PROPOSALS FOR BULK TRANSPORT AND DELIVERY OF LIMESTONE IN GHANA
2.1Name of Project: – PERL Haul Limited: – Bulk Transport and delivery of Limestone in Ghana.
•Head Office: Accra
•Quarry Site: Oterkpolu, near Odumase Krobo in the Eastern region of Ghana.
•Servicing Workshop:Winneba, in the Central region of Ghana
•Delivery Points:Tema ( Greater Accra Region), Takoradi (Western Region), Lome (Togo)
PERL Haul Limited was incorporated as a limited liability company in December 2012 with the main object of Bulk Transportation and Delivery of industrial mineral Ores and other quarry products in West Africa.
The Company is a subsidiary entity of the PERL Logistics Limited, the logistic delivery service concern of the PERL Trust Investments Group.
2.4Project Definition and Scope:
The project aims at establishing a bulk transport pool that will provide bulk haulage transport services to the mining companies. The project therefore seeks to haul on contract basis limestone from GHACEM’s limestone quarry site at Krobo Odumase to designated cement factories at Tema, Takoradi and Lome.
The annual targeted Haulage tonnage of limestone from the quarry site to the three cement factories ranges from 216,000 metric tons in the first year to 720,000 metric tons in the third year and thereafter.
Other target areas of business for the project are Bauxite and Manganese Ores haulage from their respective mines of Awaso and Nsuta to the sea Port of Takoradi. The industry is segmented among many small Bulk Transport companies and few large fleet holders, with total haulage capacity far below the demand capacity of the cement factories. Consequently, there has been a back lock of Bulk Haulage Transport services in the sub sector. The railway transport system that could have been the answer to the problem still remains inefficient and inaccessible to the new mining sites.
2.5Project Investments Cost:
The total initial investment cost of the project is estimated at approximately US$3.050 million, comprising a capital investment cost of US$2.20 million and an indirect investment costs amounting to approximately, US$800 thousand. Additional Capital investments of approximately US$2.20 million are expected to be injected into the project in the second and third years of the project. These injections will seek to expand the company’s fleet of haulage trucks from ten to thirty by close of the third year.
The entire funding of the initial project cost of US$3.050 million is sought from a medium term loan of US$3.0 million and an equity contribution of fifty thousand (US$50,000.00) from the project company owners. Further investment of US$2.60 million in the second year is sought from a medium term loan of US$1.5 million from a financial institution and the rest from profit accruals of the project company. The entire third year’s capital investment was funded by the projects reserves.
Assuming debt financing can be confirmed and disbursement for the project effective by close of October 2008, to allow the procurement phase to precede immediately, the project could be operational by the beginning of June 2009.
A financial analysis of the project shows a high profitability. Turnover is expected to increase from a level of US$4.212 million in year 1 to US$11.867 million in year 3 and thereafter. A profit after tax of about US$1.43 million is expected in year 1, increasing steadily to US$3.69 million in year 5.
Cash inflows from operation are significantly impressive, starting from a net flow level of about US$1.65 million in year 1, increasing gradually to US$3.15 in year 4 and sharply rising to US$8.3 million in year 5. The sharp rise experienced in Year five was as a result of a huge residual value of fixed assets of the project. Cumulative net cash flow could reach US$19.1 million by close of the plan period.
Unistar Haulage Limited has critically accessed the business venture and it is convinced that it is technically and operationally feasible. Moreover, the cash flow analysis carried out also indicates that the project is financially viable under the stated assumptions.
The project when discounted over 5 years shows an Internal Rate of Returns of about 30.7% that far exceeds the cost of capital. Even with the introduction of a conspicuous caution in the evaluation, the project showed high viability.
2.9Conclusions and Recommendations:
Unistar’s proposed Bulk Haulage Transport Service venture for the industrial mineral ore mining sector is technically feasible and financially viable. The project will be able to generate adequate cash flow from its operations to meet all its financial obligations, including payment of dividends to share holders and also to embark on an expansion programme. It is our recommendation that the project be implemented.