8- Milk and Dairy Processing Factory-1

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Milk and dairy processing factory

PROJECT TYPE

Expansion

PROJECT GOALS OBJECTIVES

The goal of this project is to establish an intensified high yield cow dairy farm based on thecompanys current material base of livestock, practice and experience; expansion of itsoperations, processing of milk yielded in its established medium-size modern dairy facility withprocessing capacity of 10-15 tons of milk per day. Obtain milk from our Soum area andsurrounding farmers, process, package and distribute for sale in Ulaanbaatar and Darkhancities.

The present project was reflected in Tuv Aimag Governors Office Action plan for years 2008-2012 won the bid announced from the Development Policy Department of the Aimag.Therefore the Aimag administration is supporting present project in terms of policy. Also, the

administration shall assist in finding investors and arranging land and infrastructure requiredfor the factory.

EXPECTED RESULTS

We plan to process and produce 5 million liters of milk and dairy products a year and covermarket demand. 8-10 percent of raw milk shall be yielded from the farm of our company andthe rest would be obtained via purchasing from local herders, individuals and businessenterprises.

Create steady source of income for 40 people - 20 full time jobs, 20 contract jobs.

Prevent local people being taken advantage of when they supply their milk to milk factories inUlaanbaatar to sell at prices dictated by these factories. Also, create direct market access forlocal herders, where they dont have to drive their own vehicles to Ulaanbaatar to get their rawmilk processed.

The implementation of project would assist in realizing the policy to development of milkprocessing factories, reflected in the Tuv Aimag Governors Action Plan, and policy to fostersmall and medium enterprises. Although Tuv Aimag supplies majority of Ulaanbaatar city milkdemand, there are still issues of food safety and processing, which the present project wouldseek to address.

PROJECT DESCRIPTION

The project would be implemented by the Jisheelbel LLC. The company would operate based onmilk farms of own group companies and further it plans to cooperate with herder families andfarms of Batsumber Soum, neighboring other Soums, Selenge Aimag and outskirts ofUlaanbaatar.

The following activities are planned in the framework of this project:

Construction and installation of infrastructure required to run production. (Water, electricity,sewage disposure facility etc.)

The main raw material is milk. It would be brought in from farmers, as well as milked at our

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facilities with electric milking machines. It is planned to build a factory and install equipment in Batsumber Soum. The location of

factory is in distance of 50 Km from Ulaanbaatar city and is connected both to auto and railways.

Run promotion and advertisement campaigns designed for successful market penetration ofour products.

PROJECT BACKGROUND

Our company plans to make its own contribution in matter of protecting safety of consumers inareas of high population density and provide daily milk and dairy products by establishing a dairyprocessing plant with advanced technology and capacity to produce 10-15 liters of milk per dayand an intensified dairy farm as a solution to the current problem of free-range farming - gettingbetter yields with minimum expenditures from fewer, better bred cattle instead; produce andprocess milk on site (without having to breech storage regime and lower quality by trucking)making products with longer shelf life and modern packaging.

On the other hand this creates a new market opportunity and makes it possible to becomean exemplary enterprise for individuals, enterprises and organizations running milk farms, and riseprofitability of own animal husbandry business by introducing advanced foreign equipment andadding value to products.

PROJECT SITE

Batsumber Soum of Central Province. This location was chosen by Tuv Aimag GovernorsProgram of 2008-2012 to implement a bid-winning project.

Current infrastructure relating to production place:

Access to railway to connects with target market. Direct route to it measures 50 km from Ulaanbaatar, or 85 km on paved road. Connected to the central power line. Good telecommunications infrastructure (cellular phone coverage, internet, postal services) Shall drill deep water well The sewage dispose facility shall be built by the project executer

In terms of climate it is located in relative favorable weather environment. In winter the temperaturereaches max. -300, average summer temperatures are between 200 and 250, relatively humidatmosphere.

TOTAL FUNDS REQUIRED

Total Investment fund required: 453,500,000 MNTIncluding external investment: 375,000,000 MNT ($300,000.0)

Annual interest rate: 2.4%

Term: 5 year

Note: the external investment is planned to cover procurement of milk processing, dairy productionequipment. At period when the rate of US$ to MNT is 1,250US$ the investment is planned to be



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US$300,000.0.

Investment return: it would be $336,000 including interest for 5 years. There is possibility to add upto 7 percent bonus depending from investment return and companys operations.

Detailed projections are shown in the project proposal.

SALES PLAN& MARKETING ANALYSIS

Population of Ulaanbaatar city is roughly 1,5 million people including permanent and temporaryresidents. At calculation of their milk demand, assuming 300 gr./person per day, the totaldemand would be 450,000 liters per day and 164,3 million liters a year. Our factory hascapacity to provide about 3 percent per year from that demand. This is a potential market tooperate in.

Main marketing slogan: our milk is pure without mixes and is cheap. Oriented toward certain target group (school, kindergarten etc.) Everyone interested in milk processing factory may get a tour of it in groups.

Project details reflected in main project proposal.

IMPLEMENTATION SCHEDULE

The project would be implemented in two stages:o Research of production equipment, machinery and facilities, auxiliary tools, real

estate.1o Construction and exploitation of factory, product advertisements and promotional

campaigns.

The plan would be developed in form of table according to activities to be implemented at eachstage. The last column of the table shows investment required for each stage.

Tasks Term Investment

Research and choice of productionequipments and machinery

To be completedby November

2011-

Construction of infrastructure requiredfor the factory (electricity, heating,sewage disposal facilities)

March April2012

35,000,000 MNT

(+/- 2.0%)

Construction of milking parlorApril-June 2012

21,000,000 MNT

(+/- 7.5%)

Construction of factory building April-October

2012

55,000,000 MNT

(+/- 9.0%)Construction of auxiliary facilities July-September

201215,000,000 MNT

(+/- 10.0%)

Import and installation of factory September- 312,500,000 MNT

1 If the factory equipment was chosen in previous developed project from the technique manufactured in

China, then now in improved version of project we aimed to select from equipment manufactured inEuropean states.



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equipment December 2012 ($250,000.0)

Experimental operation of factory December 2012-January 2013

5,000,000 MNT

(+/- 5.0%)

Promotion campaigns, commencement

of sales

January 2013-

March 2013

10,000,000 MNT

(+/- 2.0%)TOTAL October 2011-

March 2013453,500,000 MNT

IMPLEMENTING ORGANIZATION

Name of project proposing enterprise: Jisheelbel LLC

Form of business enterprise: private company

Current activity: dairy farm in Bayanchandmani Soum of Tuv Aimag.

Address, contact phone: Gonchigsure

Tel: 9911-1419

Erdene Bag, Bayanchandmani Soum, Tuv Aimag.

Management and organizational structure of enterprise:

Daughter company of the Lopos LLC (Lopos Group). Other companies of the Lopos Group arespecializing in the fields of agriculture, cultivation, travel and tourism. Foundedin 2001. Currentlyhas no debts.


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8- Milk and Dairy Processing Factory-1