8/20/2019 Magnesite Refractories Production
1/71
8/20/2019 Magnesite Refractories Production
2/71
8/20/2019 Magnesite Refractories Production
3/71
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
8/20/2019 Magnesite Refractories Production
4/71
i
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
8/20/2019 Magnesite Refractories Production
5/71
ii
TABLE 15– PROJECTED CASH FLOW................................. ............................................................... ... 35 TABLE 16– PROJECTED BALANCE SHEET ........................................................ ................................. 36
ANNEXURE- 1 PAKISTAN – A PROFILE
8/20/2019 Magnesite Refractories Production
6/71
iii
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
8/20/2019 Magnesite Refractories Production
7/71
iv
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.
8/20/2019 Magnesite Refractories Production
8/71
v
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.
8/20/2019 Magnesite Refractories Production
9/71
vi
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.
8/20/2019 Magnesite Refractories Production
10/71
1
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.
8/20/2019 Magnesite Refractories Production
11/71
2
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.
8/20/2019 Magnesite Refractories Production
12/71
3
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
8/20/2019 Magnesite Refractories Production
13/71
4
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%.
8/20/2019 Magnesite Refractories Production
14/71
5
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-
8/20/2019 Magnesite Refractories Production
15/71
6
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.
8/20/2019 Magnesite Refractories Production
16/71
8/20/2019 Magnesite Refractories Production
17/71
8
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
8/20/2019 Magnesite Refractories Production
18/71
9
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.
8/20/2019 Magnesite Refractories Production
19/71
10
‘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
8/20/2019 Magnesite Refractories Production
20/71
11
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.
8/20/2019 Magnesite Refractories Production
21/71
12
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.
8/20/2019 Magnesite Refractories Production
22/71
13
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
8/20/2019 Magnesite Refractories Production
23/71
14
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
8/20/2019 Magnesite Refractories Production
24/71
15
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.
8/20/2019 Magnesite Refractories Production
25/71
16
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
8/20/2019 Magnesite Refractories Production
26/71
17
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.
8/20/2019 Magnesite Refractories Production
27/71
18
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
8/20/2019 Magnesite Refractories Production
28/71
19
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.
8/20/2019 Magnesite Refractories Production
29/71
20
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.
8/20/2019 Magnesite Refractories Production
30/71
21
• 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.
8/20/2019 Magnesite Refractories Production
31/71
22
• 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
8/20/2019 Magnesite Refractories Production
32/71
23
TABLE – 9
MACHINERY AND EQUIPMENT
Name of MachineQuantity
(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
Chain Bucket Elevator (I) 1
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
Chain Bucket Elevator (I) 1
Continued
8/20/2019 Magnesite Refractories Production
33/71
24
TABLE – 9
MACHINERY AND EQUIPMENT
Name of MachineQuantity
(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
8/20/2019 Magnesite Refractories Production
34/71
25
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.
8/20/2019 Magnesite Refractories Production
35/71
26
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
8/20/2019 Magnesite Refractories Production
36/71
27
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.
8/20/2019 Magnesite Refractories Production
37/71
28
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
8/20/2019 Magnesite Refractories Production
38/71
29
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.
8/20/2019 Magnesite Refractories Production
39/71
30
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:
8/20/2019 Magnesite Refractories Production
40/71
31
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.
8/20/2019 Magnesite Refractories Production
41/71
32
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.
8/20/2019 Magnesite Refractories Production
42/71
33
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.
8/20/2019 Magnesite Refractories Production
43/71
34
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
8/20/2019 Magnesite Refractories Production
44/71
35
5.3 PROJECTED CASH FLOW STATEMENT
The projected cash flow is shown below in Table -15:
TABLE - 15PROJECTED CASH FLOW
(Rs. in thousand)
Description Year 1 Year 2 Year 3 Year 4 Year 5
Capacity Utilization 50% 60% 70% 80% 90%
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
8/20/2019 Magnesite Refractories Production
45/71
36
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)
Description Year 1 Year 2 Year 3 Year 4 Year 5
Capacity Utilization 50% 60% 70% 80% 90%
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
8/20/2019 Magnesite Refractories Production
46/71
37
TABLE – 16 (Continued)
PROJECTED BALANCE SHEETS
(Rs. in thousand)
Description Year 1 Year 2 Year 3 Year 4 Year 5
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.
8/20/2019 Magnesite Refractories Production
47/71
38
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.
8/20/2019 Magnesite Refractories Production
48/71
i
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.
8/20/2019 Magnesite Refractories Production
49/71
ii
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.
8/20/2019 Magnesite Refractories Production
50/71
iii
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
8/20/2019 Magnesite Refractories Production
51/71
8/20/2019 Magnesite Refractories Production
52/71
8/20/2019 Magnesite Refractories Production
53/71
vi
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
8/20/2019 Magnesite Refractories Production
54/71
vii
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.
8/20/2019 Magnesite Refractories Production
55/71
viii
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
8/20/2019 Magnesite Refractories Production
56/71
ix
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
8/20/2019 Magnesite Refractories Production
57/71
x
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,
8/20/2019 Magnesite Refractories Production
58/71
xi
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