Teyomi International Limited plans to open a quarry to take advantage of high demand for chippings from ongoing infrastructure projects. The quarry will produce chippings through blasting, crushing, and grading raw materials extracted from stone deposits. It will be run by a production, administration, and accounting department, employing up to 15 workers. Financial projections estimate revenues of 209-262 million Kenyan shillings annually over 5 years based on projected output volumes and prices. Capital costs of 180 million shillings will be financed by equity and bank loans.

1. Chippings are basic inputs in road construction works, buildings, landscaping,
construction of bridges and a host of other civil engineering works. Activities in
these areas by governments, corporateentities and individuals are presently at their
peak. The situation is given a boostbythe infrastructural development
policies/programs of the three tiers of government, especially at the State level.
Specifically the LVSR roads as well as The ADB funded road from Ahero to
Isabenia,Mungatsi Buyofu Musikoma, ahero- Isabenia
The market for chippings is so large that saturation in the near future is out of the
question. If anything, the quantum and tempo of infrastructural development
activities is of the magnitude that is capable of constraining supply and creating a
seller's market in which big players in the quarry business will continue to call the
shots for a long time.
Teyomi International Limited is aware of this business opportunity and intends to
exploit it.
Basic Assumptions
This investment proposal/study, apart from the prevailing spate of infrastructural
development activities, can further be anchored on the following critical
assumptions:
1. Some macro-economic indicators like the domestic price level and exchange rate
will remain stable, at least, in the medium term.
2. Democracy will continue to thrive thereby engendering political stability necessary
for socio-economic growth and development.
3. The basic raw material for the quarry business (deposits of stone) is freely
available and other necessary inputs like explosives, gas and lubricants can easily
be obtained locally.
4. The cost of the inputs is low vis-à-vis the value of output and will remain
unchanged, other things being equal, in the medium term.
5. The quarry site will enjoy a secure tenure as the land will be acquired in a manner
satisfactory to landowners/stakeholders from the community.
6. Trained and/or trainable stone blasting/crushing operatives will be available and
will be recruited under conditions that will keep them in employment, at least, in
the medium term.
7. The producer goods, mainly plant and equipment, are easily serviceable and will
function optimally for the first 3 years of their life, a time long enough to

2. generate revenues for their eventual replacement in the ordinary course of
business.
The present macro-economic indicators, economy-wide trends, development
policies and the conditions peculiar to the quarry business provide reasonable
assurance that the assumptions are realistic and will hold. Therefore one is assured
that some of the necessary conditions for the unhindered operations of the quarry
can be guaranteed.
Technical Process
The technical processes involved in the production of chippings are fairly straight
forward. They include:
a) Clearing and setting up the site
b) Blasting the boulders using explosives
c) Excavation of boulders (big stones), using a bulldozer and excavator
d) Crushing & Grading into appropriate sizes
e) Loading and tipping
Operational Structure (Staffing of the Proposed Quarry Plant)
The Management of the Quarry Plant rests with the Chairman/Managing
Director of the company and the Directors, who constitute the Board. This board
has the key role of taking policy decisions on issues affecting the operation of the
company on a routine basis. It is proposed that the plant operations be handled by
three basic departments or units, namely:
Production/Technical Operations to be headed by a Production manager
Administrate to be headed by an Administration Manager
Accounting/sales to be headed by a qualified Accountant
Up to 10-15 workers will be recruited as the plant becomes fully operational. Most
of the employees will be drivers and operators of the various equipment/tools.
Personnel emoluments are covered under recurrent/operating costs. The technical
operatives will be given sufficient training to enable them deliver effective and
efficient service which is in the overall interest of the company and its clients.
2.0 FINANCIAL ANALYSIS
The financial analysis of the proposed quarrying plant shall appraise the
financial projections; determine the economic production levels with a view to
justifying the financial feasibility of the proposed plant.

3. 2.1 ASSUMPTIONS
The financial projection and viability analysis are predicted on the following
assumptions:
i. An installed capacity of 100-130 tonnes of mixed chippings per hour and assumed
production capacity of 88 tonnes.
ii. One shift of eight hours per shift translating to 8 No. hours per day.
iii. 260 working days per year.
Full production capacity of 200,000 tonnes of mixed chippings per year (derived
from i-iii) above
iv. Plant operating capacities are 60%, 65% and 70% in the first, second and third
year, respectively.
v. Constant prices for other raw materials (explosives, rue! and lubricants) within the
projected period. The major raw material, the deposits are free.
vi. Fringe benefits such as rent allowance, transport allowance, health and insurance
are included in the salaries and wages. Wages and salaries remain fixed within the
projected period.
vii. Depreciation: Fixed assets to be depreciated on a straight line basis as follows:
S/N
Description Life (years)
Percentage
i. Buildings 10 10
ii Infrastructure 5 20
iii Plant, Machinery and Equipment 4 25
iv Vehicles 4 25
v Furniture and office equipment 4 25
viii. Estimate for construction were obtained from priced bill of quantities and random
rates were checked with present rates.
ix. A Contingency provision of 10% of project cost.
(5% as physical contingency, 5% as price contingency)
x. Most of the equipment costs were obtained directly from market surveys conducted
internally and overseas. Adequate provision was made in the cost to cover
fluctuations in the cost at time of purchase.
xi. Cost of the installation of plants and equipment and training of personnel to handle
those plants are put 7% of the cost of equipment.

4. xii. Cost of explosives is xxx/tonne of chippings blasted while gas and lubricant is at
xxx/tonne of production
xiii. Maintenance expenses for plants and equipment are estimated at 15% of capital
cost of equipment in the first year of commercial operation and will increase
annually by 10%.
xiv. FINANCE CHARGES
Interest on Term Loan - 15% p.a.
Interest on Bank Overdraft - 18%p.a.
Repayment Programme - 3 years (12 quarters)
Moratorium period - 6 months
Total life of term loan - 3 1/2years
xv. Associated revenue computations were put at very moderate values which
compares favorably with those obtained in similar quarries. Hence weighted
average price of output (mixed chippings) as at today is 2200 per ton (mumias) and
2400 (Busia), ex-factory price: is put at 1400 per ton.
xvi. Cost of licensing and permits have been included in the pre-operational expenses.
xvii. Raw material cost is inclusive of transportation and handling charges as well as
20% wastages.
xviii. Prevailing tax rate of 30% is to be used.
2.2 PROJECT CAPITAL STRUCTURE
The proposal for the realization of the required capital for the execution of
the proposed Quarrying Plant is a stated below:
Table 1
S/N SOURCE
AMOUNT
Kshs 000 % CONTRIBUTION
1. Equity contribution and promoters
2. Bank Term Loan
TOTAL (INVESTMENT COST) 180,000 100.0
Note:
i. Bank Term Loan Repayment - 3 years (i.e. 12 quarters)
ii. Moratorium Period - 6 months
iii. Total life of the loan - 3¼ years
iv. Debt/ equity ratio - TBD

5. 2.3 REVENUE ESTIMATES
The revenue estimate is as presented in the accompanying table
Table 2
Year Capacity Utilization Output tonnes '000 Price per Tonne Revenue '000
1 60% 150 1400 209,664
2 65% 162 1400 227,136
3 70% 175 1400 244,608
4 75% 187 1400 262,080
5 75% 187 1400 262,080
Notes
i. Installed Plant capacity = 120 tons/ hour
ii. Assumed production Capacity = 100 tons/hour
iii. 1 Shifts of 8 hours each = 8 No. hours per day
iv. 260 working days in the year is assumed
v. From the above, full production capacity = 100x8x260 = 208,000
vi. Ex-factory Price = Kshs 2200 per ton
vii. Factory Price = kshs 1400 per ton
About the Design
1.Primary crushing: In this design, we adopt Jaw crusher PE600x900 as
primary crusher, with maximum feeding size 500mm.
2. Secondary crushing: We adopt Hydraulic Impact crusher PFW1214III as
secondary crusher.
3. From this design, you can get four kinds of aggregates: 0-4mm, 4-10mm, 10-
14mm, 14-20mm.

6. Table 3: Investment Cost Estimates
2.4 INITIAL WORKING CAPITAL REQUIREMENTS
ITEM Ksh’000
1 Three month stock of raw materials -Explosives fuel lubricants 4,030
2 Three month of maintenance expenses 3,420
3 Three month of administrative expenses 2,670
4
Total 10,120
1 Preoperational expenses 5,000
2 Land acquisition & Community Issues 9,000
3 Construction, Road and Building 5,000
4 Trucks 5 Trucks 15,000
5 Power driller/Explosives 3,500
6 Wheel Loader 6,800
7 Excavator 18,200
Pickup & 4x4 Transport 5,200
8 Transformer Elec to site 3,000
9 Generator 5,000
10 Camera system 1,500
11 Borehole 1,500
12 Office equipment 2,000
13 Plant and equipment including installation and training 100,000
Sub Total A (Capital Cost) 180,700
(B) Recurrent Cost/ Working Capital Initial Cost Kshs’000
1 Administrative expenses 10,680
2 Explosives, fuel and lubricants 16,120
3 Maintenance 23,730
4 Professional Fees 3,000
Sub- Total B ( Working Capital) 53,530
Total capitalization (A+B) 234,230

7. Table 4: annual depreciation provision using the Straight Line Method
1 Land 9,000 Perpetual - -
2 Buildings 5,000 10 10 500
3 Infrastructure 100,000 7 14 14,286
4 Plant, Machinery & Equipment 55,200 4 25 13,800
5 Furniture & Office Equipment 3,500 4 25 875
Total 172,700 29,461
Annual depreciation provision of 29M
TABLE 5: PROJECTED PROFIT AND LOSS STATEMENT
Profit & Loss Projections
Year 1 2 3 4
Capacity Utilization (%) 60 65 70 75
Output (‘000 tons) 150 162 175 187
Price Per ton (Kshs)
Gross Sales (Kshs‘m) 209,664 227,136 244,608 262,080
Less sales expenses (1%) 2,097 2,271 2,446 2,621
Less Cess (5%) 10,378 11,243 12,108 12,973
Less Direct Expenses (Labour, raw
material & maintenance) 43,480 47,828 52,611 57,872
Marketing 10,483 11,357 12,230 13,104
Depreciation 19,889 19,889 19,889 19,889
Principal on Loan 32,369 32,369 32,369
General Expenses 3,145 3,407 3,669 3,931
Profit before Interest & Tax 87,823 102,179 112,955 155,621
Gross Margin % 42% 45% 46% 59%
Profit before tax (PBT) 87,823 102,179 112,955 155,621
Add back depreciation 19,889 19,889 19,889 19,889
Less capital Allowance 19,889 19,889 19,889 19,889
Taxable Income 87,823 102,179 112,955 155,621
Less 30% Corporation tax 26,347 30,654 33,886 46,686
Profit after Tax 61,476 71,525 79,068 108,935
Net Margin % 29% 31% 32% 42%
Zenith 8hrs Production

8. Profit & Loss Projections
Year 1 2 3 4
Capacity Utilization (%) 60 65 70 75
Output (‘000 tons) 225 243 262 281
Price Per ton (Kshs)
Gross Sales (Kshs‘m) 314,496 340,704 366,912 393,120
Less sales expenses (1%) 3,145 3,407 3,669 3,931
Less Cess (5%) 15,568 16,865 18,162 19,459
Less Direct Expenses (Labour, raw
material & maintenance) 56,880 62,568 68,824 75,707
Marketing 15,725 17,035 18,346 19,656
Depreciation 19,889 19,889 19,889 19,889
Principal on Loan 32,369 32,369 32,369
General Expenses 4,717 5,111 5,504 5,897
Profit before Interest & Tax 166,204 188,571 205,653 254,477
Gross Margin % 53% 55% 56% 65%
Profit before tax (PBT) 166,204 188,571 205,653 254,477
Add back depreciation 19,889 19,889 19,889 19,889
Less capital Allowance 19,889 19,889 19,889 19,889
Taxable Income 166,204 188,571 205,653 254,477
Less 30% Corporation tax 49,861 56,571 61,696 76,343
Profit after Tax 116,343 132,000 143,957 178,134
Net Margin % 37% 39% 39% 45%
Zenith 12 hrs Production

9. Profit & Loss Projections
Year 1 2 3 4
Capacity Utilization (%) 60 65 70 75
Output (‘000 tons) 162 176 189 203
Price Per ton (Kshs)
Gross Sales (Kshs‘m) 227,136 246,064 264,992 283,920
Less sales expenses (1%) 2,271 2,461 2,650 2,839
Less Cess (5%) 11,243 12,180 13,117 14,054
Less Direct Expenses (Labour, raw
material & maintenance) 53,530 58,883 64,771 71,248
Marketing 11,357 12,303 13,250 14,196
Depreciation 29,461 29,461 29,461 29,461
Principal on Loan 51,443 51,443 51,443 51,443
General Expenses 3,407 3,691 3,975 4,259
Profit before Interest & Tax 64,424 79,334 90,301 100,679
Gross Margin % 28% 32% 34% 35%
Profit before tax (PBT) 64,424 79,334 90,301 100,679
Add back depreciation 29,461 29,461 29,461 29,461
Less capital Allowance 29,461 29,461 29,461 29,461
Taxable Income 64,424 79,334 90,301 100,679
Less 30% Corporation tax 19,327 23,800 27,090 30,204
Profit after Tax 45,097 55,534 63,211 70,476
Net Margin % 20% 23% 24% 25%
Metso 8hrs Production

10. Profit & Loss Projections
Year 1 2 3 4
Capacity Utilization (%) 60 65 70 75
Output (‘000 tons) 243 264 284 304
Price Per ton (Kshs)
Gross Sales (Kshs‘m) 340,704 369,096 397,488 425,880
Less sales expenses (1%) 3,407 3,691 3,975 4,259
Less Cess (5%) 16,865 18,270 19,676 21,081
Less Direct Expenses (Labour, raw
material & maintenance) 66,930 73,623 80,985 89,083
Marketing 17,035.20 18,454.80 19,874.40 21,294
Depreciation 29,461 29,461 29,461 29,461
Principal on Loan 51,443 51,443 51,443 51,443
General Expenses 5,111 5,536 5,962 6,388
Profit before Interest & Tax 150,453 174,154 192,075 209,259
Gross Margin % 44% 47% 48% 49%
Profit before tax (PBT) 150,453 174,154 192,075 209,259
Add back depreciation 29,461 29,461 29,461 29,461
Less capital Allowance 29,461 29,461 29,461 29,461
Taxable Income 150,453 174,154 192,075 209,259
Less 30% Corporation tax 45,136 52,246 57,622 62,778
Profit after Tax 105,317 121,908 134,452 146,482
Net Margin % 31% 33% 34% 34%
Metso 12hrs Production
Implementation Schedule.
Manufacture 98 days
Shipping 45 days
Installation 60 days
Contingency 30 days
Total 233 days 8 Months.
Payment Terms
25% down payment
10% Civil drawings 30 days
60% after production 98 days
5% after commissioning

11. Summary
The quarry business has been historically a very profitable business albeit with
high capital input. With the ongoing construction boom in Kenya, the prospects of
more and continued profitability are positive.
I have used very conservative revenue projections. For example the ex factory
price is what is currently being quoted ex kisumu or Eldoret. There is no quarry in
western province. The cost of transport accounts for almost 30% of the cost of
ballast. If we are positioned in western Kenya we will be able to raise the price by
the at least 20% to cover for the transport element previously being paid.
Secondly, I have only used one shift of 8 hours. Typically quarries run for two
shifts. If we were to do two shifts or at a minimum 12 hours 1 ½ shifts our
revenues would increase by 40-50 percent. We can do some more simulations
with these scenarios.
In conclusion we invest approx of 180M and make a worst case scenario of
45M in the first year and 70M per year by year five.
Having talked to a few quarry owners and visited several quarries. This is a very
good investment waiting to be exploited with very high barriers of entry.