Granite Quarry in Zhytomyr Region InVenture

Name of the project: Granite quarry in Kishinskyi area (Zhytomyr region, Ukraine)
Branch: Extractive industry
Area: Ukraine, Zhitomir region, Olevskyi district, city of Olevsk
Stage of the project: Initial stage
Form of business entity: Ltd company (2 founders 50% / 50%)

Capital assets:

•   Special permission on mineral resource use for 5 years from 28.05.2013
•   The property right to the land parcel – 16 hectares
•   The project of research and industrial quarrying (at a completion stage, it is planned until the end of 2015)
•    Resources - 3,5 million cubic meters in an array

Web: http://ukrstone.com.ua

Investment Considerations:

• Buy-out of 50% of business share (as a non-core investor) – 500 000 USD
• Joint investment into quarrying in proportions of 50% for 50%

Participation in joint venture could be provided by: 1) provision of equipment for the granite extraction, 2) export supplies or 3) financial investments.

Current situation

The project documentation is currently being developed for the purpose of industrial development of a granite quarry in Kishinskyi area, with the organization of further production and implementation of Kishinsky granite .

Concurrently, the company began the activities according to the implementation of different types of granite and products from it, having involved the partner careers. It carried out the sales of granite, gabbro, and labradorite from Kishinskyi, Tokovsky, Emelyanovsky, Pokostovsky and other areas

The product promotion is carried out by advertising on the Internet (Google, AlliBiz, PromUA, OLX), the company also collaborates with key design and project bureaus.

The sales of products are carried out through direct sales and through the largest hypermarket chain in Ukraine, Epicenter. The customers of the production are representatives of different spheres. These are building companies and brigades, construction retail networks, and private clients.

Granite products: facing tile, slabs, paving stone (3 types), borders, window sills, balusters, granite blocks, slabs, stone for ashlar works.

Competitive advantages

Kishinskyi area of granite have been developed relatively recently. So, Kishinskyi granite is a new stone with unique color and structure. Granite has a good modularity contributing to export potential of blocks.

Cooperation with the different stone processing enterprises gives the opportunity to offer a customer different types of granite. It helps to reduce the costs for customers on search of different types of granite.

Characteristic of the granite in Kishinskyi area

Kishinskyi granite has the medium-grained pink color; it’s massive, equally grained which hypidiomorphic microstructure. The general color of granite is grayish-pink, consists of the main pink body on which it is watched smoky-gray grains of quartz and small-sized dark stars of biotite. Granite has high strength which in combination with natural density of a stone gives it longevity. Granite can be good cut, grinded and has a mirror polish. There is no crumbling at the edges of the polished surfaces.

Granite from Kishinskyi area has the 1st class of radioactivity, it radiates up to 15 µR/hr, and it is much less, than the modern brick or concrete.

Mechanical-and-physical properties of the granite

Volume weight: 2620 kg/m ³

Water absorption: 0,25%

Durability on compression: 241 MPas

Bending resistance: -

Abradability: 0,61 g/cm ²

Mineral composition:

Microcline: 48%
Plagioclase: 14%
Quartz: 35%
Biotite: 2%

Kishinskyi granite is traditionally used in building, design, manufacture of finishing materials, monuments and other quite unique products.

Opportunities and perspectives
We are planning to organize the export of granite blocks in the future, provided active cooperation with the stone processing enterprises in China, Poland and Italy. Extensive sales of normal blocks will be carried in the territory of Ukraine. The investor has the opportunity to engage in business at the time of recession of building activity to provide higher profitability in medium-term perspective, and getting a possibility of sale of the company at the peak of the market growth.

Main risks
Legislation. Raider attacks. Corruption. Low consumer ability of the Ukrainian purchasers, general reduction of consumption

EXPECTED TECHNICAL AND ECONOMIC INDICES

Name of indices	Unit of measurement	Meaning
1. Expected reserves Cat. A + B + C1	thousand. m3	500,0
2. enterprise capacity(per year): Acc. to rock mass - by blocks - I Cat. - II Cat. - III Cat. - IV Cat. - V Cat. - VI Cat. - By crushed stone - By screening	thousand. m3 thousand. m3 thousand. m3 thousand. m3 thousand. m3 thousand. m3 thousand. m3 thousand. m3 thousand. m3 thousand. m3	16230 3000 1200 900 250 200 250 200 7000 4900
3. The construction period of the enterprise	years	3
4. The term of the area development	years	31
5. Capital investment in manufacturing, incl .: – Expenses on geologic exploration – industrial and production assets	thous. UAH. thous. UAH. thous. UAH.	8503,1 1082,0 7421,1
6. Operational production costs: incl. depreciation cost	thous. UAH. thous. UAH.	4741,8 2271,4
7. Cost of block production: - I Cat. - II Cat. - III Cat. - IV Cat. - V Cat. - VI Cat. - By crushed stone - By screening	UAH. UAH. UAH. UAH. UAH. UAH. UAH. UAH.	1525,6 1340,5 940,5 680,0 450,6 295,5 30,0 6,0
8. The implementation price (without the VAT) on units : - I Cat. - II Cat. - III Cat. - IV Cat. - V Cat. - VI Cat. - By crushed stone - By screening	UAH. UAH. UAH. UAH. UAH. UAH. UAH. UAH.	3100,0 2450,0 2185,0 1631,0 965,0 454,0 50,0 12,0
Annual cost of production	thous. UAH.	7538,3
Profitability to prime cost	%	18,8
Profitability to PPF	%	15,7

* As of 01.01.2016

MARKETING ANALYSIS

The pricing policy for products from Kishinskyi Granite (TM «ROSA KYSHYN») as of 01.01.2016

Granite blocks

Category	Block Size	Price, excluded VAT, $ / cubic m on EXW
6	Up to 0.7 cubic meters	245
5	0,71 -1,00 cubic meters	270
4	1,01 - 2,00 cubic meters	285
3	2,01 - 3,5 cubic meters	305
2	3,51-5,00 cubic meters	335
1	More than 5.01 cubic meters	470

*For export payment is made according to the clearing settlement according to an invoice and the gemological inference

Paved Tiles

№ п/п	Name	Texture of the surface	Price, excluded VAT, $ / m2 on EXW
1	paved tiles т.30 mm	heat-treated	45
2	paved tiles т.40 mm	heat-treated	50
3	paved tiles т.50 mm	heat-treated	56
4	paved tiles т.60 mm	heat-treated	65
5	paved tiles т.80 mm	heat-treated	70
6	paved tiles т.100 mm	heat-treated	73

FACING TILE

No.	Name	Texture of the surface	Price, excluded VAT, $ / m2 on EXW
1	facing tile т.20 mm	polished	45
2	facing tile т.30 mm	polished	50
3	facing tile т.40 mm	polished	55
4	facing tile т.50 mm	polished	60

Granite curbs

No.	Name	Size, mm	Unit of measurement	Price, excluded VAT, $ / r.meter on EXW
1	Curb ГП1 sawn	300*1504	r.meter	33
2	Curb ГП1 heat treated	300*1504	r.meter	40
3	Curb ГПВ sawn	200*1504	r.meter	27
4	Curb ГПВ heat treated	200*1504	r.meter	32
5	Curb ГП4 sawn	200*1004	r.meter	22
6	Curb ГП4 heat treated	200*1004	r.meter	24
7	Curb ГП5 sawn	200*804	r.meter	19
8	Curb ГП5 heat treated	200*804	r.meter	21