Study and Cost Estimates - Mn Dabeiba Exploitation - Final

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AllRightsreservedforDabeiba

Manganese

RicardoBoteroR

uíz

Analysis, Evaluation and Cost Estimation of

Exploitation and Realized Investment.

EXPLOITATION PROJECT DABEIBA MANGANESE

Mining Concession Contract 6132RICARDO BOTERO RUÍZ

Medellín, Colombia

June 2011



AllRightsreservedforDabeibaManganese

RicardoBoteroRuíz

Content

INTRODUCTION ..........................................................................2

Income - Analysis and Estimation 3

PIB Analysis 3

Mn Ore Analysis 5

Electrolytic Mn Analysis 6

Analysis and Cost Estimates 9

IPC Analysis 9

1. REA LIZED INVESTMENT TO DATE ............................................................ 12

2. MONTHLY COST FROM DABEIBA MN EXPLO ITATION PROJECT ......... 13

Payroll Analysis 13

Freight Analysis 14

Operating Costs Analysis 15

Analisys – Extraction and Exploitation Cash Flow Summary 16

3. Reference Sou rces ...................................................................................... 19



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RicardoBoteroRuíz

Analysis, Valuation and ForeCast of Mn Exploitation Costs and Initial Invesment 2

INTRODUCTION

This document analyze, evaluate and estimates the implicit costs in the Dabeiba

Manganese mining project, as well as the different components of the realized

investment to date, in pursuit of the minimum standards of the project, to

initiate mineral works of extraction and exploitation.

Dabeiba Manganese project is operated through the 6132 Mining Concession

Agreement in favor of Ricardo Botero Ruiz.

The 6132 Concession Agreement authorizes technical exploration and economic

exploitation of Manganese and all associated minerals or products of the land in

an area of 78.4921 hectares located in the settlement of Dabeiba, North West of

Antioquia, Colombia with an effective term of 30 years according to the Mining

Record Certificate issued by the Colombian Institute of Geology and Mining

INGEOMINAS.

Total operating costs of the Mn Dabeiba exploitation and the realized investment

components are identified through a field study and data contrast, supported by

Benchmarking of similar projects both national and international, developed in

similar settings and environments. the analysis of the latter is founded on

historical data and in the variables that influence the behavior of these which is

done based on econometric methods, using modeling software, and is sustained

with our technical and fundamental analysis, likewise from known and qualified

authors1

in the matter.

1IPC and Dolar Forecast, Graphs 1. And 13.



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Income - Analysis and Estimation

Revenues in the Mn Dabeiba exploitation project are estimated based on technical analysis of

incident variables in the local economy growth and in the Manganese price forecast according to the distribution of trading data on the international market since the early 90s.

This estimate is consistent with the operating licenses and quantities of reserves, thus

optimizing the extraction time and volume.

PIB Analysis

Graph 1. Local Economy Main Indicators. IPC Forecast



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Graph 2. Local Economy Main Indicators



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Mn Ore Analysis

Graph 3. Manganese Ore

Graph 4. Mn Ore Trading Data.



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Electrolytic Mn Analysis

Although not a direct part of the initial project, some graphics and information on

the behavior of electrolytic manganese trading prices in international markets are

presented. Should be noted the considerable difference in the price of electrolytic

manganese compared with the price of manganese ore.

Graph 5. Electrolytic Manganese



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Graph 6. Electrolytic Mn Trading Data.

Graph 7. Bollinger Band Electrolytic Mn



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Graph 8. Price Series Analysis Mn ORE @RISK

* Please refer to the Microsoft Excel file for more details on the analysis of the distribution of

the price series of Mn ORE.

@RISK Fit Statistics

0,305 1,350

2,5%0,5%

95,0%98,3%

2,5%1,2%

0

0,00002

0,00004

0,00006

0,00008

0,0001

0,00012

0,00014

0 , 2

0 ,

4

0 ,

6

0 , 8 1

1 ,

2

1 , 4

Values in Thousands

Fit Comparison for Dataset 1RiskLognorm(181,65;237,25;RiskShift(296,5))

Input

Lognorm



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Analysis and Cost Estimates

After of being fully identified the entire project costs, all factors and variables that influence

the change in costs are studied and analyzed on an annual basis. For this, the behavior of theconsumer price index in Colombia is analyzed, and after data processing are generated

estimates of inflation for the variation in of project costs.

IPC Analysis

The forecast and interpretation of term structure of interest rates in the economies has been

for a long time, subject of great interest in the practice, because, Firstly, of the economic

information contained and, secondly to the possibility of valuing assets in the economy.

Therefore, the forecast of Consumer Price Index are estimated with the term structure of

interest rates using basically the Nelson and Siegel (1987) method to generate the yield

curves.

Table 1. Yield Curve Information.

Graph 9. UVR & COP Forecast Yield Curves

B0 B1 B2 tao DATE

Pesos 8,60468 -4,38977 -0,00719 2,02615

UVR 4,14817 -2,99728 0,06725 1,2665214/06/2011

2,0000%

3,0000%

4,0000%

5,0000%

6,0000%

7,0000%

8,0000%

9,0000%

0 5 10 15 20

COP UVR IPC





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Graph 12. Annual IPC – Annual Accumulated Trading Data vs Forecast



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1. REALIZED INVESTMENT TO DATE

For the adaptation and achievement of the plant, terrain and working capital minimum

requirements that allow the initiation of mineral exploitation and extraction led to the following investments, which have been valued to date, taking into account changes in key

variables that affect the prices, as an example the CPI.

Table 2. Initial Invesment Mn Dabeiba

ITEM UNITS PRICE PER UNIT TOTAL

MACHINERY

Bulldozer 1 204.444,44$ 204.444,44$

Backhoe 1 225.000,00$ 225.000,00$

Lift Fork 1 86.666,67$ 86.666,67$

Pneumatic Drill 2 16.666,67$ 33.333,33$

Plant 2 50.000,00$ 100.000,00$

Grinding Mill 2 20.555,56$ 41.111,11$

Conveyor Belt Motor 2 4.722,22$ 9.444,44$

Tolv 2 31.666,67$ 63.333,33$

Conveyor Belt 2 33.333,33$ 66.666,67$

Packer 1 36.111,11$ 36.111,11$

Water Pump 2 16.666,67$ 33.333,33$

BUILDINGS

Warehouse 500 m2 1 416.666,67$ 416.666,67$

Workshop 1 16.666,67$ 16.666,67$

TERRAIN 1 555.555,56$ 555.555,56$

Terrain Adequation 1 250.000,00$ 250.000,00$

Concession Contract 6132 1 194.444,44$ 194.444,44$

Payroll 12 40.204,20$ 482.450,42$

Representation Expenditures 1 36.800,00$ 36.800,00$

Feasibility Studies 1 48.000,00$ 48.000,00$

Security 1 250.000,00$ 250.000,00$

INITIAL INVESTMENT

TOTAL 3.150.028,20$

899.444,44$

433.333,33$



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2. MONTHLY COST FROM DABEIBA MN EXPLOITATION PROJECT

Payroll Analysis

Listed below are the wages and the extra-payments for the manganese mining

project Dabeiba.

PAYROLL MONTHLY

WAGE#

Employees 2011

Operator 15 $ 6.666,67

Messenger 2 $ 833,33

Secretary 2 $ 1.000,00

Logistic Auxiliary 2 $ 1.333,33

Operative Auxiliary 3 $ 2.000,00

Tax Auditor 1 $ 1.388,89 Accountant 1 $ 833,33

Operative Chief 1 $ 1.555,56

Commercial Advisor 3 $ 5.000,00

Marketing Manager 1 $ 1.833,33

Assistant 1 $ 1.388,89

Technician 6 $ 4.500,00

Consultant 2 $ 3.888,89

Manager 1 $ 4.444,44

Transportation Assistance 19 $ 649,17

TOTAL 41 $ 37.315,83

Social Security Pension $ 1.466,67

Social Security Health $ 1.466,67

Employees Total Deductions $ 2.933,33

PAYABLE TOTAL $ 34.382,50

BENEFITS CONTRIBUTIONS Monthly

Occupational Hazards $ 893,20

Compensation Fund $ 1.466,67

ICBF $ 1.100,00

SENA $ 733,33

Health $ 3.116,67

Pension $ 4.400,00

SOCIAL SECURITY SUBTOTAL $ 11.709,87

PLUS EMPLOYEE DEDUCTIONS $ 14.643,20

SERVICES PRIME $ 3.109,65

EXTRA-LEGALS $ 8.170,95



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MONTHLY PAYROLL TOTAL $ 60.306,30

Table 3. PayRoll Details Mn Dabeiba Project.

Freight Analysis

From the following compilation of national freight rates, we estimate

a similar path to calculate the transportation cost per ton of Mn Ore from the mine

site to the Gulf of Uraba.

Table 4. Colombian Freight Rates per Ton 2011.

DESTINO

ORIGEN ARMENIA B/QUILLA BOGOTA B/M ANGA B/TURA CALI C/GENA IBAGUE IPIALES M/ ZALES M/ LLIN

POPAYA

N YOPAL

ARMENIA - 120.545 64.778 88.772 50.991 38.591 118.875 36.123 101.196 30.617 62.818 53.135 187.208

B/QUILLA 131.255 - 139.188 102.476 152.105 154.875 37.873 144.431 178.108 132.927 110.962 163.080 170.020

BOGOTA 58.359 91.366 - 64.929 76.629 74.583 91.366 44.431 134.973 67.470 69.939 89.183 60.028

B/MANGA 90.541 79.727 79.882 - 120.225 113.606 89.528 81.078 168.129 91.050 96.886 131.339 110.259

B/VENTURA 55.169 155.854 102.952 123.224 - 43.875 153.740 75.745 102.224 62.886 95.775 58.290 133.694

CALI 39.458 133.706 83.134 114.100 43.875 - 133.706 60.659 80.175 53.136 75.908 39.382 121.055

C/GENA 133.694 33.741 142.975 105.446 159.912 152.334 - 134.843 176.983 127.221 106.805 166.596 172.959

CUCUTA 111.819 89.054 95.660 48.686 135.524 133.706 96.570 101.778 176.984 109.128 112.276 143.039 127.778

DUITAMA 82.603 91.366 41.459 62.360 98.947 94.365 101.644 65.683 153.059 83.343 95.217 106.590 45.560

IBAGUE 47.493 114.487 45.991 80.974 62.907 57.067 111.601 - 111.614 56.361 73.630 83.937 87.324

IPIALES 96.506 184.238 134.973 160.899 97.326 82.965 184.238 111.257 - 110.429 132.504 79.034 163.370

M/ZALES 40.948 109.865 79.821 92.411 56.638 51.652 107.261 56.528 110.891 - 52.139 70.172 110.878

MEDELLIN 54.676 76.532 73.172 80.208 72.098 65.652 74.923 73.630 115.487 53.502 52.139 74.025 125.164

NEIVA 66.700 135.524 63.116 101.310 81.078 69.604 135.524 41.459 117.636 74.114 84.105 95.515 98.184

PASTO 85.407 168.859 121.886 143.596 86.317 74.222 172.359 105.572 27.849 96.752 117.113 70.172 154.554

PEREIRA 35.863 116.404 76.848 91.547 54.422 42.037 113.932 57.090 106.754 37.873 58.451 66.562 111.386

S.MARTA 140.149 32.109 132.770 95.625 151.010 149.653 40.007 135.056 172.359 132.572 116.704 160.676 167.748

V/CENCIO 70.122 115.935 43.639 78.357 86.551 87.992 115.935 58.076 146.066 72.240 90.692 96.506 75.745

Tarifas por tonelada en pesos (COL $)



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Table 5. Freight Mineral Transportation (20 years)

Operating Costs Analysis

The minimum required operating amounts to permit the project to work are showed in the

table below.

Table 6. Monthly and Annual Operating Costs Mn Dabeiba.

AÑO 1 2 3 4 5 6

PRODUCCION (Tons.) 48.000,00 61.980,00 64.025,34 66.138,18 68.320,74 70.575,32

COSTO/TON 19,58 20,23 20,97 21,79 22,69 23,66

FLETE 940.000,00$ 1.253.945,13$ 1.342.417,63$ 1.441.105,90$ 1.550.240,78$ 1.670.021,73$

7 8 9 10 11 12 13

72.904,31 75.310,15 77.795,38 80.362,63 83.014,60 85.754,08 88.583,96

24,70 25,80 26,96 28,17 29,45 30,79 32,19

1.800.762,96$ 1.942.930,47$ 2.097.140,23$ 2.264.145,92$ 2.444.826,71$ 2.640.178,41$ 2.851.308,75$

14 15 16 17 18 19 20

91.507,23 94.526,97 97.646,36 100.868,69 104.197,36 107.635,87 111.187,86

33,65 35,18 36,79 38,46 40,22 42,05 43,96

3.079.436,18$ 3.325.891,62$ 3.592.122,61$ 3.879.699,31$ 4.190.322,11$ 4.525.830,54$ 4.888.213,41$

ITEM Year Month

Labor 723.675,63$ 60.306,30$

Raw material 333.333,33$ 27.777,78$Fixed Costs 70.555,56$ 5.879,63$

Variable Costs 40.000,00$ 3.333,33$

Maintenance Expenditure 17.222,22$ 1.435,19$

Utilities 30.555,56$ 2.546,30$

Administrative Expenses 160.800,00$ 13.400,00$

Sales expenses 203.333,33$ 16.944,44$

Security 93.100,00$ 7.758,33$

SUBTOTAL 1.672.575,63$ 139.381,30$

Provisiones 334.515,13$ 27.876,26$

TOTAL 2.007.090,76$ 167.257,56$

OPERATING COSTS (Minimum Required)



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Analisys – Extraction and Exploitation Cash Flow Summary

The project's cash flow and the other analysis should be viewed in the Excel File, where it

could be appreciated the integration of the monthly and annual variables.



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APPENDIX

USD/COP Trading Data and Forecasts American Dollars/Colombian Peso

Graph 13. USD/COP Forecast.



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Graph 14. COP Daily prices



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3. Reference Sources

Bloomberg Transaction platform 2011.

Reuters International information services 2011.

NTC 5254

Buenas prácticas para la gestión y Supervisión del riesgo operativo. Febrero 2003

http://www.datacredito.com.co/wpsv6/wps/portal/Empresas

http://www.symantec.com/business/command-line pgp

www.bancodeoccidente.com.co

www.grupobancolombia.com

www.latam.ci t ibank .com

www.bbva.com.co

Mining Registry. Mining Concession Number 6132.



http://www.symantec.com/business/command-line


http://www.bancodeoccidente.com.co/


http://www.grupobancolombia.com/


http://www.latam.citibank.com/




http://www.bbva.com.co/








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Study and Cost Estimates - Mn Dabeiba Exploitation - Final