Summary

An opportunity for an investor or investors to get on board and buy a 50% equity stake into a small scale mining company carrying out mining in Uganda, Congo & Tanzania. Tantalite, Cassiterite,Tin,Copper, Gold & Diamonds are the minerals and precious stones predominatelty mined on an alluvial scale. investment of R1.390 million would yield a projected return of of 70 to 80% per annum. The promoter of this investment, a SA, is a seasoned small scale miner who will be hands on in operations.

1. History Background

Fully describe the business's activities?

This business proposal is brand new and will suit an investor who is willing to risk a relatively small cash investment to yield high annual returns. As with all mining activities the risk is encompassed in the demand and price of the commodity relative to cost of production. This business model is relatively simple as the proposed company only partners with existing miners who are presently mining the reserves manually without mechanization. The proposed company will partner with existing small scale miners who have exploration/mining permits and licences for Tin, Gold, Copper, Tantalite, Wolfram and Lead. The partnership will purchase very basic earthmoving, dredging and density separation equipment and employ this equipment in improving the quantity and quality of ore currently produced. The mining is limited to surface mining of alluvium and placer deposits. Once the ore is removed and dressed to a point where minimal gangue material is associated with the ore it will be packed into bags and/or drums for export. Export documentation will be drawn up and the ore will be transported to a warehouse where it will be assayed by an independent laboratory service and sold to contracted buyers. Selling contracts will be arranged prior to the commencement of mining operations. Distribution of profits will be determined in the JV contracts drawn up with the license holders beforehand. There is no attempt at this stage to acquire mining licenses independent of the artisan miners as this avoids the lengthy process of application and approval thereof, it also avoids completion and is in keeping with the mining and mineral codes and ambitions of the governments in the region which is in favour of formalising the artisan mining sector because it maintains employment and offers advancement opportunity for local entrepreneurs. In most instances a small investment in mechanisation will quadruple production and more. This will create a very profitable Joint Venture for both the small scale artisan miner and the investor.

How long has the business been established?

This is a proposal to establish a new business in a very profitable sector of mining as the minerals targeted are relatively expensive and in high demand.

How long has the owner had the business?

The promoter of this investment has been active in the artisan mining sector in Tanzania, Zambia, Congo, Uganda, Rwanda etc for the past 12 years. He is acquainted with the local small scale miners and has first hand knowledge of existing mineral reserves.

What steps are in place to solve 'load shedding' problems?

Since all mining activities are done in rural settings, generator power will power the machinery and equipment.

2. Present Market

PROPOSAL

We propose the formation of an Exploration, Trading, Development and Investment Company in Uganda that can bolster trade and assist in formalizing trade in minerals. Search out and cultivate raw opportunity prospects in small scale mining and exploration into fully bankable projects that can be sold on to investors, miners and mineral ore developers. The function of this company will be to; (1) Purchase and trade in mineral ores through the fundamental support of small scale and artisan miners. (2) Work in conjunction with local prospector and exploration license holders in the research and exploration of minerals in areas of known resources, based on local knowledge and / or previous mining or current artisan activity. (3) Conduct research into opportunities in primary processing of raw materials, sometimes looking at tolling facilities. (4) Develop these resources into mining opportunities in conjunction with local and foreign entrepreneurs. (5) Encourage and secure investment in opportunities that have been identified and developed into bankable projects.

JUSTIFICATION

Traditional transport route for trading in minerals: Rwanda, Uganda and Tanzania are the traditional export routes for material mined in DRC. Recently large quantities of material have been routed through Rwanda, but areas to the north of Rwanda are mineral rich and volumes of material from this area are still exported through Uganda. Existing trade: There is an existing network of miners and traders in minerals, precious metals in all the countries mentioned above. Business environment and facilities Uganda has a relatively good road and rail network. Banking and other business facilities are readily available. Services and utilities are reasonably reliable. Low establishment costs: Costs of entry to most business in Uganda are low in the region with attractive licensing and export fees and duties. Government encouragement and assistance The Uganda government currently describes Uganda as the next mining destination for the exploitation of potentially vast reserves of Gold, Platinum, Chrome, Copper, Lead, Tungsten Tin, Tantalite, Diamonds and a host of other industrial minerals and base metals. Current legislation encourages exploration and the various government departments are well positioned to provide basic information and assistance in the promotion of the mining sector. The Uganda Government Mineral Policy Objectives are: (a) To stimulate mining sector development by promoting private sector participation; (b) To ensure that mineral wealth supports national economic and social development; (c) To regularize and improve artisan and small scale mining; (d)To minimize and mitigate the adverse social and environmental impacts of mineral exploitation; e) To remove restrictive practices on women participation in the mineral sector and protect children against mining hazards (f) To develop and strengthen local capacity for mineral development; and (g) To add value to mineral ores and increase mineral trade. The proposers have a wealth of experience in the region having worked with many small scale miners and prospectors. We have the capacity to do basic geological assessments and report on general geomorphological settings; environmental impacts and complete desk top studies prior to any ore body assessment.

What competition exists?

Competition is in the form of the existing artisan miners who can be used as suppliers of additional at very competitive prices. Recently there has been a marked increase in the amount of Chinese and Indian investment into small scale mining operations in Sub-Saharan Africa, since the cost of entry into this lucrative sector is relatively low with substantial returns. There are also bigger mining companies who have operations in the region and even bigger mining houses that have projects in the pipeline. The world demand for the minerals targeted is very buoyant and the presence of other miners is no deterrent to profitability, but an advantage in that there presence helps to improve logistics and supply of spares and process consumables.

3. Financial

POTENTIAL

Potential Profit in trading mineral ores can be anything from 10% to 30% of turnover. It is expected that assistance to miners will deliver a margin in excess of 40%. Copper ore, Tantalite, Cassiterite and Wolfram can be bought at good profit potential from existing artisan miners. It must be remembered that the artisan miners are not in the position to produce large quantities of material and any attempt to trade in really commercial quantities will require assistance of some sort. A committed buying office in Uganda dealing in these minerals will benefit greatly from this opportunity. Finding and proving a mineral resource has enormous profit potential as is seen from the financial successes of companies like Anglo, Billiton, Xstrata and recently a host of Australian and Canadian companies exploring in Africa. AS AN EXAMPLE: IAMGOLD spent $4.6 million on exploration at the Buckreef deposit in north-central Tanzania in 2008. At year end, resources at Buckreef were estimated to be 27.8 Mt at a grade of 2.1 grams per metric ton (g/t) gold (IAMGOLD Corp., 2009, p. 62, 147). The value of this resource today is $2,500 000 000.00. If mined and processed.This proven resource will now be used to finance itself for further development. An investment into this proposed company will generate revenue from the word go as it basically becomes a JV partner in an existing income generating operation. The investment into mechanized equipment will maximise output thereby generating sufficient revenue to provide healthy investor returns.

LEGAL ISSUES & COMPANY STRUCTURE

An investment of R1.390 million will buy a 50% stake into the company. The other 50% will be owned by the promoter of this proposed company. A trading compony will be registered in Uganda as its infrastructure is ideally positioned to support and promote this sort of operation.

What is the ROI?

The return on investment would be anything from 70 to 80% per annum to an investor. A point to remember that this is a scalable proposition and further capital expenditure in the region of R500k could yield an investor a further 200% in returns per annum.

4. Staffing

What is the total staff complement?

All staff with regards to artisans will be sourced from the country where the actual mining will occur. The promoter, a South African together with an experienced mining supervisor will oversee operations and will be responsible for the implementation of the tenants of this proposed business.

5. Premises

Do you require a licence?

Yes, a mining licence is required. This will not be a problem as the small scale miners we desire to partner with already have licences in their possession. Our goal is to form JV partnerships with them thereby eliminating any licencing issues that may arise.

6. Assets

Is a full asset list on file?

A full asset list of all equipment required will be made available to qualified investors. Most equipment will be bought in SA and transported to the target mining area.

7. S.W.O.T. Analysis

Strengths?

A relatively small investment with the prospects of earning above average returns. An existing mining operation exists which provides for instant revenues thereby eradicating the risk of wild catting. A good supply of local mining know-how makes efficient productivity possible. This proposed business will provide the necessary skills which will enable upliftment in the living standards of the local artisan miners. A definite skills transfer will result in an efficient work force.

Weaknesses?

Capital restraints will always be a weakness as many investors are risk averse when considering Africa as a an investment destination. This said, a lot has changed in Africa over the past 10 to 15 years, brought on mainly by the advent of the internet and globalization.

Opportunities?

Now is the ideal time to invest in Africa, whilst the region is still relatively underdeveloped. With the increased Chinese and indian investment mobilization in the area, soon this small scale mining sector will become saturated. With a relatively cheap labour force and the demand for mining products and commodities I forsee a sustainable business in the making.

Threats?

Political instability has always been a threat in Africa as well as a slowing demand for commodities could have adverse effects on revenues going forward.

9. Conclusion

Why is this a good business?

The proposed business will participate in a sector where demand will continue to soar thus providing for sustainable revenues. A simple business model exists which essentially aims at retrieving the raw materials from the earth and selling them to a captive market in the form of readily available dealers. The promoter of this business is a seasoned mining facilitator, who is incidentally also a commodities broker who has a wealth of intellectual capital to inject into this venture. He has know-how, contacts within the region who could expedite legal and logistical issues and has the energy and character to drive this venture. The Promoter, a nurtural entrepreneur will be hands on in the venture and will provide for the transfer of skills to the local artisans thereby eradicating the need for expensive mining engineers or consultants.

What is the price plus stock and the net profit?

An investment of R1.390 million buys a 50% equity stake in the proposed company with an expected return of R950k in the first year of operations. The financial analysis that follows makes use of projected revenues and expenses and the assumptions made were rather conservative. The profit quoted in the financial plan is projected and is the average that the 50% equity investor can expect to achieve in the first year's trading.