The purpose of this project is investment attraction for financing of prospecting works on confirmation of reserves and construction of a gold-extracting complex. The summary of the project is shown in the following table.
|Site||Trans-Baikal Territory, in the territory of the Mogochinsky region, to Entre Rios the Shilka river and the river Amazar|
|Field||License area with a total area of 185,8 sq.km|
|Resourses||Cumulative forecast resourses of categories P1 and P2 - 177,53 tons of gold|
|Project stages||The project is being implemented in 4 stages:
|Plan sales volume||8,5 tons of gold a year|
Table 1. Main characteristics of the project.
The project includes an investment attraction for establishing a gold mining company with the initial resource base of 177 tons (5.7 million troy ounces) of gold and annual extraction of gold-bearing ore totaling to 3.5 million tons per year. The company’s primary activity shall be gold mining on the gold field of Kadara in the Trans-Baikal Territory.
The company has a license for geological survey and extraction of ore gold and associated components in the Kadara river basin. The expected annual extraction is 8.5 tons of gold (273.3 thousand troy ounces).
The project envisages financing of prospecting works for confirmation of the gold reserves and construction of a gold-processing complex. All investment shall be completed within four years after the project is commenced.
|Direction of investments||Total||At the expence of investments||Due to refinancing||Years|
|Conducting exploration works||15 256,65||9 214,36||6 042,29||2017-2020|
|Quarrying and mountain machinery||16 756,60||9 238,38||7 518,22||2017-2020|
|Objects of industrial construction of a gold-processing complex||59 600,00||24 064,46||35 535,54||2017-2021|
|Housing and civil facilities||6 700,34||2 630,34||4 070,00||2017-2020|
|Small hydroelectric power station||18 205,11||11 624,18||6 508,93||2017-2020|
|External transport||3 155,71||2 548,28||607,43||2017-2019|
|Research and development||1090,00||680,00||410,00||2017-2019|
|SUM TOTAL||120 764,41||60 000,00||60 764,41|
Table 2. Investment plan, in ths US dollars.
The project involves financing from the following two sources: funds from investors and own funds of the gold mining company (based on refinancing).
Investment attraction conditions are as follows:
Chart 1. Schedule of calculations for financing, in ths US dollars.
Implementation of the project is estimated as feasible for both the parties to the project participants and the economy, as well as the society in whole. The project takes on even more importance in the current social and economic situation - instability of the national currency and demand for gold from banks, mostly from the Central Bank of the Russian Federation, as well as private investors.
The project promoter is SStarTrade SA, a Swiss consulting company, which has been engaged in financial and legal consulting since 2005, and also acts as managing company for a number of international projects.
The company implementing the project is the Russian gold mining company Favorit-Centre LLC (further referred to as "Company") which has been engaged in prospecting and surveying works for ore gold in Eastern Siberia since 2004. The headquarters of the Company responsible for corporate planning and financial activities is located in Moscow.
The scheduled period of the project is 6 years.
The commercial efficiency of the project was calculated based on the discount rate of 15%.
The aggregates of the project efficiency, after the gold mining complex reaches the project capacity, are shown in Table 3.
The financial forecast analysis confirms high investment attractiveness of the project:
|Project performance indicators|
|Net present value (NPV), ths USD||64 174,49|
|Discount rate, %||15|
|Profitability rating (PI)||1,53|
|Internal value of return (IRR), %||29|
|Sales volume, ths USD||330 123,62|
|EBITDA, ths USD||202 729,22|
|Net income, ths USD||157 492,52|
|Net discounted income, ths USD||120 400,60|
|Total amount of financing, ths USD||120 764,41|
|Volume of investment, ths USD||60 000,00|
|Volume of refinancing, ths USD||60 764,41|
|Breakeven point, ths USD||60 909,44|
|Investment period, years||5|
|Payback period, years||5|
Table 3. Summary performance indicators of the project.
The benefits of the project are based on its primary feature, i.e. establishment of a gold mining company engaged in the sphere of gold mining with a long-term perspective of extracting at least 8.5 tons of gold a year for 20 years:
The drawbacks of the project include its high investment cost and the need for a long-term financing. Moreover, a permanent monitoring of production costs and gold quotations is required to maintain the production profitability.
Overall, the project is estimated as a perspective one, featuring considerable financial and business advantages.