- Country: Kenya
- Industry: Energy, Natural Resources, Mining
- Stage: Seed
- Investment size: $500,000 / min. $450,000
- ROI: 62% in 3 years
- Type of investment: Equity
• Ballast production with a 100 ton/hr plant targeting a new road bypass
• Funding required for land, equipment purchase & installation
• 49% shareholding for investor
• Ballast production involving drilling and crushing at 100 tons per hour
• Targeting local market for house construction and roads. The site location is within the proximity of a new highway being constructed by the central government.
• A sale is always on site and payment is on cash basis. Lorries find their way to the quarry and pay upfront. At the same time ballast and sand (fine dust) is sold to the local market from an ideal location near the target market.
• The goal is to establish a sustainable quarry business that quickly recovers cost of investment within the first 3 years. The business is expected to perform better in the subsequent years due to vigorous marketing and capitalising on return business. Part of the profits will be re-invested by securing more land and a higher capacity machinery to avoid underproduction.
• Ideal land has been identified and feasibility study concluded (Market, competitive advantage, risks, profit margins and marketing / expansion strategies).
• Various market leaders for equipment supply have been contacted and prices & quality analysed. The name of the business has been registered with the Kenya government.
• Project timelines:
o initial land acquisition 5 acres, December 2016
o Equipment purchase, installation and testing, Jan-Feb 2017
o 3 months pilot production with intense marketing, Mar-May 2017
o Full capacity production June 2017 - June 2020
o Expansion of business, July 2020.
• We require technical support funding by the investor(s). The investor provides the equity and owns 49% of the total profits.
Our main competitive advantage is the proximity to the government's planned greater eastern bypass construction and the already started outer ring road expansion to a dual carriageway. This will provide a good demand and few suppliers due to our proximity to the projects. The exact quarry location is Utawala while most quarries are further west where competition is steeper. Due to the strategic location, I will be able to serve Katani, Utawala and Kamulu regions. Most customers won’t have to drive all the way to Mlolongo and Athi River for the commodity. No one wants additional transportation costs eat on their profit margins.
Our marketing strategy is unrivalled. We'll be utilising technology as a main marketing tool. Most quarry owners do not market their business instead; they leave the awareness to the few current customers to direct more into their quarries. Being a technocrat company, we intend to heavily use the internet and social media as a marketing tool in addition to posters and use of sales agents.
Another advantage is buying land as opposed to leasing. Leased land always poses unpredictable challenges like disturbance or breach of contract by the landlord during the production tenure. During the feasibility study, several quarries that initially leased land had several unprecedented challenges with the owners who often become greedy and try to change terms of the agreement.
Rationale for the deal
Demand for ballast and sand has increased double fold due to the increasing demand of clean housing especially by the middle class. The rate of mortgage consumption has pushed the rate of construction to a whole new level in the last 5 years. Also, after the government launched the construction of missing link roads and major highways, the demand for ballast has drastically gone higher than the other components of construction like sand and cement. Due to the high costs of start-up capital, very few individuals have managed to venture into this business despite its lucratively high returns.
The sale of ballast (not only in Nairobi) is a very lucrative business with a guaranteed ROI. Coupled with sales from other by-products of the production like sand and the dust only increases the profit margins since nothing goes to waste.
There are efforts by other players in the market to start quarries along the bypass, but have all concentrated on a single area making competition very steep. Out of over 15 quarries, only 3 seem to see the gap on my target market. We are ready to compete with these especially with our unique marketing strategy.
I have been in the selling business of ballast for 4 years and I understand the demand and supply dynamics as well as the loop holes used by sales agents and brokers to undermine the quarry business' full potential. I am also working with an experienced local engineer in the ballast production business. He has setup a dozen quarries (some, my competitors) and also very good in providing technical support and advice.
Use of financing
The required funding will be used to secure an initial piece of land (5 acres), the quarry production equipment and the related machinery like a wheel loader, a tipper, a driller and a power generator
Cost estimates are as follows:
• Land 5 acres - $140,000
• Quarry equipment complete with vibrating screen, impact and cone crushers, & conveyor belts - $200,000
• Tipper - $60,000
• Generator - $10,000
• Loader - $25,000
• Driller - $25,000
• Basic construction - $20,000
• Initial government advance / statutory taxes - $10,000
• Miscellaneous - $10,000
We need two rounds of financing
Opportunity for the investor
49% shares will be offered to the investor(s). Dividends will also be shared on a 50-50 basis.
After full ROI, the investor may wish to reinvest into the company or sell his shareholding.
We don't mind a silent investor but a more hands-on investor is preferred.
The sellers of the equipment needs payment in 2 instalments, the second one should be paid after installation and commissioning.
Therefore full payment required by the equipment suppliers is desired.
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