000000

-4000000

-5000000

-6000000 1 2 3 4 5 6 7 8 9 10 11 Scrap

Cumulative net present value

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

1 2 3 4 5 6 7 8 9 10 11 Scrap

Cumulative net present value -5,524,333.00 -4,347,840.71 -3,188,573.64 -2,178,144.06 -1,299,572.76 -535,597.72 122,096.88 694,005.23 1,191,316.84 1,623,761.72 1,999,800.74 2,046,035.69

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

NET INCOME STATEMENT

Us Dollar Production 2 3,632,640.00 1,577,862.34 741,294.22 716,518.20 0.00 120,049.92 2,054,777.66 56.56 574,346.30 0.00 0.00 0.00 574,346.30 0.00 1,480,431.36 40.75 0.00 0.00 1,480,431.36 40.75 0.00 0.00 0.00 1,480,431.36 0.00 1,480,431.36 518,150.98 962,280.38 26.49 0.00 962,280.38 0.00 Production 3 3,632,640.00 1,577,862.34 741,294.22 716,518.20 0.00 120,049.92 2,054,777.66 56.56 574,346.30 0.00 0.00 0.00 574,346.30 0.00 1,480,431.36 40.75 0.00 0.00 1,480,431.36 40.75 0.00 0.00 0.00 1,480,431.36 0.00 1,480,431.36 518,150.98 962,280.38 26.49 0.00 962,280.38 0.00 Production 4 3,632,640.00 1,577,862.34 741,294.22 716,518.20 0.00 120,049.92 2,054,777.66 56.56 574,346.30 0.00 0.00 0.00 574,346.30 0.00 1,480,431.36 40.75 0.00 0.00 1,480,431.36 40.75 0.00 0.00 0.00 1,480,431.36 0.00 1,480,431.36 518,150.98 962,280.38 26.49 0.00 962,280.38 0.00 Production 5 3,632,640.00 1,577,862.34 741,294.22 716,518.20 0.00 120,049.92 2,054,777.66 56.56 574,346.30 0.00 0.00 0.00 574,346.30 0.00 1,480,431.36 40.75 0.00 0.00 1,480,431.36 40.75 0.00 0.00 0.00 1,480,431.36 0.00 1,480,431.36 518,150.98 962,280.38 26.49 0.00 962,280.38 0.00 Production 6 3,632,640.00 1,577,862.34 741,294.22 716,518.20 0.00 120,049.92 2,054,777.66 56.56 574,346.30 0.00 0.00 0.00 574,346.30 0.00 1,480,431.36 40.75 0.00 0.00 1,480,431.36 40.75 0.00 0.00 0.00 1,480,431.36 0.00 1,480,431.36 518,150.98 962,280.38 26.49 0.00 962,280.38 0.00 Production 7 3,632,640.00 1,577,862.34 741,294.22 716,518.20 0.00 120,049.92 2,054,777.66 56.56 530,520.30 0.00 0.00 0.00 530,520.30 0.00 1,524,257.36 41.96 0.00 0.00 1,524,257.36 41.96 0.00 0.00 0.00 1,524,257.36 0.00 1,524,257.36 533,490.08 990,767.28 27.27 0.00 990,767.28 0.00 Production 8 3,632,640.00 1,577,862.34 741,294.22 716,518.20 0.00 120,049.92 2,054,777.66 56.56 530,520.30 0.00 0.00 0.00 530,520.30 0.00 1,524,257.36 41.96 0.00 0.00 1,524,257.36 41.96 0.00 0.00 0.00 1,524,257.36 0.00 1,524,257.36 533,490.08 990,767.28 27.27 0.00 990,767.28 0.00 Production 9 3,632,640.00 1,577,862.34 741,294.22 716,518.20 0.00 120,049.92 2,054,777.66 56.56 530,520.30 0.00 0.00 0.00 530,520.30 0.00 1,524,257.36 41.96 0.00 0.00 1,524,257.36 41.96 0.00 0.00 0.00 1,524,257.36 0.00 1,524,257.36 533,490.08 990,767.28 27.27 0.00 990,767.28 0.00 Production 10 3,632,640.00 1,577,862.34 741,294.22 716,518.20 0.00 120,049.92 2,054,777.66 56.56 530,520.30 0.00 0.00 0.00 530,520.30 0.00 1,524,257.36 41.96 0.00 0.00 1,524,257.36 41.96 0.00 0.00 0.00 1,524,257.36 0.00 1,524,257.36 533,490.08 990,767.28 27.27 0.00 990,767.28 0.00

Sales revenue Less variable costs Material Personnel Marketing (except personnel) Other variable costs VARIABLE MARGIN in % of sales revenue Less fixed costs Material Personnel Marketing (except personnel) Depreciation Other fixed costs OPERATIONAL MARGIN in % of sales revenue Interest on short-term deposits Financial costs GROSS PROFIT FROM OPERATIONS in % of sales revenue Extraordinary income Extraordinary loss Depreciation allowances GROSS PROFIT Investment allowances TAXABLE PROFIT Income (corporate) tax NET PROFIT in % of sales revenue Dividends RETAINED PROFIT RATIOS Net profit to equity (%)

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

NET INCOME STATEMENT

Us Dollar Production 11 3,632,640.00 1,577,862.34 741,294.22 716,518.20 0.00 120,049.92 2,054,777.66 56.56 530,520.30 0.00 0.00 0.00 530,520.30 0.00 1,524,257.36 41.96 0.00 0.00 1,524,257.36 41.96 0.00 0.00 0.00 1,524,257.36 0.00 1,524,257.36 533,490.08 990,767.28 27.27 0.00 990,767.28 0.00

Sales revenue Less variable costs Material Personnel Marketing (except personnel) Other variable costs VARIABLE MARGIN in % of sales revenue Less fixed costs Material Personnel Marketing (except personnel) Depreciation Other fixed costs OPERATIONAL MARGIN in % of sales revenue Interest on short-term deposits Financial costs GROSS PROFIT FROM OPERATIONS in % of sales revenue Extraordinary income Extraordinary loss Depreciation allowances GROSS PROFIT Investment allowances TAXABLE PROFIT Income (corporate) tax NET PROFIT in % of sales revenue Dividends RETAINED PROFIT RATIOS Net profit to equity (%)

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

NET INCOME STATEMENT

Us Dollar Production 2 14.83 16.86 Production 3 12.92 16.85 Production 4 11.44 16.85 Production 5 10.27 16.85 Production 6 9.31 16.85 Production 7 8.75 17.35 Production 8 8.04 17.35 Production 9 7.44 17.35 Production 10 6.93 17.35

Net profit to net worth (%) Net profit+interest to investment (%)

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

NET INCOME STATEMENT

Us Dollar Production 11 6.48 17.35

Net profit to net worth (%) Net profit+interest to investment (%)

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

Net Profit to Total Sales (Us Dollar)

30

25

20

R 15 a t i o 10

0 2 3 4 5 6 7 8 9 10 11

Net profit to sales

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

2 3 4 5 6 7 8 9 10 11

Net profit to sales 26.49 26.49 26.49 26.49 26.49 27.27 27.27 27.27 27.27 27.27

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

Net Profit to Equity | Net Worth (Us Dollar)

16

14

12

10

R a t i o

0 2 3 4 5 6 7 8 9 10 11

Net profit to equity

Net profit to net worth

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

2 3 4 5 6 7 8 9 10 11

Net profit Net profit to equity to net worth 0.00 14.83 0.00 12.92 0.00 11.44 0.00 10.27 0.00 9.31 0.00 8.75 0.00 8.04 0.00 7.44 0.00 6.93 0.00 6.48

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

Net Profit+Interest to Investment (Us Dollar)

18

16

14

12

10 R a t i o

0 2 3 4 5 6 7 8 9 10 11

Net profit+interest to investment

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

2 3 4 5 6 7 8 9 10 11

Net profit+interest to investment 16.86 16.85 16.85 16.85 16.85 17.35 17.35 17.35 17.35 17.35

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

BREAK-EVEN ANALYSIS - TOTAL

Us Dollar Production 2 3,632,640.00 1,577,862.34 2,054,777.66 56.56 574,346.30 0.00 1,015,386.42 27.95 3.58 574,346.30 1,015,386.42 27.95 3.58 Production 3 3,632,640.00 1,577,862.34 2,054,777.66 56.56 574,346.30 0.00 1,015,386.42 27.95 3.58 574,346.30 1,015,386.42 27.95 3.58 Production 4 3,632,640.00 1,577,862.34 2,054,777.66 56.56 574,346.30 0.00 1,015,386.42 27.95 3.58 574,346.30 1,015,386.42 27.95 3.58 Production 5 3,632,640.00 1,577,862.34 2,054,777.66 56.56 574,346.30 0.00 1,015,386.42 27.95 3.58 574,346.30 1,015,386.42 27.95 3.58 Production 6 3,632,640.00 1,577,862.34 2,054,777.66 56.56 574,346.30 0.00 1,015,386.42 27.95 3.58 574,346.30 1,015,386.42 27.95 3.58 Production 7 3,632,640.00 1,577,862.34 2,054,777.66 56.56 530,520.30 0.00 937,906.47 25.82 3.87 530,520.30 937,906.47 25.82 3.87 Production 8 3,632,640.00 1,577,862.34 2,054,777.66 56.56 530,520.30 0.00 937,906.47 25.82 3.87 530,520.30 937,906.47 25.82 3.87 Production 9 3,632,640.00 1,577,862.34 2,054,777.66 56.56 530,520.30 0.00 937,906.47 25.82 3.87 530,520.30 937,906.47 25.82 3.87 Production 10 3,632,640.00 1,577,862.34 2,054,777.66 56.56 530,520.30 0.00 937,906.47 25.82 3.87 530,520.30 937,906.47 25.82 3.87 Production 11 3,632,640.00 1,577,862.34 2,054,777.66 56.56 530,520.30 0.00 937,906.47 25.82 3.87 530,520.30 937,906.47 25.82 3.87

Sales revenue Variable costs Variable margin Variable margin ratio (%) Including cost of finance Fixed costs Financial costs Break-even sales value Break-even ratio (%) Fixed costs coverage ratio Excluding cost of finance Fixed costs Break-even sales value Break-even ratio (%) Fixed costs coverage ratio

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

Break-Even Ratio - Including Costs of Finance (Us Dollar)

30

25

20

R 15 a t i o 10

0 2 3 4 5 6 7 8 9 10 11

Break-even ratio (%)

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

2 3 4 5 6 7 8 9 10 11

Break-even ratio (%) 27.95 27.95 27.95 27.95 27.95 25.82 25.82 25.82 25.82 25.82

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

PROJECTED BALANCE SHEET

Us Dollar 1 5,524,333.00 0.00 5,524,333.00 0.00 0.00 5,524,333.00 0.00 0.00 5,524,333.00 0.00 0.00 5,524,333.00 100.00 100.00 0.00 0.00 2 6,553,153.98 1,603,167.28 4,949,986.70 0.00 0.00 6,553,153.98 66,540.60 0.00 5,524,333.00 0.00 962,280.38 6,486,613.38 84.30 98.98 0.00 24.09 3 7,510,557.88 3,134,917.48 4,375,640.40 0.00 0.00 7,510,557.88 61,664.11 0.00 5,524,333.00 962,280.38 962,280.38 7,448,893.77 73.55 99.18 0.00 50.84 4 8,472,948.67 4,671,654.57 3,801,294.10 0.00 0.00 8,472,948.67 61,774.52 0.00 5,524,333.00 1,924,560.77 962,280.38 8,411,174.15 65.20 99.27 0.00 75.62 5 9,435,229.06 6,208,281.26 3,226,947.80 0.00 0.00 9,435,229.06 61,774.52 0.00 5,524,333.00 2,886,841.15 962,280.38 9,373,454.54 58.55 99.35 0.00 100.50 6 10,397,509.44 7,744,907.94 2,652,601.50 0.00 0.00 10,397,509.44 61,774.52 0.00 5,524,333.00 3,849,121.54 962,280.38 10,335,734.92 53.13 99.41 0.00 125.37 7 11,388,276.73 9,266,195.53 2,122,081.20 0.00 0.00 11,388,276.73 61,774.52 0.00 5,524,333.00 4,811,401.92 990,767.28 11,326,502.21 48.51 99.46 0.00 150.00 8 12,379,044.01 10,787,483.11 1,591,560.90 0.00 0.00 12,379,044.01 61,774.52 0.00 5,524,333.00 5,802,169.21 990,767.28 12,317,269.49 44.63 99.50 0.00 174.63

TOTAL ASSETS Total current assets Total fixed assets, net of depreciation Accumulated losses brought forward Loss in current year TOTAL LIABILITIES Total current liabilities Total long-term debt Total equity capital Reserves, retained profit brought forward Retained profit Net worth RATIOS Equity to total liabilities (%) Net worth to total liabilities (%) Long-term debt to net worth Current assets to current liabilities

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

PROJECTED BALANCE SHEET

Us Dollar 9 13,369,811.30 12,308,770.70 1,061,040.60 0.00 0.00 13,369,811.30 61,774.52 0.00 5,524,333.00 6,792,936.49 990,767.28 13,308,036.78 41.32 99.54 0.00 199.25 10 14,360,578.58 13,830,058.28 530,520.30 0.00 0.00 14,360,578.58 61,774.52 0.00 5,524,333.00 7,783,703.78 990,767.28 14,298,804.06 38.47 99.57 0.00 223.88 11 15,351,345.86 15,351,345.86 0.00 0.00 0.00 15,351,345.86 61,774.52 0.00 5,524,333.00 8,774,471.06 990,767.28 15,289,571.35 35.99 99.60 0.00 248.51

TOTAL ASSETS Total current assets Total fixed assets, net of depreciation Accumulated losses brought forward Loss in current year TOTAL LIABILITIES Total current liabilities Total long-term debt Total equity capital Reserves, retained profit brought forward Retained profit Net worth RATIOS Equity to total liabilities (%) Net worth to total liabilities (%) Long-term debt to net worth Current assets to current liabilities

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

Equity Capital to Total Liabilities (Us Dollar)

100 90 80 70 60 R a t i o 50

40 30 20 10 0 1 2 3 4 5 6 7 8 9 10 11

Equity to total liabilities (%)

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

1 2 3 4 5 6 7 8 9 10 11

Equity to total liabilities (%) 100.00 84.30 73.55 65.20 58.55 53.13 48.51 44.63 41.32 38.47 35.99

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

Net Worth to Total Liabilities (Us Dollar)

100 90 80 70 60 R a t i o 50

40 30 20 10 0 1 2 3 4 5 6 7 8 9 10 11

Net worth to total liabilities (%)

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

1 2 3 4 5 6 7 8 9 10 11

Net worth to total liabilities (%) 100.00 98.98 99.18 99.27 99.35 99.41 99.46 99.50 99.54 99.57 99.60

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

Debt to Net Worth Ratio (Us Dollar)

1 0.9 0.8 0.7 0.6 R a 0.5 t i 0.4 o 0.3 0.2 0.1 0 1 2 3 4 5 6 7 8 9 10 11

Long-term debt to net worth

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

1 2 3 4 5 6 7 8 9 10 11

Long-term debt to net worth 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

Current Ratio (Us Dollar)

250

200

150 R a t i 100 o

50

0 1 2 3 4 5 6 7 8 9 10 11

Current assets to current liabilities

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

1 2 3 4 5 6 7 8 9 10 11

Current assets to current liabilities 0.00 24.09 50.84 75.62 100.50 125.37 150.00 174.63 199.25 223.88 248.51

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

Net Present Value of Total Capital Invested Variation of Sales Revenue (Us Dollar)
14000000 12000000 10000000 8000000 6000000 4000000 2000000 0 -2000000 -4000000 -6000000 0 10 20 30 40 50 60 70 80 90 100

N P V

Discounting rate (%) Net present value Sales revenue + 10% Sales revenue - 10%

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

Discounting rate (%) 0.00 % 10.00 % 20.00 % 30.00 % 40.00 % 50.00 % 60.00 % 70.00 % 80.00 % 90.00 % 100.00 %

Net present Sales Sales value revenue + 10% revenue - 10% 9,765,238.35 12,126,454.35 7,404,022.35 3,783,811.86 5,156,553.37 2,497,006.19 774,290.69 1,657,615.72 18,895.50 -913,580.64 -301,521.11 -1,372,344.52 -1,947,842.92 -1,500,693.56 -2,223,146.64 -2,628,600.23 -2,289,484.00 -2,780,310.12 -3,103,211.99 -2,839,241.23 -3,165,605.08 -3,449,770.50 -3,240,638.86 -3,443,832.19 -3,712,460.15 -3,544,921.11 -3,651,783.85 -3,917,726.00 -3,782,731.61 -3,811,543.84 -4,082,179.10 -3,973,306.33 -3,937,015.40

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

Net Present Value of Total Capital Invested Variation of Sales Revenue (Us Dollar)
16000000 14000000 12000000 10000000 8000000 6000000 N P V 4000000 2000000 0 -2000000 -4000000 -6000000 0 10 20 30 40 50 60 70 80 90 100

Discounting rate (%) Net present value Sales revenue + 20% Sales revenue - 20%

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

Discounting rate (%) 0.00 % 10.00 % 20.00 % 30.00 % 40.00 % 50.00 % 60.00 % 70.00 % 80.00 % 90.00 % 100.00 %

Net present Sales Sales value revenue + 20% revenue - 20% 9,765,238.35 14,487,670.35 5,042,806.35 3,783,811.86 6,529,294.89 1,210,200.53 774,290.69 2,540,940.74 -736,499.69 -913,580.64 310,538.42 -1,831,108.41 -1,947,842.92 -1,053,544.21 -2,498,450.36 -2,628,600.23 -1,950,367.78 -2,932,020.01 -3,103,211.99 -2,575,270.47 -3,227,998.17 -3,449,770.50 -3,031,507.22 -3,437,893.89 -3,712,460.15 -3,377,382.06 -3,591,107.55 -3,917,726.00 -3,647,737.21 -3,705,361.69 -4,082,179.10 -3,864,433.55 -3,791,851.70

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

Net Present Value of Total Capital Invested Variation of Operating Costs (Us Dollar)
12000000

10000000

8000000

6000000

4000000 N P V

2000000

-2000000

-4000000 -6000000 0 10 20 30 40 50 60 70 80 90 100

Discounting rate (%) Net present value Operating costs + 10% Operating costs - 10%

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

Discounting rate (%) 0.00 % 10.00 % 20.00 % 30.00 % 40.00 % 50.00 % 60.00 % 70.00 % 80.00 % 90.00 % 100.00 %

Net present value 9,765,238.35 3,783,811.86 774,290.69 -913,580.64 -1,947,842.92 -2,628,600.23 -3,103,211.99 -3,449,770.50 -3,712,460.15 -3,917,726.00 -4,082,179.10

Operating costs + 10% 7,635,124.19 2,441,015.44 -165,059.73 -1,623,333.09 -2,515,277.05 -3,101,502.66 -3,509,725.05 -3,807,514.33 -4,033,049.19 -4,209,154.43 -4,350,153.75

Operating costs - 10% 11,895,352.50 5,163,935.11 1,769,208.32 -137,243.16 -1,305,766.45 -2,074,296.55 -2,609,142.28 -2,998,609.55 -3,292,744.20 -3,521,540.87 -3,703,861.95

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

Net Present Value of Total Capital Invested Variation of Operating Costs (Us Dollar)
16000000 14000000 12000000 10000000 8000000 6000000 N P V 4000000 2000000 0 -2000000 -4000000 -6000000 0 10 20 30 40 50 60 70 80 90 100

Discounting rate (%) Net present value Operating costs + 20% Operating costs - 20%

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

Discounting rate (%) 0.00 % 10.00 % 20.00 % 30.00 % 40.00 % 50.00 % 60.00 % 70.00 % 80.00 % 90.00 % 100.00 %

Net present value 9,765,238.35 3,783,811.86 774,290.69 -913,580.64 -1,947,842.92 -2,628,600.23 -3,103,211.99 -3,449,770.50 -3,712,460.15 -3,917,726.00 -4,082,179.10

Operating costs + 20% 5,505,010.03 1,098,219.01 -1,104,410.15 -2,333,085.55 -3,082,711.18 -3,574,405.10 -3,916,238.11 -4,165,258.16 -4,353,638.23 -4,500,582.85 -4,618,128.40

Operating costs - 20% 14,025,466.66 6,544,058.37 2,764,125.95 639,094.32 -663,689.98 -1,519,992.87 -2,115,072.56 -2,547,448.60 -2,873,028.24 -3,125,355.74 -3,325,544.80

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

Net Present Value of Total Capital Invested Variation of Increase in Fixed Assets (Us Dollar)
12000000

10000000

8000000

6000000

4000000 N P V

2000000

-2000000

-4000000 -6000000 0 10 20 30 40 50 60 70 80 90 100

Discounting rate (%) Net present value Increase in fixed assets + 10% Increase in fixed assets - 10%

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

Discounting rate (%) 0.00 % 10.00 % 20.00 % 30.00 % 40.00 % 50.00 % 60.00 % 70.00 % 80.00 % 90.00 % 100.00 %

Net present Increase in fixed Increase in fixed value assets + 10% assets - 10% 9,765,238.35 9,019,453.39 10,511,023.30 3,783,811.86 3,099,479.38 4,481,334.25 774,290.69 122,936.55 1,445,429.00 -913,580.64 -1,545,496.33 -257,820.23 -1,947,842.92 -2,567,388.65 -1,301,452.22 -2,628,600.23 -3,239,767.89 -1,988,065.37 -3,103,211.99 -3,708,410.52 -2,466,354.34 -3,449,770.50 -4,050,537.18 -2,815,170.44 -3,712,460.15 -4,309,823.56 -3,079,152.66 -3,917,726.00 -4,512,402.39 -3,285,030.82 -4,082,179.10 -4,674,684.51 -3,449,601.59

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

Net Present Value of Total Capital Invested Variation of Increase in Fixed Assets (Us Dollar)
12000000

10000000

8000000

6000000

4000000 N P V

2000000

-2000000

-4000000 -6000000 0 10 20 30 40 50 60 70 80 90 100

Discounting rate (%) Net present value Increase in fixed assets + 20% Increase in fixed assets - 20%

E107 - Construction - Automatic equity generated due to lack of funds!

COMFAR III Expert

ICS-UNIDO, ITALY

Discounting rate (%) 0.00 % 10.00 % 20.00 % 30.00 % 40.00 % 50.00 % 60.00 % 70.00 % 80.00 % 90.00 % 100.00 %

Net present Increase in fixed Increase in fixed value assets + 20% assets - 20% 9,765,238.35 8,273,668.44 11,256,808.26 3,783,811.86 2,415,146.91 5,178,856.64 774,290.69 -528,417.59 2,116,567.31 -913,580.64 -2,177,412.02 397,940.18 -1,947,842.92 -3,186,934.39 -655,061.51 -2,628,600.23 -3,850,935.56 -1,347,530.52 -3,103,211.99 -4,313,609.04 -1,829,496.68 -3,449,770.50 -4,651,303.87 -2,180,570.38 -3,712,460.15 -4,907,186.97 -2,445,845.16 -3,917,726.00 -5,107,078.79 -2,652,335.64 -4,082,179.10 -5,267,189.92 -2,817,024.08

E107 - Construction - Automatic equity generated due to lack of funds!

ANNEX 2

142

INTERNATIONAL CENTRE FOR SCIENCE AND HIGH TECHNOLOGY