SUMMARY

This project objective is to setup Granite Quarrying and processing plant in Harar city. The
plant would process (cut to predefined sizes and polish) raw blocks and produce marble strips/tiles
and slabs. The project would not only focus the construction industry and demand for marble in
the country, but also export market opportunities in to Middle East as well as even Europe market.

There is a great demand for a fully equipped marble processing plant. The new plant could not
only explore the construction industry within the country which is on a boom since past 10 years,
but could also fulfill the orders from other countries. Finished goods include tiles, slabs and strips.
The unit would have 100% capacity after 5 years to process annually around 60,000 m 2 of Gran-
ite, and 45,000 m2 Terrazo tiles.

The total capital cost of the project is Birr 27,471,600 (Twenty seven million four hundred
seventy one thousands and six hundred birr) of which birr 23,120,660 ( twenty three million
one hundred twenty thousands and six hundred sixty birr) will be required for fixed invest-
ments such as machineries, construction and civil works, while the remaining birr 4,350,940
(four million three hundred fifty thousand and nine hundred forty birr )will be for working
capital. The main material for processing and quarrying is consumables which is drilling bits, cut-
ting discs & diamond segments and polishing abrasives & resins which are used in different stages
of production and from the first phase quarrying produce blocks and delivered to processing plant
to further transforming blocks to slabs and polishing. The main input raw materials Granite are
available in abundance in the Harar area. The selected for Granite quarry which is resource avail -
able is around Harawea which is 8 km from harar town, it is asphalt road to Jig-jiga and Berbera
port and the Total reserve or deposit estimated for Granite reserve is 2,750,000 m 3, and for the
production of the above capacity ( 60,000 m2 Granite ) we need 2,400 m 3 of Granite block and the
reserve can yield for more than 1,000 years for a given capacity of production.
 The plant would process in two steps quarrying which is extracting block from the host rocks
and then block transported to processing unit which block is cut to predefined sizes and polish,
and produce strips/tiles and slabs. The project would not only focus the construction industry and
demand for marble within the country, but also in the export market as well. Once the facility
starts at its operation, it could export and supply marble steps, strips, tiles, and slabs to Middle
East, Africa and Europe markets

Granite and marble processing is gaining popularity due to increase in its usage in construc-
tion industry. Today almost all the modern architectural designs of houses and plazas include the
final touch of beautiful shades of Granite and marble in exterior as well as interior portions. There
are large deposits of superior quality limestone and granite in the area. There is also the possibility
of getting additional quarry site for variety color production and supply optional colors to the mar-
ket. The current selection of quarrying and processing machines which modern technique applica-
tion reduce the wastage and improve the production capacities and profitability.

The project has the following advantage for the country and economy

 Add some value in mining industry of the country as well boosts economy of the harari na-
tional people’s regional state.
 The project earns foreign currency to the country amount 3 million US Dollars every year
when operated at full capacity.
 The growing housing industry in Ethiopia as well as in the world increases the marketing
demand of the marble & granite.
 Enhance the standardization of the products and experience modern production techniques.
 Potential of the project. Housing industry in the region is estimated to be growing.
 Have back ward linkage to mining industry and technology transfer to the country and for-
ward linkage to the Construction industry and also create employment for 66 citizens

The project target market out let is 80% for export (48,000m 2) and 20% (12,000m2) for local
market. And generate over birr 40 million when operation is at full capacity and the profit to total
sales ratio is 45.5 during the first year and is estimated to grow to 49.6% in the second year of
operation. Likewise, net profit to equity ratio (Return on equity) is found to be 80% within two
years of its commencement. This, therefore, shows that the project is among the very few lucrative
investment opportunities in the country

1. Product Descriptions and Applications

Introduction
The term dimensional stone is defined as, “a natural building stone that has been selected, cut
and trimmed to specified shapes or sizes with or without one or more mechanically dressed
surfaces”. The definition applies to rough blocks, slabs and polished material used in building and
construction and monument industries. Stones that are finished to specific dimension and shape
are considered as dimension stone. It can be defined as natural rock material quarried for the
purpose of obtaining blocks or slabs that meet specifications as to size and shape.
Dimension stone, sometimes called ornamental stone for the basic reason that it gives a
romantic beauty to the fascinating architects of modern buildings. Color, grain size, texture and
pattern, and surface finish of the stone are normal requirements.
Durability, strength, and the ability of the stone to take a polish are also other important
selection criteria.
Natural stone is the oldest construction material used by man. From ancient times until today,
natural stones have played an important role in Ethiopian industry and architecture.

1.1, Product Descriptions

In the framework of this study the ‘dimension stones sector’ implies the reference to the
mining, processing and commercialization of all rocks extracted in the form of blocks and
manufactured to obtain elements having a well-determined geometric shape to be utilized as
building and ornamental materials.
In terms of nature of stones, the dimension stones sector basically consists of two main classes
of rocks whose definition is to be intended on commercial terms, in accordance to the UN
international classification of exchanged goods1:

• “Calcareous material” or, conventionally, “Marble” comprising the whole class of carbonate
rocks anable to sawing and polishing, beyond the limits of the mere lithologic characterization.
• “Siliceous material” or, conventionally, “Granite” including the whole set of eruptive rocks
having granular structure and poly-mineral composition, irrespective of the content of quartz.
These two classes represent the large majority of ‘dimension stones’, the other materials, such
as slate and limestone, having a much more limited importance in terms of quantity and value of
production.
The world dimension stone industry has expanded since the early 1990s with production
growing by about 7.5% and trade by almost 9% per year. This demonstrates the prosperity of the
sector if compared to the average growth rate of the whole economic system and trade. This
positive trend has been continuous, with the only exception of 1998, confirming the strategic
character of the granite, marble and general dimension stones sector. Such a long lasting tendency
is linked to the natural global expansion of the construction sector, owing to an extraordinary
development of the world population, which passed from 0.75 billion units at the beginning of last
century to the actual 6.2 billion and will reach 9 billion by 2025, according to the forecasts of
United Nation Organization. As a consequence, the construction sector is bound to keep growing,
also benefiting from the world socio-economic development, leading to an increasing demand, in
quantity and quality, for housing and building in general. The very large yet untapped abundance
of world natural reserves of marble and granite, and their outstanding technical features, qualify
such construction materials as an important resource for the construction sector for the years to
come.
Nevertheless other factors equally impacted on the positive dimension stone sector
performance, such as technical development and, last but not least, a political will, now
consolidated in many countries, to promote the sector within the sphere of national and local
strategies. It is interesting to mention that, after the United Nation Organization recommendation
to governments concerning potentialities of the stone sector in supporting social and economic
development, some countries decided to reclassify these materials as first category goods (as was
the case of Bulgaria, Nigeria, Paraguay and more recently India).

The driving force in the sector is trade, involving export of about 25 million tons in 2003,
equivalent to about 460 million square meters of finished products of conventional thickness of cm
2. More than 55% of world consumption concerns materials quarried in different countries from
those of installation. The import-export trade of materials, especially finished products, has grown
geometrically over the last 10 years, and the emerging production countries have seen their
markets expand globally.
However the main four stone countries - China, India, Italy and Spain – still represent about 53
% of the total production, as well as they account for the 64% of the global export figure (data
2003), confirming that the industry concentration is still very strong and that new countries have
to face considerable competition.2. DION TONE USES AND MAIN PRODUCTS
The trends in global utilization of dimension stone materials is characterized by a predominant
application in floors, especially indoor, and, to a lesser extent, for cladding, due to the severe
competition exerted by alternative ceramic products (tiles and vitrified stoneware). Accordingly
there is a good demand for tiles, especially marble for interior flooring owing to its aesthetic
features, whereas granite is chiefly used for exterior cladding and in the funerary art.
Since 1996, world consumption of dimension stone progressed from 25 million tons to 44 million
tons (that is from about 480 million m2 equivalent to over 800 million m2 equivalent) for an
average annual growth of 7.5%.

1.2, Product Application

The main uses of dimensional stone is for Floors and paving, External wall cladding, Steps,
Internal cladding, Special works, Structural works, and Memorial art
The final uses of stones have been recently characterized by a gradual increase in special
innovative uses (Pullman-tops, bathroom furnishing, kitchen surfaces, mosaics) favored by
technical development. In the meantime, other traditional uses as flooring and exterior coverings
have lost part of their market share mainly due to strong competition made by alternative materials
such as ceramic tiles. Anyway flooring that implies a simpler technology than other uses accounts
for over a third of world stone consumption with about 16 million tons (equivalent to 300 million
square meters at conventional thickness of 2 cm). It is worth underlining that the development of
special processed materials accounts for an increasing part of the value added and consequently of
the employment of the sector. However at the same time those products require proportional
investments and financial resources.

In the past, besides mere decorative purposes, stone was essentially used in the form of cubic
 pieces for heavy self-supporting structures and for monuments. Today it is mainly employed in the
form of slabs of variable surface and thickness, applied to the supporting frame by means of
fastening devices: the stone element behaves as an active part of the system, giving a positive
contribution to the overall structural performance. According to modern building criteria, also
dictated by economic reasons, the design of constructive elements is developed in order to take
advantage of their resistance properties. In particular interest is growing towards the development
of lightweight building elements in which a thin layer of natural stone is associated to honeycomb
metal structures or other reinforcing materials. In such a context, employed materials must meet
very strict specifications, within the frame of internationally recognized rules and standards, so
that building materials can satisfy both their static and aesthetic function.
Concerning the chromatic feature, grey, beige, white and pink represent the large majority of
dimension stone global demand. However a strategic marketing effort has been made to promote
less recurrent colours (red, green, blue) especially in non-European countries.

2. Resource Potential and Marketing Study

2.1, Resource potential study
Granite has been processed and used by all civilizations in Axum. Since ancient times Marble
and granite has been used as an architectural decoration in order to beautify the floors and walls of
palaces, temples and public areas. The statues and monuments dating back to the Axumite
civilization, Greek and Roman amphitheaters, arenas and other works of art; the palaces, baths,
caravanserais, mosques and madrasas of the Seljuk Turks, and Ottoman mosques, minarets and
fountains all prove that marble has been extensively used.
The natural stone industry consists of basic stones such as marble, granite and other natural
building stones such as limestone, travertine, basalt, sandstone, serpentine, and slate. In addition to
these stone varieties.

In Harawwea, the area mapped is wholly occupied with granite plutonic intrusive rock of the
acid family composed of feldspar (orthoclase), quartz, and ferromagnesian minerals, mostly
biotite. Their grain size ranges trom medium to coarse grained. The color of the granite for is fresh
white have pale pinkish greydark grey tones and pink respectively and all are hard, compact and
massive.
Harawwea Granite Deposit
Location
The Harawwea granite deposit is located 8 km South-East of Harrar town, almost on the Harrar –
Jig-Jiga main road.
Access
The selected quarry for Granite block mining is lying with in the new road from Harar - Jig
Jiga and it is 8 kms from harar town and the village called harawwea, found under Sofi Waredas
of Harar.
Geology
The area mapped, 50,000m2, is wholly occupied with granite plutonic intrusive rock of the acid
family composed of feldspar (orthoclase), quartz, and ferromagnesian minerals,mostly biotite.
The Harawwea granite, on the surface attacked by weathering along the joints and cracks
formed large cuboidal blocks which rest on granite. This rounded convexity' of weathered granite
which is common all over the area, can be observed in any size from block to rounded knolls and
even elongated cliffs: Badly weathered basaltic rock, probably dyke rock, has been observed in
western Valley. Inclusions of country rock or mineral segregation or preferred orientation of
minerals have not been observed.

Provisional Volume Estimation

Provisional Volume Estimation and Recommendation
The thickness of the fresh granite can be estimated at this present work. However two figures, i.e.,
30 and 80 meters of thicknesses are tentatively assumed to give a rough idea as to the volume of
the granite deposit.
Taking 55 meters average thickness of the fresh granite, then we can have the following reserve
estimation of

Surface area = 50,000 m2 and Thickness = 55 m

Volume= Area x Thickness_ 50,000 m2 x 55 m = 2,750,000 m3
Considering the 1 m3 of block yield of 25 m2 slabs and the above production capacity, the
Granite block required to produce the 60,000 m2 slab is 2,400 m3 per annum.
Therefore the above reserve can operate for more than 1,000 years operation.
2.2, Marketing Study
Commercialization of dimension stones basically concerns two categories of products, both for
marble and granite:
• Raw material just as excavated or as merely trimmed into pieces/blocks or slabs
• Finished goods that have been processed and transformed into building elements ready for
installation (mainly cut –to-size elements, tiles and cubes) obviously raw material is acquired to be
subsequently processed into finished goods that represent the final use of the stone.
Methodology
The marketing study was conduct considering different parameters like: the market demand,
supply ability, selling price, production cost and quality standards required to compete in the
global product supplies.
Based on the above parameters the study was categorized in to two broader category and market
target.
1, local market 2, export market

1, local market
The local dimensional stone survey conducted by the local producers, manufacturing, importers
and the import data which acquired from custom office.
The first parts of survey is considering processing companies like ALEK Granite and terrazzo,
National mining company, which are the only producers of the granite to the local market and also
Sofomer marble, Ferdose marble, Ethio marble, Ali marble and Abdallah marble the above
companies are some of the processing industries that supply marble and granite to local market.
The second part of survey is the importers and the local dealers which are selling as a retailers
and which mostly having the direct know how and contact with the vast majority of the
consumers.
Among the importers the lion share import and sells of granite and marble was conducted by
Renaissance marble and granite company which even have edge cutter machineries and they
import bigger slab and further cut according to customer orders and need.
The retailers which mostly located in the meskel flower areas and also in areas which are
boosting construction movements like CMC and LEbu areas.
The output of this marketing survey can be summarized as follows.
a, price
The average selling price of Granite, marble and limestone is for processing company; granite
is selling at 1,200 brr per m 2 and 1,350 per m2 for 2cm and 3 cm thickness slab respectively. And
the marble was selling at 900 brr per m2 and 1,100 per m2 for 2 cm and 3 cm thickness slab
respectively. And for those the retailers are selling the granite and marbles by adding margins of
100-200 brr and for limestone the average selling price is around 1,000 brr, the imported marble
and granite was selling in two ways, the given standard size and the given thickness with per m2
value, this mostly in steps and risers of 150 cm linear with width of 34cm and the steps with 3 cm
thickness and risers of 2 cm thickness is selling at average of 1,200 brr per pcs, and with the
second type of average 1,600 brr per m2.
b, Delivery time
Most processing of marble will deliver within 1 months and importers can deliver if they have in
stocks and the retailers mostly takes 15 days to deliver. But for granite Alek granite can deliver not
less than 3 months and NMC(National mining Company) can deliver not less than 6 months, also
this delivery time for NMC depends on the orders on the hand and the projects on the subsidiary
companies like MIDROC etc. and sometimes it might take even 10 to 12 months to deliver.

The importing data analysis

The Ethiopian revenue and custom authority import data prevailed that with in the last five year
between 2010 to 2014 the granite imported to the Ethiopia in different countries.
Table, 2.2, Granite imported in previous 5 years
No. Granite imported Net weight in Kg C.I.F value in Brr
1 Granite 2014 18,837,207.42 206,179,620.4
2 Granite 2013 11,108,668.14 78,863,937.78
3 Granite 2012 7,229,510.11 52,031,874.06
4 Granite 2011 12,274,710.52 96,517,500.44
5 Granite 2010 3,503,354.83 17,554,844.42

Owing to the booming of construction industry in Ethiopia, the demand for granite has risen
sharply. Previously the demand for granite was mainly met through domestic producers. However,
despite growing opportunities for granite querying and processing businesses due to rapidly
expanding construction sector that has raised the demand for granite, the expansion in local
production and supply of granite is believed to be left far behind the expansion in its demand.
However, lack of official statistics in the volume of domestic granite quarrying has made this
analysis a bit difficult, but the above import data will help more on demand analysis that for the
last years the local market demand of granite and marble will be satisfied by importing of the gap,
based on the above conclusion the gap imported in the year 2014 from different countries are
206,179,620.4( two hundreds and six millions one hundred and seventy nine thousands and six
hundred twenty brr and forty cents in C.I.F cost) and 34,142,141.19 ( thirty four million one
hundreds forty two brr and eighteen cents C.I.F cost) are imported respectively and this shows
there is a very large gap to satisfy the local market demands.
2, Export market

This market survey gives an overview of the opportunities and threats that potential region for
export should be analyze before making a decision to export to the global market. It reviews the
following aspects:

a, Global Production and Consumption

“Dr. Carlo Montani’s statistical yearbook for the stone branch appeared in its 25th edition this
year. And, as always, the humble master of numbers had a pleasant flash-back at hand: Turn-over
of natural stone has been on the increase continuously world-wide for the last two and a half
decades, as has been stone consumption beating even the average rate of economic growth.

Despite the recession during the 2008/2009 crisis one could say, stone is not merely a material
with a long life span. It is a sure investment in times of economic uncertainty – at least the branch
seems to know how to negotiate the times of crisis. This is particularly interesting considering that
all the companies involved are small or medium-sized enterprises. There is no natural-stone-
„Industry“ with companies employing a staff of 1000 or more anywhere in the world.

Montani concentrated his flash-back on figures compiled in the last decade: net production of
natural stone was up by 7% per year, international trade by more than 10% on average. ‘‘

b, Middle East Stone: a new natural stone trade Target area

MENA-Region, that is Middle East and Northern Africa, are looking at a specialized
product for natural stone. The MENA-Region is promising in a number of ways, the area is
currently experiencing an unequalled building boom all of which can be classified as luxury
 projects. „Owing to the sweltering-hot climate, of the GCC, building without these materials (i.e.
granite, marble and ceramic) would be unthinkable.

Perhaps most visible is gulf countires are striving to create a reputation for first class luxury
tourism. The ever-present: the shopping centers and luxury dwelling complexes, e.g. Palm
Jumeirah Island are nothing short of spectacular. The target groups are the wealthy from all over
the world especially from the newly industrialized Asian countries.

Let us take a closer look at the GCC States. The Gulf Cooperation Council includes Kuwait,
Bahrain, Saudi-Arabia, Qatar, Oman, and the United Arab Emirates whose cooperation dates back
to 1981 and who in 2008 signed a Common Market Agreement.

2.3, Price structure

Different trade channels mean different export prices and margins for natural stone and natural
stone products. The market prices for natural stone and stone products are not set by any
(inter)national organizations or institutions. Prices are set in individual deals and contracts
between suppliers and buyers. The price the consumer pays generally consists of the following
components:

For the exporter price, the initial production costs can be divided into: fixed capital (land and
building, machinery, rent), working capital (labor, raw materials, utility costs, other contingency
costs) and government taxes (royalties to exploit the quarry). Then, value is added within the trade
channel from the logistics and services provided in this supply chain. These functions range from
distribution and repackaging to sawing and processing activities.
The margins for the exporter and the other intermediaries in the trade channel are difficult to
determine, because they are influenced by many factors, such as:

2. The size of the order (the larger the order, the smaller the margin);
3. The quality and exclusivity of the product (exclusive products allow for high margins);
4. Availability of the product and value Added deriving from the processing operations such as
cutting, sawing, polishing, carving etc… (a custom-made kitchen countertop will have a higher
margin than a standard tile).
5. The number of intermediaries in the trade channel;
 As an example, most of the polished granite tiles from India in the size of
(40 x free length x 1.5) are sold by the manufacturer in the price range of 25-35 euro/m 2, FOB.
Then the following margins usually apply through the trade channel:
Another important price development is the rising transportation costs of some like China.
The Chinese export economy is growing fast and this effect has an impact on container
transport. The cost of shipment has recently risen because of a shortage of space on the container
ships. And labor cost in china is somewhat risen due to the competition in the demand for and if
the above costs will rise then the production cost will also rise which affect the selling price to the
global market specially in Europe and MENA countries and makes our product more competent in
terms of price.
Despite the higher and rising current retail price of granite in both local & Export market,
considering sufficient margin for distributors and transportation cost, a factory-gate price for local
market will be of birr 750 per m2 for polished granite is recommended for the envisaged plant,
and for export market the current F.O.B price will be 25 USD/ m 2 will be considered and take for
this cost analysis purpose.

3. PRODUCTION PROCESS AND PLANT CAPACITY

3.1, PRODUCTION PROCESS

The successful and economical working of granite quarries and processing depends upon an
intelligent application of knowledge of the structure of the rock and its natural divisions in the
mass, as well as upon improved methods, tools, and machineries for quarrying. The topographical
location of the quarry and its relation to facilities for transportation are also important factors that
affect the productiveness and greatly modify the actual cost of operations in a given place. In this
regard, the project site is located in a very strategic and advantageous position in terms of
production cost as well as initial investment need.
The manufacturing process of granite slabs from Granite blocks involves the following four
major steps of operations: Block to Slab cutting, Polishing and Edge cutting according to the
customer order and finally packing and storing.

i. Slab cutting
 The squared blocks prepared from the quarry will be transported to the location of block cutting
machine using Gantry crane or forklift. The block cutting machines in this option have two
different types. One multi-blade bridge cutter and two single blade vertical & horizontal cutter and
will split the squared block in to slabs in the required thickness of 1.5cm, 2cm or 3cm.

ii. Polishing
The slabs will feed to semi Automatic polishing machine or manual polishing and the granite
slabs will be polished using abrasives and resin polishing wheels to bring out the beauty of the
color and pattern in the granite. The granite slabs are then produced in bundles and stored in
temporary storage area till the edge cutting machine is ready to process.
iii. Edge cutting
Once the granite slabs are polished and are ready for distribution, it will be further cut and
ornament as per the customers’ size & specifications using table cutting machines and finally the
product will be packed and be ready to transport and delivered either export market or central
Addis Ababa market according to every customer’s order.
The Waste produced in granite quarrying & processing are granite bolders, sludge and slabs which
is very smaller size that will not feet to sell as tiles. And this waste are properly handled and stored
for further terrazzo production.
1.2, Plant Capacity

The plant can produce daily 200m 2 and 150m2 of Granite slab and Terrazzo tiles respectively, in
the above setup of machineries. It is therefore recommended that the envisaged plant will have an

annual production capacity of 60,000 m2 Granite slab and 45,000 m2 terrazzo tiles. The plant will
operate single shift of 8 hours a day, and for 300 days a year.
1.3, Production Program
The envisaged production program is given in Table 1.1, below. The schedule is worked out in
consideration of the time required for gradual build-up in labor productivity and fine-tuning of
machineries. Production is assumed to start at 50% of plant capacity in the first year of operation
and reaches full-gear in the 5th year of operation since the export sales target for granite slabs will
be the 80% of product and the remaining 20% of granite slabs and all of terrazzo tiles will be sold
for local market.

Table 3.1, PRODUCTION PROGRAMME

Years of Operation 1 2 3 4 5
Capacity Utilization (%) 50 65 75 85 100

Production Granite(m2) 30,000 37,200 45,000 51,000 60,000

Production Terrazzo(m2) 22,500 29,250 33,750 38,250 45,000

3.2, Machineries and Equipment’s

The list of machineries and equipment’s required for granite quarry, processing and Terrazzo
production at the planned capacity is given in Tables 2.1, 2.2, and 2.3, below. As indicated in this

table, for the planned annual capacity of 60,000m 2 of granite slabs, and Terrazzo tiles of

45,000m2 total cost machinery and equipment required is estimated at Birr 12,938,460 ( twelve
million nine hundred thirty eight thousands four hundred sixty birr ) of which 457,007 USD
( four hundred fifty seven thousand and seven US dollar ) is required in foreign currency while
the remaining Birr 2,305,000 ( two million three hundred five thousand birr ) of inland and
bank charge cost is required in local currency.
Table 3.2, MACHINERY REQUIREMENT for Granite processing COSTS

Description Qty U. price T. price T in Birr

1 Large slab bridge block cutter 1 28,500 28,500 655,500

2 Horizontal & vertical bridge stone cutting machine 2 40,000 80,000 1,840,000

3 Semi Auto polisher(8 Head) 1 28,500 28,500 655,500

4 Manual polisher 2 5,000 10,000 230,000

5 Manual edge cutter 3 6,200 18,600 427,800

6 Over head crane ( 10 Ton) 1 20,000 20,000 460,000

7 Forklift (10Ton) 1 32,000 32,000 736,000

TOTAL Machinery F.O.B 217,600 5,004,800

TOTAL Shipping cost 22,000 506,000

Bank Charge (5%) 11,980 275,540

4 TOTAL Inland costs 315,000

Grand TOTAL Machinery 6,101,340.00

Table 3.4, Auxiliary machinery required for the above is

No. Auxiliary equipment Qty Unit P. in Total P. in Total Price in

Description Usd Usd Birr

1 Workshop equipment’s 250,000

2 Damp Truck 1 1,200,000
3 Diesel Generator(308Kva) 1 28500 655500
4 Pickup Car 1 25,000 25,000 575,000
TOTAL Aux, cost 2,680,500
 3. Infrastructure cost for granite processing

At the Granite quarrying, and processing need different infrastructure like building areas for
different purpose like processing, workshop area storages and office facilities and electric power
supply need 1,000 KW for three operations, granite quarrying, granite processing and terrazzo
processing lines and also the water is need for the overall system, the road construction is very
crucial to operate and transport both raw materials and output products. Accordingly, the total
Infrastructure cost is expected to be birr 10,182,200.00 (ten million one handred eitghty two
thansands and two handred birr) in operational phase.
4.1, Land, Building and Civil Works
The envisaged project has two sites, the Granite processing site and the limestone processing
site. The granite processing site is located in the granite resource area at the distance of 8km from
Harar city. The granite processing site is expected to be located In Harawea area and is expected to

be 10,000m2. The latter will be acquired as soon as the operation modality is defined.
Out of the two sites, since the limestone processing site is already secured and already use to
process limestone in very limited capacity.
The lease price in Harari region for industrial sites do not sets till now but mostly average price
surrounding area for industrial zone is around 8 birr per m2 in a yearly base and also the
compensation cost sometimes take into consideration as a first lease payment and it could be
around 200,000 birr value will be appropriate.

The processing site is expected to have 10,000m 2 of which the built up area will be 1,200 m 2
for main processing area used for block cutting, polishing and edge cutting steps including two
temporary storage areas for slabs further processed and feed to machines and final packaging area
and this built up area erected in pre-fabricated steel structure with a given foundation designs and
works by the suppliers and the workshop for both processing and quarries will be in this
processing site and the technicians can go if they are needed in limestone areas and the size of

workshop shade will be 100m2 and also the store for consumables and other items which further

uses by processing and quarries will be 150m 2 the dining rooms and office area 180m 2 is also
needed. So the Total cost of Birr 4,477,200.00 is required for construction and civil work.
Table 4.1, Building and civil work cost

No Description In USD In Birr

1 Fencing work 250,000.00
2 Foundation cost 1,450,000
3 Steel Structure 62,000.00 1,426,000.00
4 Erection cost 200,000.00
5 Workshop and office facilities 400,000.00
6 Storage areas 200,000.00
7 Shipping cost for S.S. 6,000.00 138,000.00
8 Inland costs 85,000.00
9 Land lease or Compensation 250,000.00
10 Bank charge 5% 3,400.00 78,200.00
TOTAL 4,477,200

4.2, Electric supply estimated costs

The electric supply cost include the extending from national grid with 850KVA transformer from
Electric energy utility and purchasing different distribution boards and installing the electric
system and materials costs like cables etc. for three operations(for granite quarry processing and
terrazzo production).
Table 4.2, Electric energy required costs
No. Description Qty Unit cost Total Cost
1 EPU new power Lms 1,350,000 1,350,000
2 Main distribution boards 1 350,000 350,000
3 Sub distribution boards 3 150,000 450,000
4 Electric cables Lms 450,000 450,000
5 Lightening and workshop system 320,000 320,000
6 Installation cost (Labor) 300,000 300,000
TOTAL COST 3,220,000

4.3, Water System

 Water system is the supply of water for the processing plant as per requirements of the machines
and recommended water supply is drilling water well in a potential ground water area and
supplying to the processing site and as well as the quarry this need the following cost.

Table 4.3,
Water supply required for granite quarry, processing and terrazzo production.

No Description Qty Unit cost Total Cost

1 Water well Drilling cost 1 500,000.00 500,000.00
2 Submersible pump 1 250,000.00 250,000.00
3 Water recycle compartment 200,000.00 200,000.00
4 Pressure pump 85,000.00 85,000.00
5 Water supply & recycle for quarry 400,000.00 400,000.00
6 HDpe pipes & fittings 450,000.00 450,000.00
TOTAL COST 1,885,000.00

4.4, Road construction

Road construction needed from the main road to the processing site and also from processing to
the quarry area including the car parking inside processing site and the site clearance work also
include under this category. And estimated road construction cost for the above work is around
600,000.00 birr.

Table 4.4, Summery for Total infrastructure cost

No. Description COSTS

1 Land and building costs 4,477,200
2 Electric supply 3,220,000
3 Water system 1,885,000
4 Road construction 600,000
TOTAL INFRASTRUTURE COST 10,182,200
 5. RAW MATERIALS AND INPUTS

5.1, RAW MATERIALS

The basic raw materials and input (consumables) required in these operations are various types
of consumables needed for the stone quarrying and processing. For the envisaged project the
quarrying and slab production will be carried out near the quarry site. The block is handled and
transported from quarry to processing area by derrick crane and stored in block storage area till the
block will feed to the block slicing or cutting machine using the forklift or overhead crane.
Accordingly, the annual consumables and raw materials needed to process and produce slab of

60,000 m2 of finished granite slab and 45,000 m2 of terrazzo tiles per annum is indicated in table
4.1,4.2,4.3, as follows.
Table 5.1Annual Granite quarry consumables

U. cost in Total Cost Total Cost In

No. Consumables parts Qty
Usd Usd Birr
1 Diamond wire for larger machines 560 45 25,200 579,600
2 Diamond wire for block squaring 240 40 9,600 220,800
3 DTH Drill rods, 80 33 2,640 60,720
4 DTH bottom bits 24 60 1,440 33,120
5 DTH hammer, 12 240 2,880 66,240
TOTAL CONSUMABLES FOR 41,760 960,480
Shiping cost (2, 20feet ) 2 3,500 7,000 161,000
Inland transport & other costs 70,000
Bank Charge 5% 48,024
G. TOTAL Cost on arrival 1,239,504
Table 5.2, Annual Granite processing consumables

Description U.Price, Qty Total (in Usd) TOTAL in Birr

(Usd)

Disc Blades 2,200mm 3,480 6 20,880 480,240

Disc Blades 2,000mm 1,840 6 11,040 253,920

Disc Blades 1,800mm 1,250 6 7,500 172,500

Disc Blades 1,600mm 576 6 3,456 79,488

Disc Blades 350mm 30 200 6,000 138,000

Disc Blades 400mm 35 200 7,000 161,000

Diamond Segments 1.33 57600 76,608 1,761,984

Metal Disc #50,200,200,400 7.8 1100 8,580 197,340

Resin Disc,#500,500,800,800 13.7 310 4,247 97,681

Resin Diosc, #1,500 14.5 40 580 13,340

Buff 20.6 221 4,552.6 104,710

TOTAL Consumables Costs 150,443.6 3,460,203

Shipping Cost 3,500 1 3,500 80,500

Bank Charge (5%) 177,037.14

Inland Costs 68,000

TOTAL COST 3,785,740.14

 C, Raw Materials for terrazzo tiles
The raw materials and consumables required for terrazzo tiles production is as follow.
Table 5.3,Terrazo raw materials and consumables
Daily
No Terrazzo Raw Material Qnty Annual cost
Unit costs
1m2 in daily Annual
1 Marble chips Kg 17 3,520 102,000 704 162,000
2 Marble Sludge Kg 65.5 10,480 393,000 1,048 314,400
3 Cement Kg 15 2,400 120,000 4,800 1,920,000
4 Sand Kg 20 3,200 120,000 160 48,000
5 Aggregate Kg 20 3,200 120,000 160 48,000
TOTAL 22,800 855,000 6,872 2,061,600
Consumables Qty Unit cost Total Annual Cost
1 Mold cost 13 4,500 58,500
2 Polishing pads 350 100 35,000
Total Consumable 93,500
TOTAL R. M. And
consumables 2,155,100.00
N.B:- the raw materials cost for terrazzo like marble chips and sludge cost is only handling
and transportation cost.
Therefore, total annual raw materials and consumable cost for terrazzo processing is 2,155,100.00.
- The total raw materials and consumables required for granite quarrying, processing and
terrazzo tiles production are as follows;
Table 5.4, Annual raw materials and consumables required for
 No. Descriptions Total costs
Granite Quarry 1,239,504
Granite Processing 3,785,740.14
Terrazzo tile production 2,155,100
TOTAL Cost 7,180,344.14

5.2, Utilities and Other Operating Expenses

Electricity, water and Fuels are those utilities required by the plant to operate.
Table 5.5 below shows annual requirements and associated costs at full production capacity.
Table 5.5
Annual Utility costs for Granite quarrying, and processing.

No. Description Qty U. Price (Birr) Cost (Birr)

1. Electricity (kWh) 1659750 0.69 1,145,227.5

2 Water (m3) --- ---- ----
3. Fuel and lubricants 431,715
4. Miscel. Expenses L.Sum 250,000
Total Utility cost 1,826,942.5

6. ORGANIZATION AND MANAGEMNT

The overall operation of the business will be organized in to two special management teams, the
production planning and marketing management and production operation management.
The production operation of both processing and quarries will be headed in one highly skilled
production manager and under this head there are four operation supervisor for each operations
and the responsibility of the operation supervisor is 1, production output quantity and quality 2,
the usability of the resource for a given target production.
The production planning department is organized as managing the planning as market demands
and request, the marketing team will be organized under this umbrella so as to ensure efficiency
and effectiveness in production planning and its execution. The planning and management team
was operating the marketing sales, and production planning.
The production operation will be handled with all the necessary manpower. The manpower,
 classified according to the production nature and contains, 5 teams;
i, Central Office.
This operation unit may be resides in Addis Ababa and focus on production planning,
marketing and sells, human resource and procurement duties are engaged in this operation team.
Table 6.1, Central Office Manpower Requirement
Monthly ANNUAL
Qty Total Monthly
M.P. CENTRAL OFFICE Salary SALARY
1 G/ Manager 1 15,000 15,000 180,000
2 Production Planner 1 12,000 12,000 144,000
3 Financial manager 1 12,000 12,000 144,000
4 HR and procurement/Purchasing head 1 10,000 10,000 120,000
5 Accountants 2 6,000 12,000 144,000
6 Purchaser 2 5,000 10,000 120,000
7 Cashiers Head 1 4,500 4,500 54,000
8 Cashiers 2 3,500 7,000 84,000
9 Sales and marketing 2 4,000 8,000 96,000
TOTAL C. Office M.P. 13 90,500 1,086,000

ii, Granite Quarry

This operation engaged in producing the block from in situ rocks and deliver to the processing
unit.
Table 6.2, Granite Quarry Manpower Requirement.
Grnt QUARRY M.P. Monthly Total ANNUAL
N0. REQUIRMENTS Qty Salary Monthly SALARY
2.1, Quarry supervisor 1 7,000 7,000 84,000
2.2, Grnt Chief driller 1 4,000 4,000 48,000
2.3, Grnt Chief sawing operator 1 4,000 4,000 48,000
2.4, crane operator 1 3,800 3,800 45,600
2.5, Assistance technicians 6 2,700 16,200 194,400
2.6, Guards 2 1,200 2,400 28,800
2.7, Assistence Store keeper 1 2,500 2,500 30,000
2.8, Driver 1 2,700 2,700 32,400
 TOTAL Granite QRY COST 14 42,600 511,200
iii, Granite processing,
This operation unit takes the block from the granite quarry that is ready to processing and
expected output in this operation is polished and cut to size slab according to customers order. The
production manager even though focusing in granite processing but also manages over all systems
of production.

Table 6.3, Granite Processing Manpower Requirement

U. Monthly Total ANNUAL
3 GRANITE PROCESSING Qty
Salary Monthly. SALARY
3.1, Operation manger 1 10,000 10,000 120,000
3.2, Super visor 1 8,000 8,000 96,000
3.3, Chief blcock cutting operator 2 4,500 9000 108000
3.4, Chief polishing operator 4 4,500 18000 216000
3.5, Chief edge cutting operator 3 5,000 15,000 180000
3.6, Assitance technicians/ Operators 10 3,000 30000 360000
3.7, Store keeper head 1 3,500 3,500 42,000
3.8, Assitance store keeper 1 2,500 2,500 30,000
3.9, Foklift Operator 1 3,200 3,200 38,400
3.10, Workshop Head 1 4,000 4,000 48,000
3.11, Electricians 1 3,500 3,500 42,000
3.12, welding technician 2 3,500 7,000 84,000
3.13, packaging and loading unloading 3 2,500 7,500 90,000
3.14, transport organizer 1 3,300 3,300 39,600
3.15, Guard head 1 1,800 1,800 21,600
3.16, Guards 4 1,200 4,800 57,600

TOTAL PRSSING M.P. COST 37 131,100 1,573,200

iv, Terrazzo processing unit

This operation unit uses most of the two processing wastes like, sludge from water treatment
system, broken slabs that cannot meet the tiles size and produce different shape and style of tiles,
and the processing plant will be next to granite processing plant.
 Table 6.4, Terrazzo processing.

U. Monthly Total ANNUAL

M. P. for Terrazzo processing Qty
4 Salary Monthly. SALARY
4.1, Production Supervisor 1 7,000 7,000 84,000
4.2, Molding and pressing technician 1 4,000 4,000 48,000
4.3, Polishing technician 1 4,000 4,000 48,000
4.4, Assistance technicians 4 2,500 10,000 120,000
4.5, curing and load/Unload 3 2,000 6,000 72,000
4.6, store keeper 1 2,500 2,500 30,000
4.7, Truck driver 1 3,500 3,500 42,000
TOTAL TERRAZZO M.P. 12 37,000 444,000

Therefore, according to this the annual manpower cost for the central managing and market,
quarry, processing and terrazzo production is birr 4,518,000.00 ( four million five hundred
eighteen thousands).

Table 6.5, Total four operation Man power required

No Manpower Total Qty Monthly Total Annual Total

1, M.P. Central Office 13 90,500 1,086,000
2, M.P. Granite processing 37 131,100 1,573,200
3, M.P. Granite Quarry 14 42,600 511,200
4, M.P. Terrazzo Production 12 37,000 444,000
Total Labor 66 301,200 3,614,400
Total Man power incentive 75,300 903,600
TOTAL Including incentive 376,500 4,518,000

 Incentive assumed in this table is the pension (17%) and different transport and other
allowance based on the company policy and Total incentive assumed is 25% of the Salary.

8. FINANCIAL ANALYSIS

The financial analysis of the granite quarrying, processing and terrazzo production operation is
based on the data presented in the previous chapters and the following assumptions:-

Construction period 12 months

Raw material foreign 4 months
Work in progress 2 days
Repair and maintenance 5% of the machinery cost
Other running cost 60 days
Depreciation for machineries at 20%
Depreciation for infrastructure 10%

7.1, TOTAL INITIAL INVESTMENT COST

The total investment cost of the project including working capital is estimated at Birr
27,471,600 (Twenty seven million four hundred seventy one thousands and six hundred birr)
of which birr 23,120,660 ( twenty three million one hundred twenty thousands and six
hundred sixty birr) will be required for fixed investments such as machineries, construction and
civil works, while the remaining birr 4,350,940 (four million three hundred fifty thousand and
nine hundred forty birr ) will be working capital, pre-production expenditure, training and
commissioning cost.

The major breakdown of the total initial investment cost is shown in Table 7.1.
Table 7.1 INITIAL INVESTMENT COST ( ‘000 Birr)
No Cost Items Total Cost
1 Infrastructure development 10,182.2
2 Plant, Machinery and Equipment?? 12,938.46
3 Pre-production Expenditure* 350.00
4 Working Capital 3,450.94
5 Training and commissioning 550
Total Initial Investment 27,471.6

7.2, PRODUCTION COST

The production cost for the first year of production is calculated under the assumption that the
production would be undertaken in 50% of installed capacity, the total production cost is estimated
at 18,028,120 Birr (eightteen million twenty eight thousands and one hundred twenty birr ).
The detail is indicated in the following table 7.2.

Table 7.2, Annual Production Cost at Full Capacity (,000 Birr)

Items Cost(,000)
Raw Material and Inputs 7,180.35
Utilities and Other operating expenses 1,826.94
Maintenance and repair 5% of Machinery 646.9
Man Power Required 4,518
Marketing cost 250.00
Total Operating Costs 14,422.21
Depreciation (Machineries at 20%) 2,587.69
Depreciation (Infrastructure at 10% ) 1,018.22
Total Depreciation 3,605.91
Total Production Cost 18,028.12

7.3, TAXES
 In Ethiopian manufacturing and mining sectors there are different taxes will applicable like, in
mining sectors, mining of construction materials will be 5 % of the product sales and according to
this project our first product in quarrying is production of blocks and the production and there is

known trends in country for granite and marble block sales price in cubic meter(m 3) and for the

given type we assume the sales price of the granite block is 3,000 birr per m 3 then we need to 8

m3 to produce the 200 m2 of slab in a day and 2,400m 3 to producing 60,000m2 of slab annually.
For terrazzo tiles production it is the secondary products and will not apply the loyalty tax.
The Total loyalty tax at full capacity production will be 315,000 birr.
The following table will summarize the loyalty tax in the five year.

Table7.3, The Loyalty tax

Loyalty tax
Year 1 Year 2 Year 3 Year 4 Year 5 TOTAL in 5 years
180,000 234,000 270,000 306,000 360,000 1,350,000

7.4, FINANCIAL EVALUATION

During the five years of production of slab is estimated. In the first years of production

utilization is expected to be 50 % of the installed capacity which is of 200 m 2 per day and annual

production of granite slab at full capacity will be 60,000m 2. Accordingly, assuming 80% the
granite slab will be sold for export market and remaining 20% of granite will be sold for local
market and the product to be sold as finished product at factory gate price of USD 25 for export

market and birr 750/m2 for local sale, the following sales income is expected during the full
capacity utilization of production.
Table 7.4, Estimated sales Granite slab & terrazzo (at full capacity operation).
Sales and revenue estimations
No Granite sales quantity U. Price Total Sales
Daily Annual Daily Annual
1 export sales 80% 160 48,000 25 1,200,000
Export sales in Birr 512.5 82,000 24,600,000
2 Local Sales 20% 40 12,000 750 30,000 9,000,000
 3 Terrazzo sales 150 45,000 150 22,500 6,750,000
TOTAL Granite sales 134,500 40,350,000

Table 7.5, Estimated Total sales of Granite and terrazzo in five years of production
Projected Income Statement
Year 1 Year 2 Year 3 Year 4 Year 5 TOTAL in 5 years
20,175 26,227.5 30,262.5 34,297.5 40,350 151,312.5

7.5, NET PROFIT

Net profit after tax is on the total revenue subtracting the total operational cost including the
depreciation and the taxes (loyalty tax), so the net profit after tax in the first years of production
will be 12,061,480 birr (Twelve million sixty one thousands four hundred and eighty birr) and the
remaining years from second years to fifth years operation will be 22,070,230 birr ( twenty two
million seventy thousands two hundred and thirty birr )the following table will shows net profit
expected in operational years
Table 7.6, Net profit after tax in five years(,000 birr)
No 1st Yr 50% 2nd Yr 65% 3rd Yr 75% 4th Yr 85% 5th Yr 100%
1 Revenue generates 20,175 26,227.5 30,262.5 34,297.5 40,350.00
2 Total operational C. 10,817.01 12,980.35 14,422.57 15,864.79 18,028.12
3 T. Loyalty Tax 180.00 234.00 270.00 306.00 360.00
Net Profit after tax 9178.00 13,013.00 15,570.00 18,127.00 21,962.00

7.6, RATIOS
In financial analysis financial ratios and efficiency ratios are used as an index or yardstick for
evaluating the financial position of a firm. It is also an indicator for the strength and weakness of
the firm or a project. Using the year-end balance sheet figures and other relevant data, the most
important ratios such as return on sales which is computed by dividing net income by revenue and
 return on total investment (net profit divided by total investment) has been carried out for the
initial year, in which the project is assumed to be operational after a year at 50% of its capacity.
The return on sales ratio is 45.5% for the first year production that means in the second years of
investment and 49.6 % in the second years of investment) and become over 54 % when the
factory operated at full capacity. This shows that the project is among the very few lucrative
investment opportunities in the country.

7.7, PAYBACK PERIOD

The payback period, also called pay – off period is defined as the period required to recover the
original investment outlay through the accumulated net cash flows earned by the project.
Accordingly, based on the projected cash flow it is estimated that the project’s initial investment
will be fully recovered within 3 years of investment.
7.8, LIQUIDITY
The project cash flow statement depicted under table 7.7 indicates that the project will not face
liquidity problem. It will have net cash inflows of about Birr 6.5 million in the first year of project

operation. This amount gradually increases to about Birr 64 million by the end of the 5 th year.
This shows that the business will be able to meet its commitments without any difficulty if any,
and it can undertake future expansion program from its own internal source.
Table 7.7, Projected Cash Flow Statement (Option Two)
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Cash Inflow
Bank Loan 19,230.12
Equity Capital 8,241.48
Net Income 9,178.00 13,013.00 15,570.00 18,127.00 21,962.00
Add Total Depreciation 3,605.91 3,605.91 3,605.91 3,605.91 3,605.91
Total Cash Inflow 27,471.60 12,784.00 16,619.00 19,176.00 21,733.00 25,568.00
Cash Out Flows
Total Initial Investment 27,471.60
Principal Loan Repayments 3,846.03 3,846.03 3,846.03 3,846.03 3,846.03
Interest payment 2,403.77 2,403.77 2,403.77 2,403.77 2,403.77
Dividend
Total Cash Outflows 27,471.60 6,249.80 6,249.80 6,249.80 6,249.80 6,249.80
 Net Cash Flows 0.00 6,534.20 10,369.20 12,926.20 15,483.20 19,318.20
Cumulative Cash Flows - 6,534.20 16,903.40 29,829.60 45,312.80 64,631.00

7.9, Financial Viability Analysis

In order to further explain financially viability of the project, the present value of the cash
flows discounted and analyzed including the internal rate of return.
The annual calculations of the present value (PV) of the cash inflows and outflows are provided
in the table 7.8 bellow. If the net present value is positive meaning that the PV of cash inflows is
higher than the PV of cash outflows, then the project is financially viable.
Furthermore, the IRR is another important financial indicator as it measures the rate of return on
the investment incurred. It could be also interpreted as the net cash flow as a percentage of
invested capital. The IRR is considered helpful for future investors to know the rate of return for
investing in the marble extraction. The IRR is the rate that will almost equate the PV of cash
inflows of the marble quarries from 2017 till 2022 to PV of cash outflows. It is calculated through
the trial and error method by replacing it instead of the WACC in the discounted cash flow
formula of the cash inflows and outflows. The IRR for the Granite project is found to be 34%.
Since the IRR is higher the current long term loan interest rate which is 12.5%, then this ensures
the financial viability of granite project.

Table 7.8, Discounted Cash flow Statement (Option two)

Yea Net Discount Factor at Discount Factor Discount Factor Discount Factor Discount Factor
r Cash 15% at 20% at 25% 25% 35%
 Dis- Dis- Dis- Dis- Dis-
Present Present Present Present Present
Follow count cout cout cout cout
Value Value Value Value Value
Factor Factor Factor Factor Factor

0 1 1 1 1 1
- - - - - -
0.8 5,423.3 0.8 0.7 5,03 0.7 4,835.
1 5,684.75 5227.36
6534.2 0.87 3 9 0 7 1.33 4 31
10,369. 6,01 0.5 5,80 0.5 549 0.5 5,2 0.4 5,08
2
2 0.58 4.14 6 6.75 3 5.68 1 88.29 9 0.91
12,926. 6,46 0.4 5,94 0.4 5,55 0.3 5,0 0.3 4,78
3
2 0.50 3.10 6 6.05 3 8.27 9 41.22 7 2.69
15,483. 6,81 0.3 6,03 0.3 5,26 0.3 4,6 0.2 3,09
4
2 0.44 2.61 9 8.45 4 4.29 0 44.96 0 6.64
19,318. 7,34 0.2 5,21 0.2 4,25 0.2 4,4 0.1 2,89
5
2 0.38 0.92 7 5.91 2 0.00 3 43.19 5 7.73
32,31 28,43 25,79 24,4 20,6
NPV
5.52 0.55 5.60 49.00 93.28
IRR = 34%