Magnesite Refractories Production

8/20/2019 Magnesite Refractories Production

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DISCLAIMER

The purpose and scope of this Pre Feasibility Study is to introduce the Project and

provide a general idea and information on the said Project including its marketing,

technical, locational and financial aspects. All the information included in this Pre-

Feasibility is based on data/information gathered from various secondary and primary

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

taken in compiling this document, the contained information may vary due to any change

in the environment.

The Planning & Development Division, Government of Pakistan, Allied Engineering

Consultants (Pvt) Ltd., Lahore who have prepared this Pre-Feasibility Study or National

Management Consultants (Pvt) Ltd. who have quality assured this study do not assume

any liability for any financial or other loss resulting from this Study

The prospective user of this document is encouraged to carry out his/ her own due

diligence and gather any information he/she considers necessary for making an informed

decision


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TABLE OF CONTENTS

ACRONYMS .................................................................................................................. iii

EXECUTIVE SUMMARY ...........................................................................................iv

CHAPTER 1 - INTRODUCTION ...................................................................................1

CHAPTER 2 – NEED ASSESSMENT/ MARKET ANALYSIS .................................2 2.1 REFRACTORY PRODUCTS..................................................................................................... 2

2.2 CURRENT APPLICATIONS............................................. ........................................................ 42.3 LOCAL DEMAND & SUPPLY ............................................................ ................................... 62.4 FUTURE DEMAND............................................................................... .................................... 72.5 WORLD MARKET TRENDS ............................................................ ....................................... 92.6 PRICES OF DEAD BURNED MAGNESIA ......................................................... ................ 10

CHAPTER 3 – TECHNICAL EVALUTION................................................................12 3.1 RAW MATERIAL SOURCES & LOCATION................................................................... ... 12

3.2 LOCATION OF THE PROPOSED PROJECT............................................................... ........ 153.3 EVALUATION OF TECHNOLOGY ........................................................... .......................... 163.4 MANUFACTURING PROCESS.............................................................................................. 183.5 MACHINERY REQUIRED .......................................................... ........................................... 193.6 PLANT CAPACITY & PROJECT DESCRIPTION............................................................... 21

CHAPTER 4 – GOVERNANCE & MANAGEMENT STRUCTURE ......................25

4.1 GOVERNANCE STRUCTURE............................................................................................ ... 254.2 MANAGEMENT STRUCTURE ................................................................. ............................ 27

CHAPTER 5 – FINANCIAL EVALUATION.............................................................30

5.1 CAPITAL COST ............................................................. ......................................................... 30

5.2 PROJECTED PROFIT & LOSS ACCOUNTS ................................................................... .. 335.3 PROJECTED CASH FLOW STATEMENT............... ............................................................ 355.4 PROJECTED BALANCE SHEET.................................................................. ........................ 36

5.5 INTERNAL FINANCIAL RATE OF RETURN.................................................................... 375.6 PAYBACK PERIOD................................... ..................................................................... ........ 37

CHAPTER 6 – CONCLUSION ....................................................................................38

LIST OF TABLES TABLE 1 – MAGNESITE/ CHROME – MAGNESITE REFRACTORY SPECIFICATION...................... 4TABLE 2 – CONSOLIDATED LOCAL DEMAND FOR MAGNESITE REFRACTORIES..................... 7

TABLE 3 – MAGNESITE REFRACTORIES DEMAND PROJECTION................................................... 8

TABLE 4 – AVAILABILITY OF MAGNESITE DEPOSITS........................................................ ............ 12

TABLE 5 – CHEMICAL ANALYSIS BALOCHISTAN OF KUMHAR DEPOSITS..............................13TABLE 6 – SPECIFICATION OF REFRACTORIES FROM KUMHAR DEPOSITS. ........................... 13 TABLE 7 – KUMHAR DEPOSIT (1) ........................................................... .............................................. 14 TABLE 8 – KUMHAR DEPOSIT (2) ........................................................... .............................................. 14

TABLE 9 – MACHINERY AND EQUIPMENT ....................................................... ................................. 22

TABLE 10– CORPORATE OFFICE − MANPOWER REQUIREMENT ................................................. 29

TABLE 11– PLANT − MANPOWER REQUIREMENT .......................................................... .................. 29 TABLE 12– ESTIMATED CAPITAL COST ......................................................... .................................... 30

TABLE 13– CIVIL WORKS & BUILDERS..................................................................................... ......... 31 TABLE 14– PROJECTED PROFIT & LOSS ACCOUNT............................................................. ........... 34


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TABLE 15– PROJECTED CASH FLOW................................. ............................................................... ... 35 TABLE 16– PROJECTED BALANCE SHEET ........................................................ ................................. 36

ANNEXURE- 1 PAKISTAN – A PROFILE


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ACRONYMS

Admin Administration

Brucite Magnesium Hydroxide

CC Concast

CCM Caustic- Chemical Magnesia

CEO Chief Executive Officer

DBM Dead Burnt Magnesite

FS Feasibility Study

GST General Sales Tax

IFRR Internal Financial Rate of Return

km Kilometer

L/C Letter of Credit

MgCo3 Magnesite

NW North West

NWFP North West Frontier Province

Rs. Rupees$ Dollar


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EXECUTIVE SUMMARY

Refractories are structural materials that are very essential for most process industries.

Refractories industry provides the materials required to achieve energy conservation inother industries.

The iron and steel industry consumes about 70% of the total tonnage of refractories

produced globally. Chrome refractory bricks of 100 percent chromium ore have been

largely replaced by magnesite bricks & bricks composed of mixtures of chromite and

added oxides ( i.e. magnesia).

Domestic installed capacity for the manufacture of refractories is 62,300 tonnes per

annum. Present annual production is estimated at 33,100 tonnes. Domestic production of

refractories is designed for and is confined mostly to insulation bricks and refractory

bricks for boilers and furnaces.

Present import of magnesite & chrome-magnesite refractories is estimated at around

14,000–15,000 tonnes per annum. The imported magnesite and chrome-magnesite bricks

are being used for new projects, repair and replacement purposes of cement plants, steel

furnaces, glass furnaces and in ceramic industry.

Current domestic demand, for magnesite and chrome-magnesite refractories is given

below:

Tonnes/ Annum

- Steel Industry 9,229

- Glass Industry 3,758

- Cement Industry 14,699

- Ceramic Industry 153

Total Demand: 27,839

It is estimated that by 2007-08 the total demand of magnesite & chrome-magnesite

refractory bricks will range between 30,000 to 36,000 tonnes, per year.


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Virtually, the manufacture of quality magnesite & chrome-magnesite refractories is

negligible in the country. Only 2,000 to 3,000 tonnes of low quality magnesite

refractories are being manufactured domestically. At present there is no plant to

manufacture refractories to meet the requirement of iron & steel, cement, glass and

ceramics industry. Demand of the industry is being met totally through imports.

Magnesite ore deposits are found in Balochistan & NWFP Provinces. The NWFP

magnesite deposits are located 29 Kms NW of Abbottabad near Kumhar Village.

Considering the availability of high quality and reasonably large deposit of natural

magnesite of Kumhar Deposit, natural gas availability and developed infrastructure, the

plant is proposed to be located in Hattar/ Haripur Area of NWFP, quite near the main

deposits.

Based on projected demand, it is proposed to install a 20,000 per annum refractory

materials manufacturing plant. It is currently a minimum economic size plant utilizing

latest processing technology. Based on 20,000 tonnes capacity the daily capacity works

out at arround 67 tonnes working on a 300 days/ year basis.

Manpower requirement has been estimated at 166 persons including managers,

executives and workers at corporate office and at the plant. Loading/unloading of

materials, janitorial services, security and other services are proposed to be out sourced.

The total capital cost of the project is estimated at Rs. 856.402 million inclusive of net

initial working capital of Rs. 26 million.

The financial structure of the project on the basis of debt/equity ratio of 60:40 will be

total loan Rs. 515.841 million and total Equity of Rs. 342.561 million.

The estimated sale revenue at 100% capacity of 20,000 tonnes @ Rs. 38,000/ tonne will

be Rs. 760 million.


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It is assumed that the plant will operate at 50%, 60%, 70%, 80% and 90% of installed

capacity during 1st, 2nd , 3rd , 4th and 5th year of operation. The project is expected to earn

profit from first year of operation. The project is expected to attain a positive (surplus)

cash flow from the first year of operation.

The Internal Financial Rate of Return of the project has been determined at 22.14% and

payback period has been calculated as 5.20 years.


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CHAPTER 1

INTRODUCTION

Government of Pakistan is making efforts to promote bring in investments in

Pakistan by facilitating establishment of viable projects in Agriculture,

Manufacturing, Mining, Tourism, Shipping and in various other productive

sectors. For this purpose, Pre-feasibility studies for selected projects are being

prepared. The refractories are structural materials and essential for many process

industries, particularly iron and steel industry which consumes 70% of the total

tonnage of the product produced globally. Magnesite and Chrome magnesite

refractories are extensively used in the industrial sector for energy conservation.

In view of sizeable requirement of magnesite refractories in Pakistan which is

almost entirely met through imports, the setting up of its mining and

manufacturing project in Pakistan has become essential.

The objective of the study is to determine the viability of setting up a Project for

production of refractories.

The methodology adopted in the preparation of this study includes primary and

secondary data collection from relevant sources and analysis of the collected data.

Based on the analysis, proposals have been developed as given in this report.

The scope of work of the study includes Need Assessment, Technical, Financial

and Organisational and Management Evaluations.

The study team consisted of market analyst, HRD & technical experts and

financial analyst who contributed their inputs in coordination with the Team

Leader. The Support Staff consisted of field Surveyors, data tabulators and word

processors.


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CHAPTER 2

NEED ASSESSMENT/ MARKET ANALYSIS

2.1 REFRACTORY PRODUCTS

The Refractories are structural materials and these are essential for most process

industries. Refractories’ industry provides the materials required to achieve

energy conservation in many other industries.

Refractories are produced from a small range of high melting point materials,

notably magnesia, dolomite, bauxite, andalusite, fireclay and silica, and smaller

quantities of carbon, graphite, chromite, zircon and zirconia are used to improve

their properties. Products consisting mainly of magnesia are classified as basic

(i.e. alkaline) and are generally used where the working environment is alkaline.

Dolomite bricks are a form of basic refractory, but they are often considered a

separate category as in certain circumstances they will withstand temperature

fluctuations better than other basic bricks. Products based on bauxite and

andalusite (i.e. high alumina) or silica are known as acidic and are used in acidic

environments. Products including less than 40 percent alumina (fire brick orinsulating products) are strictly also acidic; they tend to be of lower quality and of

use in lower temperature applications and/ or less severe operating environments.

Refractories have a variety of industrial and domestic applications including use

in high temperature processes in the cement, glass and aluminum industries and in

domestic heating systems. However, their most important use world-wide is in the

iron and steel industries.

Refractory products are characterised by their ability to withstand the effects of

exposure to heat in their industrial uses, with which we are particularly concerned

here. Refractory products are also required to be able to resist/ attain strength at

high temperatures.


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Refractories can be broadly classified into two categories: 1) Shaped Refractories;

(Fired Refractories and Chemically, hydraulically bonded and fused cast

Refractories) and 2) Unshaped Refractories.

There are granular or monolithic Refractories which are used in the building up of

new furnace walls or in their maintenance. These materials are applied insitu

through, casting, guniting, ramming etc. In some cases they are precast into

shapes and installed in area of use to be fired insitu.

Companies produce unshaped refractories (monolithic) and shaped refractories.

The latter are referred to as bricks although some of them are, in fact, quite

complicated shapes and do not look like normal bricks.

Monolithic refractories consist of crushed and mixed refractory raw materials

which have a controlled chemical content and range of particle size plus a

bonding agent such as refractory cement. They are supplied to the customer as

loose materials in sacks or in bulk in a variety of consistencies.

Materials for ramming into place are supplied as a gritty putty ready for use.

Refractory concretes, with water added, can be cast into the required shape.

Materials for gunning are simultaneously mixed with water and blasted into place

though a nozzle. Monolithies may thus be used in place of pressed bricks or, when

they take the form of a refractory cement, as a complement to bricks for sealing

the joints between them and making repairs.

Bricks are produced by crushing and milling the raw materials into a range of

small particle sizes and mixing together specified materials and sizes with a

bonding agent. The mixture may then be shaped in one of three ways: a) most

bricks are made by putting a measured amount of mixture into a steel or tungsten

carbide-lined mould and exerting a high uni-directional pressure (eg 10 tonnes per

square inch) on them; b) complicated shapes are hand-moulded and pressed; and


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c) some special refectories are isostatically pressed, eg the same pressure is

exerted on them from all directions. The moulded or pressed brick is known as

green stock (ie unfired).

Typical composition of magnesite and magnesite–chrome refractories is presented

in the table below.

TABLE -1

MAGNESITE / CHROME - MAGNESITE REFRACTORY

SPECIFICATIONS

Brick Type

MgO

(Min.) %

SiO2

(Max.) %

CaO

(Max.) %

Cr2O3

(Min.) %A-Electric Arc Furnace

BBEF – 1BMEF – 2

8591

6.53.5

2.52.0

--

B-Chemically BondedBricks

CBMB – 1CBMB – 2

5563

6.56.5

--

0511

C-Direct Bonded BricksMGDB – 1

MGDB – 2

96

92

0.5

3.0

-

-

-

-D-Glass IndustriesRefractories

GMDG – 1GMDB – 2GMDB – 3

989488

0.72.86.5

1.52.02.5

---

E-Integrated Steel PlantsMDBS – 1MDBS – 2MDBS – 3

858791

6.55.55.0

2.52.02.0

---

F-Cement Industry

VRW – 1VRW - 2

8393

1.52.0

2.02.5

-06

2.2 CURRENT APPLICATIONS

The iron and steel industry consumes about 70% of the total tonnage of

refractories produced globally. The cement and lime industry consumes 7%, the

ceramics industry 6%, the glass industry 3 to 4%, and the oil industry about 4%.


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Chrome refractory bricks of 100 percent chromium ore have been largely replaced

by bricks composed of mixtures of chromite and added oxides (i.e., magnesia) for

greater refractoriness, volume stability, and resistance to spalling

(cracking/rupturing of a refractory shape). A large quantity of Cr 2O3 raw or

synthetic grain, such as MgCr 2O4 and Cr 2O3 or as additive. Magnesia-chrome

brick can be severely affected by hydration during storage.

COPPER METALLURGY

Nearly all copper producing furnaces have adopted refractory practices based on

the use of magnesia-chrome refractories. In converter furnaces, the lining of the

furnace bottom and the tuyere zone (zone of greatest wear) is usually fused cast

magnesia-chrome or chrome-magnesite brick. The prospective replacement of

magnesia-chrome by spinel magnesia-alumina spinel brick for copper smelting

converting and refining is left undetermined at the time.

STEEL MAKING

Iron and steel plants are the major consumers of refractories. Although new

technological improvements have led to lower consumption, magnesia-chrome

refractories are commonly used in secondary steel-making plants because of their

high resistance to a wide variety of usage and their stability at high temperatures.

CEMENT KILNS

Several types of bricks are used in cement rotary kilns, and most have good

mechanical behavior and high chemical stability. Magnesia-spinel (MgO-

MgA12O4) refractories fired magnesia-chrome bricks are mostly applied in the

burning zones of the kilns.

GLASS MELTING

In glass industry chrome refractories (10 and 16% Cr2O3) offer high corrosion

resistance to soda-lime glasses and are used as paving, sidewall and back-up

lining and increasingly in the fore heart components. Sintered chrome, chrome-


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magnesite, or magnesite-chrome is used in the bottom of the checkers, as well as

on the structure surrounding the checkers and walls.

2.3 LOCAL DEMAND & SUPPLYThere were 20 refractories manufacturing units in the country, out of which 8

have closed down. Installed capacity for the manufacture of refractories is 62,300

tonnes. Present annual production is estimated at 33,100 tonnes; which, at present,

is operating at about 50% capacity.

Domestic production of refractories is confined mostly to insulation bricks and

refractory bricks for boiler and furnaces. Only 2,000 – 3,000 tonnes of low quality

magnesite bricks are being manufactured in the country, rest are mostly alumina

and silica bricks.

The present import of magnesite & chrome-magnesite refractories is estimated at

around 14,000 – 15,000 tonnes per annum. A large number of refractory materials

are being imported under BMR and some as components of new plant &

machinery and categorized under accessories to plant & machinery.

The imported magnesite and chrome-magnesite material is being used for repair

and replacement purposes of cement plants, steel furnaces, glass furnaces and in

ceramic industry. Since for establishment of demand import, statistics cannot be

relied upon as refractories are also being imported in other product codes; the

present demand can only be established through estimation of requirement of

industrial end-users as follows:

• Steel Industry: Estimated present production of Pakistan Steel and steel products

through steel melting furnaces is 1.678 million tones. On the basis of this

production, the requirement of magnesite refractories works out to 9,229 tonnes

annually.


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0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2 0 0 4 -

0 5

2 0 0 5 -

0 6

2 0 0 6 -

0 7

2 0 0 7 -

0 8

2 0 0 8 -

0 9

2 0 0 9 -

1 0

2 0 0 1 0 -

1 1

2 0 0 1 1 -

1 2

2 0 0 1 2 -

1 3

2 0 0 1 3 -

1 4

2 0 0 1 4 -

1 5

“Trend Line”

“Growth

Curve”

Cont. Ann. G.

Rate 3%

Cont. Ann. G.

Rate 6%

Cont. Ann. G.

Rate 9%

chrome magnesite refractories. Two projected scenarios are based on “Trend

Line” and “Growth Curve” methodology.

Considering the natural population growth, GDP growth and general affluence;

additional three (3) scenarios have been developed, using average annual growth

of 3% 6% and 9% per annum. The projections of magnesite & chrome-magnesite

bricks based on five scenarios is presented in Table-3 and graphically presented in

Chart -1 below:

TABLE - 3

MAGNESITE REFRACTORIES DEMAND PROJECTION

Constant Annual Growth RateYear

“Trend

Line”

“Growth

Curve” 3% 6% 9%

2004-05 27,840 27,941 27,840 27,941 27,840

2005-06 29,184 29,686 28,675 29,618 30,345

2006-07 30,852 31,933 29,535 31,395 33,076

2007-08 32,521 34,375 30,421 33,278 36,053

2008-09 34,189 37,030 31,334 35,275 39,298

2009-10 35,857 39,919 32,274 37,392 42,835

2010-11 37,525 43,063 33,242 39,635 46,690

2011-12 39,194 46,486 34,239 42,013 50,8922012-13 40,862 50,214 35,267 44,534 55,473

2013-14 42,530 54,275 36,325 47,206 60,465

2014-15 44,199 58,701 37,414 50,038 65,907

CHART -1

PAKISTAN-MAGNESITE REFRACTORIES DEMAND PROJECTION


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The methodology for “Trend Line” projections is based on a model based on a

result of polynomial curve fitting by regressing against the same variable raised to

different powers.

“Growth Curve” projection model fits an exponential curve to the known data,

and then return the one variable’s values along the curve for sway of new values

of the other variable.

The above projections are based on user industries production for the year

1999-00 to 2003-04.

For constant average annual growth rate projections end-user growth at 3%, 6%

and 9% annual growth is assumed using the year 2004-05 demand as base

demand.

It is estimated that by 2007-08 the total demand of magnesite & chrome-

magnesite refractory bricks will range between 30,000 to 36,000 tonnes.

2.5 WORLD MARKET TRENDS

Virtually the manufacture of quality magnesite & chrome-magnesite refractories

is negligible. Only 2,000 to 3,000 tonnes of low quality magnesite refractories are

being manufactured domestically. At present, there is no plant to manufacture

refractories to meet the requirement of iron & steel, cement, glass and ceramics

industry. Demand of the industry is being totally met through imports.

The world refractory magnesia market has been in a state of oversupply but has

been moving back closer to balance in recent years, according to a new report

from market analyst Roskill Information Services Ltd. (London, England). The

main reason for this has been the exit of producers in Italy, the UK and the USA

from the market, with some companies closing plants while others simply moving

into other markets.


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‘Economics of Magnesium Compounds & Chemicals’ (10th Edition, 2005)

explains that the combination of slow growth in crude steel production and

improved refractory specifications and applications continues to reduce

consumption of refractries worldwide. Refractories are such an important market

for magnesia that the decline in this market is estimated to have more than halved

the total magnesia consumption in most industrialized countries over the last 30

years.

Over the next three years to 2008, Roskill forecasts an average annual growth of

1.5% per annum to 2% per annum. This increase will be driven by increased

demand from the refractory sector in China. The majority of global magnesia is

located in the centrally planned and former centrally planned economies of China,

North Korea and Russia. Producers in these countries have the capacity to

produce over 6 million tonnes per year (mtpy) of dead burned magnesia from

magnesite, or over 75% of global dead burned magnesia capacity based on

magnesite.

In developed economies, such as Japan, the USA and Western Europe, the

magnesia capacity based on magnesite is estimated at just 0.7 mtpy out of a world

total of 10.0 mtpy.

The refractories industry has led the gradual change in the market from traditional

products to innovative products and application technologies for most of the

users, including metal, hydrocarbon, and other industrial processors. The

introduction of these new materials, products and application technologies helped

the iron and steel makers, along with other refractory users, cope with the world

market.

2.6 PRICES OF DEAD BURNED MAGNESIA

The price of dead burned magnesia rose by over 25% in 2004, which was the first

increase since the late 1990s. However, the increase in published Chinese


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magnesia prices was caused by sharp rises in costs of production such as power

and transport. The long-term price of dead burned magnesia and fused magnesia

will largely be detemined by rising Chinese consumption in refractories and the

amount of material exported from China.

About one-third of Europe’s production, including over half of special

refractories, is exported. Although this may seem surprising in view of the nature

of the product, it should be noted that the product can be of very high value

compared with transport costs. Basic refractories, for instance, have an export

value of US$ 660/tonne and special zircon based bricks at US$ 2,600/tonne.


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CHAPTER 3

TECHNICAL EVALUATION

3.1 RAW MATERIAL SOURCES & LOCATION

Magnesite (MgCO3), the naturally occurring carbonate of magnesium (Mg) is one

of the key natural sources for the production of magnesia (MgO) and

subsequently fused magnesia. Magnesite occurs in two distinct physical forms:

macro crystalline and cryptocrystalline. Cryptocrystalline magnesite is generally

of a higher purity than macro crystalline ore, but tends to occur in smaller

deposits than the macro crystalline form.

Domestic magnesite raw material for the manufacture of magnesite refractory

bricks & material is available in:

TABLE -4

AVAILABILITY OF MAGNESITE DEPOSITS

Quality Reserve Size

Balochistan

− Nisai Zhob, Muslim Bagh MgO – 45.40% 60,000 tonnes

− Spin Tangi MgO – 43-45% 6,000 tonnes

− Shabi Ghandi, Muslim Bagh MgO – 38-42% 6,000 tonnes

NWFP

− Kumhar, Abbottabad MgO – 44.00% 11.16 million tonnes

Source: Geological Survey of Pakistan

The largest magnesite deposits are located 29 Kms NW of Abbottabad near

Kumhar Village. There are 14 lenses of magnesite in the area but the main

development work is confined to lens No. I & II only. The Ore bodies are found

enveloped in the grey dolomitic limestone which constitute the carbonate Unit of

Abbottabad Formation.


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The largest ore body being explored is lens No. I. It extends along the strike for

atleast 101 meters and down the dip for more than 1145 meters, where the out

crop is exposed. Similarly, lens no. II extends along the strike for atleast 75

meters and down the dip for more than 1140 meters, where the out crop is

exposed.

Average chemical analysis of samples collected from the exploratory adit of lens

no. I & II of Kumhar is as follows:-

TABLE -5

CHEMICAL ANALYSIS BALOCHISTAN OF KUMHAR DEPOSITS

Particular MgO% CaO% Fe2O3% Al2O3% SiO2% L.O.I.%

Lens – I 44.06 2.66 2.48 0.95 1.57 50.26

Lens – II 43.97 1.76 1.19 1.16 1.72 50.19

By subjecting this magnesite to calcinations (1500 – 1700 oC), dead burnt

magnesite of the following characteristics that conforms with the specifications

laid down in standard books for the manufacture of magnesite, magnesite chrome

and chrome magnesite bricks can be obtained. Specification of various types of

refractory bricks and dead- burnt magnesite which may be manufactured based on

Kumhar deposit is given below:

TABLE -6

SPECIFICATION OF REFRACTORIES FROM KUMHAR DEPOSITS

Particular ItemMgO

%

CaO

%

Fe2O3%

Al2O3%

SiO2

%

L.O.I.

%

General MagnesiteBricks 80-90 1-4 1-5 4-10 0 1-3

MagnesiteChrome 55-80 1-3 2-7 6-12 6-20 2-6

Specifications

ChromeMagnesite 25-55 0.5-2 2-15 8-15 20-45 3-7

Lens- I 88.7 5.57 1.99 1.04 0 2.88Kumhar

Lens- II 88.3 4.87 3.83 0.77 0 2.09


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Chemical composition of both natural and dead burnt magnesite is very good

except CaO & Al2O3 is slightly on the higher side that may be brought within

permissible limits by the addition of 4-10% iron oxide to facilitate Periclase

formation. Anyhow this magnesite, can stand a high temperature during use as a

refractory material.

It is estimated that 11.16 million tons of demonstrated reserves are present in

Kumhar I and 8.75 million tonnes in Kuhmar II as given below:

TABLE - 7

KUMHAR DEPOSIT (1)

(in million tonnes)

Particular Measured Indicated Demonstrated

Lens – I 2.34 4.30 6.64

Lens – II 1.45 3.07 4.52

Total 3.79 7.37 11.16

TABLE -8

KUMHAR DEPOSIT (2)

(in million tonnes)

Particular Measured Indicated Demonstrated

Lens – I 1.84 3.37 5.21

Lens – II 1.14 2.40 3.54

Total 2.98 5.77 8.75

Based on the evaluation of the Kumhar 1 and 2 deposits it may be recommended

that an open pit technique of mining employing conventional drill, blast, load and

haul operations may be adopted. A separate detailed feasibility study on mining

needs to be undertaken.

There have been a number of exploratory studies done in the last few years to

determine the quality and quantity of raw material available by experts from


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China, JCI of Japan and M/s Minkoh International of Pakistan. In addition to the

above, they have also examined other aspects of the refractories’ project and have

found it feasible.

3.2 LOCATION OF THE PROPOSED PROJECT

Considering the availability of high quality and reasonably large deposits of

natural magnesite, the plant is proposed to be located, based on use of raw

material from Kumhar Deposit, in Abbottabad or Haripur District of NWFP

Province.

The bulk material required includes only magnesite ore brought from quarry/

mine. Energy is required in shape of electricity and fuel/ oil. The most important

factors to be considered for a site to install a refractory plant are source of raw

material, availability of natural gas, fuel oil and electricity.

For every tonne of finished material produced, the raw material requirement is

about 2.5 times, depending upon the quality of raw material. Major consideration

for location of the plant is its closeness to the raw material source.

The consumer industry of refractories is scattered all over the country. Majority of

consumers are located in the central part of the country. Three very large size

cement plants are being established in northern Punjab, in addition to plants

already existing in the area.

Second high bulk material is energy source i.e. furnace oil or natural gas.

Considering the ease of use & handling, it is more feasible that project be located

where natural gas is available.

A strong infrastructure and good transportation system is needed for the

transportation of raw material and finished goods.


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Ideal site would be close to the magnesite deposit, but since the area is not

developed, it is proposed that the plant be located in Hattar/ Hawellian area which

has good magnesite deposits. At 100% capacity utilization about seven (7) 10-

tonnes capacity trucks will be required to transport raw material to the plant daily.

A detailed study for the location of the site will be necessary for ultimate decision

on the establishment of the plant.

3.3 EVALUATION OF TECHNOLOGY

Refractories are produced in two basic forms, formed objects, and unformed

granulated or in plastic compositions. The preformed products are called bricks

and shapes. These products are used to form the walls, arches and floor tiles of

various high-temperature process equipment such as furnaces, kilns, etc..

Unformed compositions include mortars, gunning mixes, castables (refractory

concretes), ramming mixes and plastics. These products are cured in place to form

a monolithic, internal structure after application.

Raw material preparation is an essential requirement for all types of basic

magnesite refractories (magnesite, magnesite-chrome & chrome-magnesite). First

step is beneficiation of the mined material if it is associated with undesirable

compounds or the content of required element is low.

Next step is to thermally treat the raw material to complete all the changes in the

material or remove water of crystallization and sinter to increase the density.

The processed raw material then may be dry-mixed with other minerals and

chemical compounds, packages and shipped as monolithic product. Brick forming

consists of mixing the raw materials and forming them into the desired shapes.

This process frequently occurs under wet or moist conditions. Firing involves

heating the refractory materials to high temperatures in a periodic (batch) or

continuous tunnel kiln to form the ceramic bond that gives the product its


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refractory properties. The final processing stage involves milling, grinding and

sandblasting of the finished product. This step keeps the product in correct shape

and size after thermal expansion has occurred. For certain products, final

processing may also include product impregnation with tar and pitch and final

packaging.

Chromium is used in several types of nonclay refractories, including

chrome-magnesite, (chromite-magnesite), magnesia-chrome and chrome-

alumina.Chromium compounds are emitted from the ore crushing, grinding,

material drying and storage; brick firing and finishing processes used in

producing these types of refractories.

Other technological changes in the industry have affected the quality or type of

refractory required. This has meant that conditions have become more severe in

the steel ladle and a higher quality refractory is needed. Another development has

been the change from using a plug to a sliding gate valve to control the pouring of

steel from the ladle. The plates of these valves are used in an application with a

high degree of risk and are therefore allowed only very short life.

There have also been technological changes in the cement industry which have

affected the demand for refractories. Cement manufacturing companies are

switching over from the wet to the dry process which saves energy and uses a

shorter kiln. It still needs a basic- lined hot zone but it has less surface remaining

to be lined with high alumina and firebrick.

The growth of steel production caused the need to build new refractories. For

these new steel plants fireproof brickwork was made from quality magnesite

sinters made from quality raw materials, which could be assured only by building

high quality finishing plants.


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3.4 MANUFACTURING PROCESS

Beginning with open cast mining of Magnesite (MgCo3), the process of

transformation into the best of basic refractories follow the stages of preparation

and processing as shown in Chart 2 which presents a typical process flowdiagram.

The selected grade of Magnesite is sized by primary crushing, screening and

washing before being fed into the High Temperature Rotary Kilns (50-100 TPD

capacity). The DBM (Dead Burnt Magnesite) obtained is further sized to the

desired standards.

TransportingRaw Material

Storage

Crushing/ Grinding

Weathering

Calcining/ Drying

Screening/Classifying

Dead Burnt Material

Storage

Mixing Forming Drying

Milling/ Finishing Cooling Firing

Packing & Shipping

CHART - 2

MAGNESITE REFRACTORY MANUFACTURING

TYPICAL PROCESS FLOW DIAGRAM


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The meticulously formulated compositions are pressed into a variety of shapes

and sizes in an array of presses including high capacity hydraulic presses.

The bricks are dried and fired in state-of-art High Temperature Tunnel kiln from

where they are sent for finishing, testing/inspection and packing before being

forwarded to a wide range of customers across the country.

Another trend has now emerged which involves usage of specially developed

resin binders. This involves utilizing chemical bonding using resin binders

(chemical bonders). The temperature requirement for drying these types of bricks

is only 200 oC to 400 oC compared to 1200 oC to 1600 oC required for bricks with

conventional bindings.

3.5 MACHINERY REQUIRED

Depending on hardness of material, different types of crushing and grinding

equipment are used. The improved machinery now available is: Higher width jaw

crushers; Rock-on Rock crushers, which obviate the use of conventional

Gyratory-Cone-Crushers and Roll Crushers and are a better choice.

In case of relatively softer materials, impact mills and vibro-grinding mills

provide the required range of particle sizes.

All refractory materials need to be free from metallic iron introduced during the

comminuting operations. The new rare earth magnetic separators provide

excellent alternatives, both in terms of productivity and energy consumed,

compared to Induced Electro Magnetic Separators.

Mixers are the most essential piece of equipment in the manufacture of

refractories-shaped or unshaped. The new generation high intensity mixers,

though require higher power to operate, take less time to make a better mix.


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Conventional Counter current mixers would have taken 40-45 minutes to produce

the consistency now possible in 10 minutes on these high intensity mixers.

Presses are the major consumers of power in ceramic & refractory industry.

Several developments have taken place in this area. In refractory industry,

hydraulic presses are essential to achieve higher quality consistency and

productivity. Though friction screw presses are the choice, when capital is scarce

it is advisable to go for hydraulic presses. For small volume high precision

refractories, specialized vibro-pneumatic presses may be a better alternative to

conserve energy and capital. Iso-static presses are also finding increasing

application in the production of sophisticated concast (CC) refractories like sub-

merged nozzles and shrouds and also in the production of industrial ceramics. The

bricks are flat and uniform with iso-static presses and the presses are also

compact.

Kilns and Dryers are the major consumers of energy (thermal energy) in

ceramics & refractory industry. The industry has seen the most energy inefficient

down draft kiln to the modern kilns tunnel/ shuttle and roller kilns.

For high volumes, Tunnel kilns are very efficient and for low volumes, shuttle

kilns with high velocity burners may be preferred. The major losses in kilns occur

because of:

• Insulation loss;

• Exhaust loss; and through

•

Intermittent operation.

The suggestions for energy conservation are as follows:

• Insulate the furnace with proper insulating material such as ceramic fiber,

hot face insulating refractory.

• Proper combustion control system is essential to optimize fuel consumption.


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• Waste heat recovery system, typically the gases from the cooling zone area

are sent to heating zone.

3.6 PLANT CAPACITY & PROJECT DESCRIPTIONAs discussed in Chapter-2, the estimated demand, by year 2007-08, for magnesite

& chrome-magnesite refractory bricks will range between 30,000 to 36,000

tonnes per year. Based on this projected demand it is proposed to install a 20,000

per annum refractory materials manufacturing plant. This is currently a minimum

economic size plant utilizing latest processing technology. Based on 20,000

tonnes capacity the daily capacity works out at 67 tonnes/ day on a 300 days/ year

basis.

Larger capacity plant will have advantage of economy of scale but the overall

demand projections for the country do not justify installation of a plant larger than

20,000 tonnes/ annum at present. The capacity utilization will have to be linked

with marketing & promotional effort.

The financial evaluation, presented in later sections of this report, is based on

magnesite refractory bricks manufacture only. However, the proposed project is

planned to manufacture all type of refractory materials, including monolithic

material.

The sponsors of the proposed project should also consider feasibility of

manufacture of other magnesite products in addition to refractories. Most of these

are high value-added products such as:

• Magnesium Sulphate for making pulp and paper, animal feed and

pharmaceuticals.

• Magnesium Chloride used in important industries e.g. cement, ceramics and

refractories, textile and paper, chemical applications, production of

magnesium.


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• Magnesium Hydroxide (Brucite) used in sugar refining, flame and smoke

retardants, water treatment and other environmental application.

• Magnesite (Precipitated) used for insulation, rubber, paint pigment and ink,

glass.• Caustic-Clinical Magnesia CCM used for extraction of magnesium, fused

magnesia, fertiliser, vulcanisation, processing of uranium.

In this section, the requirement of typical main machinery & equipment and other

facilities is discussed. List of plant & machinery (I = imported machinery and

L=local machinery) to be used for a complete plant to produce magnesite

refractory bricks.

TABLE – 9

MACHINERY AND EQUIPMENT

Name of MachineQuantity

(Number)

CRUSHING UNIT

Bunker Lining. (L) 1

Push-Type Feeder (I) 1Impact Crusher (I) 1

Trough Belt Conveyor (L) 1

Chain Bucket Elevator (L) 1

Special-Sizer (I) 1

Feed-back Tuber for Oversize Grain (I) 1

RAW MATERIAL – TRANSPORT AND STORAGE

Trough Conveyor Belt (L) 1

Sheet Steel Silo (L) 1

Trough Conveyor Belt (L) 1

CALCINING AND GRINDING UNIT FOR PRODUCTION

OF DEAD- BURNT MATERIAL

Tunnel/ Rotary Kiln Feeding Silo (L) 1

Metering Belt Conveyor (I) 1

Tunnel/ Rotary Kiln with Bucket Wheel Sluiceway(I) 1

Hot Gas Generator (I) 1


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TABLE – 9



(Number)

Cyclone Dust Removal Installation (L) 1Screw Conveyors for Returning Material (I) 2

Waste Air Fan (I) 1

Chimney (L) 1

Screw Conveyors (I) 3

Special Sizer (I) 1

Grinding Mill (I) 1

Sheet Steel Silo (L) 1

TRANSPORT OF FINISHED DEAD-BURNT MATERIAL

AND STORAGE

Chain Bucket Elevator (I) 1

Screw Conveyors (I) 3

Hot Material Silo (L) 1

Special Delivery Chain Conveyors for DBM (I) 2

FORMING PLANT


DBM Hopper (L) 1

Screw Conveyor (I) 1Classifier (I)

Recycled Material Conveyor (L) 1

Mixer (I) 1

Forming Press with Moulds (I) 2

Special Conveyors for Bricks (I) 2

Tunnel Driers (I) 2

Tunnel Firing Furnaces (I) 2

Product Coolers (I) 2

Product Conveyors (I) 2Milling & Finishing Equipment One Set

Palletizing Unit 2

Fork Lift 3

PACKING AND LOADING PLANT FOR MONOLITHIC

PRODUCT


Continued


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TABLE – 9



(Number)

Screw Conveyor (I) 1Vibrating Screen (I) 1

Row Packing Machine (I) 1

Sack Transporting Unit (L) 1

Return Plaster Hopper (L) 1

Flat Belt Conveyor (L) 1

Rear Truck Loading Unit (L) 1

Dust Exhaustion System for Packing Machine (L) 1

Compressor Installation (I) 1

OIL SUPPLY SYSTEM

Tank Filling equipment (L) 1

Pipeline (L) 1

Accompanying Heating (L) 1

Heavy Oil Vertical Tank (L) 1

Heating Registers (I) 1

Flooring Heating Coil (L) 1

Pump – Filter Group (L) 1

Final Preheater (L) 1

Fuel Oil Tank (L) 1

ELECTRICAL EQUIPMENT

440 V Low Voltage Main Distribution (L)

Emergency Power Control (L)

Control Installations (L)

Central Control Panel (L)

Current Supply & Distribution Materials (L)

Electric Controls (L)

Emergency Power Generator (L)MISCELLANEOUS

Gas Metering & Distribution (L)

W/ Shop Equipment (L)

Laboratory Equipment (I)

Fire-Fighting & Safety Equipment (L)

Continued


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CHAPTER 4

GOVERNANCE & MANAGEMENT STRUCTURE

4.1

GOVERNANCE STRUCTURE

Establishment and governance of a limited company (public or private) is

regulated by The Companies Ordinance, 1984 with amendments thereof, and

“Code of Corporate Governance”, issued by the Security and Exchange

Commission of Pakistan”.

Corporate governance is a set of institutional and market-based mechanisms that

encourage controllers of a company to maximize the value of the company to its

owners. The conduct of the corporation is a three-way process involving the board

of directors, top management, and the employees. At the core of corporate

governance is empowerment at all levels – shareholders, the board, and top

management. The law applicable to a company is the law of the country.

Principles and rules on corporate governance need to be laid down in the Articles

& Memorandum of Association (Incorporation) and the Regulations of Board ofDirectors.

The business of the company is to be managed under the directions of the Board

of Directors. The Board is responsible for establishing broad corporate policies

and for the overall performance of the company. The core responsibility of the

directors is to exercise their business judgment and act in what they reasonably

believe to be the best interests of the company.

Proposed corporate governance structure is presented in Chart -3.


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CHART - 3

PROPOSED GOVERNANCE STRUCTURE

The Board’s Corporate Governance Committee reviews the principles and rules

regularly in the light of prevailing best practices and forwards suggestions for

improvement to the full Board for approval.

The Board’s Corporate Governance Committee is responsible for considering

matters of corporate social responsibility and matters of significance in areas

related to corporate public affairs and the company’s employees and stockholders.

The Board’s job should be to create and maintain a structure that will ensure

harmony and cooperation between management and the employees in pursuing

the goals and objectives of the organization rather than simply rubber-stamping

the actions of management.

The CompanyShare-Holders

Board of Directors

Chairman

Chief Executive

Officer

CorporateGovernanceCommittee

Corporate AuditCommittee

General

Manager

Operation

ManagerAdmin &

Procurement

ManagerMarketing

Manager

Finance

Internal Auditor& Quality

Controller orAssurance


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The Board’s Audit Committee will have two fundamental responsibilities.

Internally, it will oversee the annual external audit to ensure the accuracy and

integrity of the financial statements as required by legislation. It will also ensure

that there are no breakdowns in corporate governance rules and procedures,

including the rules of ethical conduct and internal control. The Audit Committee

also would be the practical monitor for collecting information regarding corporate

misconduct and encouraging those with such information to come forward.

4.2 MANAGEMENT STRUCTURE

The paramount duty of the Board of Directors is to select a Chief Executive

Officer and to oversee the CEO and the other senior management in the

competent and ethical operation of the company.

The Board should identify, and periodically update, the qualities and

characteristics necessary for an effective CEO of the company. With these

principles in mind, the Board should periodically monitor and review the

development and progression of potential internal candidates against these

standards.

The Chief Executive Officer (CEO) is in charge of the day-to-day management of

operations, and is responsible for ensuring that the company and management

functions are organized, run and developed in accordance with the law, Articles of

Association and decisions adopted by the Board, and the Annual General Meeting

of the Shareholders.

The management structure, presented in Chart-4, comprises of Operational

Division located at the Plant and Audit, Administration & Procurement, Finance

and Marketing Departments at Corporate Office.


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CHART - 4

PROPOSED MANAGEMENT STRUCTURE

The structure is characterized by a clear assignment of responsibilities as well as a

reduced number of interfaces.

The selected Chief executive is responsible for delivering policy and performance

for customers, society, staff and the business.

Requirement of manpower is given below:

Chief ExecutiveOfficer

General Manager

Operation

HSE Engineer

Maintenance

ManagerProduction

Manager

Technical Manager &

Quality Assurance

ManagerFinance

InternalAuditor

Manager

MarketingManager Admin& Procurement

Accounts &Administration


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TABLE - 10

CORPORATE OFFICE – MANPOWER REQUIREMENT

Description Nos.

Chief Executive Officer 1

Admin. Manager 1

Finance Manager 1

Internal Auditor 1

Assistants 9

Marketing Manager 1

Clerks 10

Peons / Others 8

Total 32

TABLE - 11

PLANT – MANPOWER REQUIREMENT

Description Nos.

General Manager 1

Production Manager 1

Tech. Manager 1

Maintenance Manager 1

Admin. / Accounts Officer 1

Senior Engineers 3

Shift Engineers 4

Senior Operators/Technicians 24

Operators / Technicians / Chemist 60

Helpers, Drivers, etc 40

Total 136

All loading / unloading of material, security, janitorial, and other services are

proposed to be out sourced.


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CHAPTER 5

FINANCIAL EVALUATION

5.1 CAPITAL COST

The total capital cost of the project is estimated at Rs. 856.402 million inclusive

of net initial working capital of Rs. 26.078 million. The foreign currency

requirement includes: imported plant & machinery; spare parts; design, know-

how, & engineering; training fees; and supervision during construction and

commissioning. Summary of capital cost is given below:-

TABLE – 12

ESTIMATED CAPITAL COST

(Rs. in thousand)

ItemsLocal

Currency

Foreign

CurrencyTotal

Land & Land Development 17,000 - 17,000

Civil Works & Buildings 41,586 - 41,586

Plants & Machinery 60,000 400,000 460,000

Know-How & Engg. 8,000 62,000 70,000Custom duties, GST and Surcharges 106,000 - 106,000

I/L Fees, Clearance, Handling, Etc. 4,060 - 4,060

Installation & Erection 36,800 - 36,800

Vehicles, Furniture & Fixture etc 9,000 - 9,000

Pre-Operation & Startup Exp. 11,167 - 11,167

SUB TOTAL 293,613 462,000 755,613

Interest During Construction 37,781 - 37,781

Contingencies 36,931 - 36,931

TOTAL FIXED COST 368,325 462,000 830,325

Net Initial Working Capital 26,078 26,078

TOTAL CAPITAL COST 394,402 462,000 856,402

Capital cost has been determined on the basis of the following factors:


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LAND AND LAND DEVELOPMENT

Twenty (20) acres of land required for the plant will be purchased at Rs.

700,000/acre, inclusive of development cost. Rs. 3.000 million has been provided

for the registration, legal and development costs. The total value of land has beenworked out Rs. 17.000 million

CIVIL WORKS AND BUILDINGS

The cost of buildings and civil works has been determined at Rs. 41.586 million

as detailed in Table 13 below:

TABLE - 13

CIVIL WORKS & BUILDINGS

DescriptionArea

(Sq. ft)

Rate

Rs./Sq. ft

Total

Amount Rs.

Production Building 60,000 500 30,000,000

Workshop 3,150 600 1,890,000

Laboratory 600 700 420,000

Offices 3,500 700 2,450,000

Canteen 600 700 420,000

Mosque 625 650 406,250

Water Storage, Lump sum 1,500,000

Boundary Walls, Roads, etc. 4,500,000

Total 41,586,250

PLANT AND MACHINARY

The total cost of plant and machinery has been estimated at Rs. 460.000 million,

out of which Rs. 400.000 million are in foreign currency and Rs. 60.000 million

in local currency.

KNOW-HOW, SUPERVISION & ENGINEERING FEES

Rs. 70. 000 million has been allocated for Know-how, Engineering and

Process License Fee.


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CUSTOMS DUTIES & GST

It is estimated that Rs. 106.000 million will be spent as customs duty and general

sales tax for the project. Detail is as under:

- 10% Importation Cost Rs. 40.000 million

- 15% G. Sales Tax on duty paid

Value of equipment & machinery Rs. 66.000 million

Total Rs. 106.000 million

INSTALLATION & ERECTION COSTS

The total cost of erection and installation of machinery and plant for the project

has been estimated as Rs. 36.800 million.

VEHICLES AND FURNITURE & FIXTURES

The total cost of vehicles and furniture and fixtures has been estimated at

Rs. 9.000 million.

PRE -OPERATION & STARTUP EXPENSES

The estimated cost of Rs. 11.167 million under this item is to cover salaries and

wages, loss of product and use of POL during trial operations, and other

overheads like bank commission, court fees, etc. during project’s implementation

and start up.

INTEREST DURING CONSTRUCTION

It is estimated that the plant will be erected and ready to start within 18 months

and weighted average loan period will be 10 months for loans. The financial

charges during construction period are capitalized. Total financial charges during

construction are estimated at Rs. 37.781 million.


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CONTINGENCIES

An adhoc amount (@ 5%) of Rs. 36.931 million has been allocated to meet

unforeseen circumstances or requirements.

WORKING CAPITAL

The net initial working capital requirement on account of the stock of raw

material, finished goods, material in process, etc., is estimated at Rs. 26.078

million.

FINANCIAL STRUCTURE.

The financial structure of the project on the basis of debt/ratio of 60:40 is shown below:

- Total Loans = Rs. 515.841 million

- Total Equity = Rs. 342.561 million

5.2 PROJECTED PROFIT & LOSS ACCOUNTS

This Profit & Loss Account has been developed for 5 years of operation and is

presented in Table 14. The project is expected to earn profit from first year of

operation.


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TABLE – 14

PROJECTED PROFIT & LOSS ACCOUNT

(Rs. in thousand)

Description Year 1 Year 2 Year 3 Year 4 Year 5

Capacity Utilization 50% 60% 70% 80% 90%

Production / Tonnes 10,000 12,000 14,000 16,000 18,000

SALES REVENUE 380,000 456,000 532,000 608,000 684,000

Less: Costs of Mfg.- Raw Materials 67,500 81,000 94,500 108,000 121,500- Packing Material 6,000 7,200 8,400 9,600 10,800- Wages & Salaries 31,488 31,488 31,488 31,488 31,488- Utilities 54,720 63,576 72,433 81,289 90,145- Repair & Maintenance 18,465 22,158 25,851 25,851 25,851

- Depreciation 80,014 80,014 80,014 80,014 80,014

258,188 285,437 312,686 336,242 359,798

Add : Opening Inv. 11,736 11,736 12,974 14,213 15,284Less : Closing Inv. 11,736 12,974 14,213 15,284 16,354

COSTS OF GOODS SOLD 258,188 284,198 311,447 335,171 358,727

GROSS PROFIT 121,812 171,802 220,553 272,829 325,273

OPERATING EXPENSES :

- Admin. Salaries 10,502 10,502 10,502 10,502 10,502- Admin. Expenses 16,796 16,796 16,796 16,796 16,796- Insurance. Rents, Etc. 7,386 7,386 7,386 7,386 7,386- Marketing & Dist. Exp. 7,600 9,120 10,640 12,160 13,680

TOTAL OPERATING

EXPENSES 42,285 43,805 45,325 46,825 48,365

OPERATING PROFIT 79,528 127,997 175,228 225,984 276,908

Financial Charges 52,694 49,010 44,040 39,057 34,073

PROFIT BEFORE W.P.F. 26,833 78,987 131,188 186,927 242,835

- W.P.F. 1,878 5,529 9,183 13,085 16,998

PROFIT BEFORE TAXES 24,955 73,458 122,005 173,843 225,836

- Income Tax 8,734 25,710 42,702 60,845 79,043

NET PROFIT 16,221 47,748 79,303 112,998 146,794

Retained Earnings 16,221 47,748 79,303 112,998 146,794

Retained Earnings B/F - 16,221 63,969 143,272 256,269

CUM RETAINED EARNINGS 16,221 63,969 143,272 256,269 403,063


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5.3 PROJECTED CASH FLOW STATEMENT

The projected cash flow is shown below in Table -15:

TABLE - 15PROJECTED CASH FLOW

(Rs. in thousand)



SOURCE OF FUNDS:

- Operating Profit 79,528 127,997 175,228 225,984 276,908

- Add Back : Depreciation 80,014 80,014 80,014 80,014 80,014

FUNDS FROM OPERATIONS 159,542 208,011 255,242 305,998 356,922

TOTAL SOURCES OF FUNDS 159,542 208,011 255,242 305,998 356,922

APPLICATION OF FUNDS:

- Repayment of Loans

- Long Term Loan - 51,384 51,384 51,384 51,384

TOTAL REPAYMENTS - 51,384 51,384 51,384 51,384

- Financial Charges 52,694 49,010 44,040 39,057 34,073

- W.P.F. 1,878 5,529 9,183 13,085 16,998

- Taxes 8,734 25,710 42,702 60,845 79,043

- Inc./(Dec.) in Working Capital - 2,983 2,983 2,418 2,418

- Replacement of Vehicles - - - - 10,062

TOTAL APPLICATION 63,307 83,232 98,908 115,404 142,595

Cash Surplus/(Deficit) 96,235 73,395 104,950 139,210 162,943

Surplus/(Deficit) B-F - 96,235 169,629 274,579 413,789

CUMULATIVE CASH

SURPLUS 96,235 169,629 274,579 413,789 576,732


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5.4 PROJECTED BALANCE SHEET

The projected balance sheet of the proposed project are shown in Table 16 below:

TABLE – 16PROJECTED BALANCE SHEETS

(Rs. in thousand)



ASSETS:

- CURRENT ASSETS:

- Raw Material 3,864 4,636 5,409 6,182 6,955- Packing Material 273 327 382 436 491

- Work-In-Progress 782 865 948 1,019 1,019

- Finished Goods Inv. 11,736 12,974 14,213 15,284 16,354

- Accounts Receivable 23,472 25,949 28,426 30,567 32,709

- Cash 102,569 176,534 282,054 421,666 585,012

TOTAL CURRENT ASSETS 142,695 221,286 331,432 475,155 642,611

FIXED ASSETS

- Land 17,000 17,000 17,000 17,000 17,000

- Building & Civil Works 46,496 46,496 46,496 46,496 46,496

- Plant & Machinery 756,766 756,766 756,766 756,766 756,766

- Vehicles, Fur., Fix. 10,062 10,062 10,062 10,062 10,062

TOTAL FIXED ASSETS 830,325 830,325 830,325 830,325 830,325

Less: Accum. Depreciation 80,014 160,028 240,042 320,056 390,007

NET FIXED ASSETS 750,311 670,297 590,283 510,269 440,317

TOTAL ASSETS 893,006 891,583 921,715 985,424 1,082,929

LIABILITIES & OWNER’EQUITY

- CURRENT LIABILITIES:- Accounts Payable 9,463 10,268 11,074 11,879 12,684- Short-term Borrowing 10,920 12,328 13,735 15,026 16,316

TOTAL CURRENT

LIABILITIES 20,383 22,596 24,809 26,905 29,000


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TABLE – 16 (Continued)

PROJECTED BALANCE SHEETS

(Rs. in thousand)


LONG TERM LIABILITIES

- Long Term Loan 513,841 462,457 411,073 359,689 308,305

TOTAL LONG TERMLIABILITIES 513,841 462,457 411,073 359,689 308,305

TOTAL LIABILITIES 534,224 485,053 435,882 386,593 337,305

OWNERS’ EQUITY:

- Paid – Up Capital 342,561 342,561 342,561 342,561 342,561

- Retained Earnings 16,221 63,969 143,272 256,269 403,063

TOTAL OWNERS’ EQUITY 358,782 406,529 485,833 598,830 745,624

TOTAL LIABILITIES AND

OWNERS’ EQUITY 893,006 891,583 921,715 985,424 1,082,929

5.5 INTERNAL FINANCIAL RATE OF RETURN

The Internal Financial Rate of Return for the project has been determined at

22.14%.

5.6 PAYBACK PERIOD

The payback period has been calculated as 5.20 years.


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CHAPTER 6

CONCLUSIONS

At present, the international refractory market is almost stagnant and likely

increase in world demand will be supplied through large capacities in China,

Turkey and Russia. Export potential for refractory products from Pakistan is

negligible. Considering the extent of the magnesite deposit at Kumhar, NWFP, it

has been recommended that the plant should be located in Haripur District of

NWFP. Some extraction is already carried out from this deposit on regular basis

at an average of 4,000 tonnes per annum. The deposit has been leased out to

PIDC. It is recommended that the lease should be taken over by the proposed project’s sponsors.

The pre-feasibility has not considered the investment cost and operation of

quarrying/mining of magnesite deposit at Kumhar. It is recommended that the

sponsors should consider operating the quarrying/mining operation as part of the

project, for which a separate detailed feasibility study would be required.

If the magnesite deposit operation is taken over by the sponsors then the option of

location of the refractory plant near the deposit needs to be investigated.

It is recommended that the option of producing other materials or products from

magnesite needs to be studied. The proposed refractory project is viable in stand-

alone state; additional product will provide diversity of marketing & operation,

and improving project viability.

The refractory material and products has demand for varying quality and sizes,

but all demand is institutional and has to be tailor-made for each end-user. A

thorough marketing effort will be necessary.


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ANNEXURE 1

PAKISTAN - A PROFILE

INTRODUCTION

Pakistan is located in South Asia. It borders Iran to the southwest, Afghanistan to the

northwest, China to the northeast and India to the east. The Arabian Sea marks Pakistan’s

southern boundary.


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The total area of Pakistan is 796,095 square kilometers and the country is divided

administratively into four provinces – Balochistan, North-West Frontier Province, Punjab

and Sindh – and numerous federally administrated areas. The disputed territory of Azad

Jammu & Kashmir lies to the north of Punjab.


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Pakistan has a diverse array of landscapes spread among nine major ecological zones

from north to south. It is home to some of the world’s highest peaks including K-2 which

at 8,611 meters above sea level is the world’s second highest peak. Intermountain valleys

make up much of the North-West Frontier Province, while the province of Balochistan in

the west is covered mostly by rugged plateaus. In the east, irrigated plains along the Indus

River cover much of Punjab and Sindh. In addition, both Punjab and Sindh have deserts,

Thal, Cholistan and Thar deserts respectively.

Most of Pakistan has a generally dry climate and receives less than 250 mm of rain per

year. The average annual temperature is around 27oC, but temperatures vary with

elevation from -30oC to -10oC during cold months in the mountainous and northern areas

of Pakistan to 50oC in the warmest months in parts of Punjab, Sindh and the Balochistan

Plateau. Mid-November to February is dry and cool; March and April bring sunny spring,

May to July is hot, with 25 to 50% relative humidity; Monsoons start in July and continue

till September; October- November is the dry and colourful autumn season.

Pakistan had an estimated population in 2005 of 160 million, 40% of this population was

less than 15 years of age. The major cities of Pakistan and their estimated populations

are; Karachi (16.0 million), Lahore (8.0 million), Faisalabad (6.0 million), Rawalpindi

(5.0 million), Multan (4.5 million), Hyderabad (3.0 million), Gujranwalla (1.8 million)

Peshawar (1.6) and Quetta (0.85). Islamabad, the Capital of the country, has a population

of around 750,000.

According to the 1973 Constitution, Pakistan is governed under a federal parliamentary

system with the President as head of state and a Prime Minister as head of government.

The legislature, or parliament, consists of the Lower House (National Assembly) and the

Upper House or Senate. Members of the National Assembly are directly elected for five-

year terms.

Executive power lies with the President and the Prime Minister. The Prime Minister is an

elected member of the National Assembly and is the leader of the majority party in the


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These roads account for only 3.5% of Pakistan’s entire road network but cater for 80% of

the commercial road traffic in the country. Improvement and extension of the existing

network is, therefore, essential to develop remote areas and provide better connection

between the economic centers of Pakistan. In addition a first class road network is

essential if Pakistan is going to connect its all-weather Arabian Seaports with the

landlocked Central Asian Republics and Western China. The Government has initiated

work on the North-South Trade Corridor with planned investment of over US$ 60 billion.

In order to further speed up the development of the road network, the Government is

actively seeking the participation of the private sector to implement road projects on a

Build-Operate-Transfer (BOT) basis. A number of projects are currently being

implemented under the BOT concept and others are in the identification stage. These

BOT projects cover the construction of new roads as well as the upgrading of existing

roads.

Pakistan has about 1062 km of coastline on the Arabian Sea running from the Indian

border to the Persian Gulf. The Karachi Port is the premier port of Pakistan and is

managed by the Karachi Port Trust (KPT). Karachi port handles about 75% of the entire

national cargo. It is a deep natural port with a 11 km long approach channel to provide

safe navigation up to 75,000 DWT tankers, modern container vessels, bulk carriers and

general cargo ships. The Karachi Port has 30 dry cargo berths including two Container

Terminals and 3 liquid cargo-handling berths. KPT intends to cater for 12-meter draught

ships, which are the most widely used container vessels. In order to facilitate

accommodate and fast turnaround time of mother vessels, the KPT is offering to the

private sector the opportunity to develop a terminal on BOT basis. In addition KPT has

plans to develop a Cargo Village on 100 acres. This Cargo Village shall serve as a

satellite to the port, integrating container, bulk and general cargo handling as well as

providing processing plants for perishable exports. With direct connection to the National

Highway Network, as well as National Railways Network the cargo village shall also

alleviate the problem of upcountry trade with cost effective storage/handling services in

the vicinity of the port. A master plan is under preparation and all the units within the


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village shall be allocated to the private sector on BOT and Build-Operate-Own (BOO)

basis within the next year.

Pakistan’s second Sea Port, Port Qasim is located 50 kilometers to the South East of

Karachi. It is the Country’s first industrial and multi-purpose deep-sea-port. Currently it

is handling 23% of Pakistan’s sea trade. Port Qasim has attractions and advantages for

investment both in port facilities and port-based industrial development. Port Qasim

Authority from the very beginning has actively sought the help of the private sector in the

development of its port structure. Some of the projects which have been completed with

private sector involvement include; dedicated oil terminal developed in private sector on

BOO basis at a cost of US$ 87 million to cater for oil imports with a handling capacity of

9 million tons per annum, a container terminal developed by P&G Group, Australia, at a

cost of US$ 35 million on BOO basis, for chemicals imports a facility in collaboration

with Vopak of Netherlands on BOT basis at a cost of US$ 67 million. Some of the

projects which the Port plans to develop with the private sector on the basis of BOT

include; establishment of a second oil jetty, establishment of a dedicated coal and

clinker/cement terminal and the establishment of a marine workshop and dry dock

facilities.

To encourage industrial development the Port Qasim Authority has reserved 300 acres of

land on a prime location in the Eastern Industrial Zone (EIZ) for allotment of plots to

Overseas Pakistanis to induce and encourage foreign investment and provide them an

opportunity to establish small size industries in Pakistan. Each plot is measuring 100

square yards at a very low cost on attractive terms and conditions. This is in addition to

existing 1,200 acres of industrial zone which houses a number of auto assemblers such as

Toyota, Suzuki, Chevrolet and the Textile City spread over 1,250 acres.

The Pakistan Merchant Marine Policy 2001, has deregulated the shipping sector and aims

to attract investment; both local and foreign, public and private, by offering a range of

incentives. The new policy in addition to offering duty-free import of ships, offers many

new incentives to local and foreign investors including Income Tax exemption till 2020.


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Pakistan's annual seaborne trade is about 45 million tons, just 5 per cent of which is

carried by the national carrier Pakistan National Shipping Corporation (PNSC), the

country's annual freight bill surpasses staggering $ 1.5 billion which is causing a colossal

drain on foreign exchange resources, the marine policy aims to reverse this situation to

some extent.

The Shipping Policy aims to revive and augment national ship-building/capacity to meet

20 per cent ship construction requirements of the country merchant marine and entire

requirements of support and ancillary crafts. The policy also aims to rejuvenate and

expand the ship repair potential to undertake the entire range of repairs and maintenance

of 50 per cent of Pakistani Flag ocean-going vessels and all ancillary sectors. The new

Shipping Policy offers many financial incentives for potential investors. It offers tax

exemptions and concessional tax measures backed by assurances. It also aims at

simplifying the rules by deregulating the sector.

To begin with, ships and floating crafts — tugs, dredgers, survey vessels, and specialized

crafts — purchased or bareboat chartered by a Pakistani entity flying the Pakistani flag

will be exempt from all import duties and surcharges till 2020. The policy accords shop-

building and ship-repair the status of an industry under the investment policy which is

entitled to all incentives contained therein.

To attract foreign investment, all port and harbor authorities in Pakistan will allow all

ships and floating crafts 10 per cent reduced berthing rates when the same are berthed for

purposes of repair and maintenance. Under the Policy, ships and all floating crafts are

considered bonafide collateral against which financing can be obtained from Banks and

Financial Institutions subject to policy of the financial institution.

There are 42 airports in the country managed by the Civil Aviation Authority (CAA). Out

of these, five airports; Lahore, Karachi, Islamabad, Peshawar and Quetta are international

airports. The CAA is planning to develop a new international airport at Islamabad for


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which land has been acquired and it is planed to fund the US$ 250-300 million on BOT

basis.

The Pakistan International Airlines (PIA) is the national flag carrier flying to 46

international and 36 local destinations. Other Pakistani airlines in the private sector

include, Aero Asia, Air Blue, Shaheen Air International and Pearl Air. In addition to

direct flights from most parts of the world, Pakistan can also be accessed through the

regional hubs of most international airlines, which operate through airports in the Gulf

countries.

The Pakistan Railways provides an important nation-wide mode of transportation in the

public sector. It contributes to the country’s economic development by catering to the

needs of large-scale movement of freight as well as passenger traffic. Pakistan railway

provides transport facility to over 70 million people and handles freight above 6 million

tons annually.

The Pakistan Railways Network was based on a total of 11,515 track kilometers

(including track on double line, yard & sidings) at the end of 2001-2002. This network

consists of 10,960 kilometers of broad-gauge and 555 kilometers of meter gauge.

Pakistan Railways has launched modernization activity with rehabilitation and

improvement plan both for its infrastructure and rolling stock including prime mover.

The ongoing schemes worth over US$ 500 million are progressing satisfactorily and have

brought a radical improvement in service. The railways is gearing up to the challenge of

providing improved connectivity to Iran, India, and link the upcoming Gwadar Port to

Afghanistan and onward to Turkmenistan.

Pakistan Telecommunication Limited (PTCL) dominated Pakistan’s telecommunications

market for the fixed-line services. Today the Pakistan Telecommunication Authority

(PTA) has the role of a regulatory body and is responsible for implementing the telecom

deregulation policy. For a long time, Pakistan lagged behind in the region as far as


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telecom access is concerned. With cellular mobile revolution taking place, Pakistan's

tele-density currently stands at 10.37%, with gross subscribers base of fixed (5.05

million) as well as mobile subscribers (10.54 million) touching 15.59 million for a

population of 160.0 million.

The Telecomm Sector has attracted the largest FDI in Pakistan with approximately

US$ 1.5 billion having been invested in 2005.

At the moment there are six companies providing mobile phone services in Pakistan, with

the largest of them, Mobilink (owned by Orascom Telecom) with nearly 50% of the

market share, other foreign players include MCE, Telenor and Warid.

In addition Wateen Telecom, a subsidiary of UAE-based Al Warid Telecom, has

launched a US$ 75.0 million project to lay an optic fiber optic backbone across the

Country. The first segment of the project of 800 kms would stretch from Karachi to

Rahimyar Khan and would be further linked with the rest of the country up to Peshawar

through 63 cities. When completed the backbone would be 5,000 kilometers, long

spanning the length and the breadth of Pakistan and would facilitate both the corporate

and residential segments, providing voice and high-speed data services on a converged

wireless network.

Pakistan in 2005 had 70 operational providers of internet services across 1,900 cities and

towns of the Country catering to about 2 million subscribers. In addition the Government

has reduced bandwidth rates for high speed board band internet connections and the

number of subscribers in this category is expected to grow to 200,000 by end of 2006.

AGRICULTURE

Agriculture accounts for nearly 23 percent of Pakistan’s national income and employs 42

percent of its workforce. Nearly 68 percent of the population lives in rural areas and is

directly or indirectly dependent on agriculture for their livelihood. Livestock is the single

largest contributor 47 percent share in the national income. The major crops; cotton,


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wheat, sugarcane and rice contribute 37 percent to agriculture while the minor crops like

oilseed, spices, onion and pulses contribute another 12 percent.

Pakistan is the fifth largest producer of milk in the world. The per capita availability of

milk at present is 185 liters, which is the highest among the South Asian countries. Milk

production in Pakistan has seen a constant increase during the last two decades. The

production has increased from 8.92 million metric tons in 1981 to 28 million metric tons

in 2005. There is a large and untapped potential in the dairy industry. With a population

of 160 million, a significant demand for dairy products exists in Pakistan. There is a need

for establishing modern milk processing and packaging facilities based on advanced

technology to convert abundantly available raw milk into high value added dairy

products. In addition, with improved conditions for milk pasteurization, availability of

chilled distribution facilities and consumer preference for the low cost pasteurized milk,

the sector provides unique opportunity for investment in establishing pasteurized milk

production plants.

There is also great scope for establishing related industries in the form of an efficient

milk collection system and refrigeration & transportation facilities. The sector offers

opportunity to foreign investors for establishing a joint venture for the production of

dairy products, particularly dried milk and infant formula milk for which great demand

exists in the neighboring countries like Afghanistan, Iran, UAE and Saudi Arabia.

Out of the 28 million tons of milk produced per

Magnesite Refractories Production

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