The Investment Benefit Analysis In Rebuilding And Extension Project By HY Mining Co. Ltd.

HY Mining Co. Ltd in Fengshan County (HY) is proposing a rebuilding and extension project with total investment of RMB 532,960,000, construction period of 2 years, capacity of 2000t/d or 660,000t/a. The product is gold concentrate. The revenue in the year reaching the designed capacity will be RMB 246,490,000.This paper utilized many aspects of theory, such as engineering economics, technical economy and management, market analysis, strategic management, human resources management, financial analysis, and project evaluation combining with a variety of analysis methods to achieve scientific research process and accurate research result, so as to achieve the purpose the purpose of investment analysis and realize the scientific of the project implementation and management. The main contents are as followed:First, since the development of non-ferrous metal mining industry, the increasingly tight supply of resources and the increasing of environmental awareness, the demand for gold mining is imminent. Basing on the contribution to the recourses share of the Group and gold production level, and combining with the current status of the development of technical and economic conditions, we proposed the development and construction of the mine.The total investment of this project is RMB 532,960,000 with the construction period of 2 years. After completion of the project, the annual production of gold concentrate will reach 1,369 kg per year. The revenue in the year reaching the designed capacity will be RMB 246,490,000, the gross profit will be RMB 69,160,000, and profit after tax will be RMB 51,870,000.Second, the demands for gold are: official reserves, jewelry, gold investment demand and industrial gold. Although the supply of gold in the world market is increasing, the demand and attention for gold is also increasing year by year. China's rapid economic development greatly stimulates the domestic gold consumption, and the purchasing power of residents in recent years has improved significantly. Gold consumption in China continued to grow in recent years, especially in the jewelry area of consumption.After completion of the project, the annual production of gold concentrate will reach 1,369 kg. This project has the characters of large scale, low investment, high productivity, and mature production technology. Currently, in order to rapidly expand the production scale of enterprises, meet the demand of domestic market, and occupy more international market as soon as possible, we hereby construct this project.Third, according to the needs of the production process, and considering the local meteorological conditions, we determine the location relationship of the mining and mineral processing industrial sites, so that the layout is reasonable.Regards to the water resource for the project, we got in touch with Guangxi hydrological geological team, and after the site survey, the water area has been basically established which is about 3km to the company. After the completion, the water supply (about 5000t / d) will meet the requirement for production.10km away from the proposed project area there is a 110/35KV regional transformer substation in Jiangzhou Area, which can meet the electricity requirements of the project. It has a 35KV backup export, so the power consumption of the project will be taken from the outlet side of the 35KV substation.This project takes the principles of contemporary design, construction and production for both environmental protection project and the main project. It takes relevant energy-saving measures according to States rules and regulations in respect of energy conservation.Fourth, according to relevant national regulations, for the implementation of project bidding and supervision of civil project, the calculation period should be 13years, the construction period should be 2 years, the production period should be 11 years, and the production reaching the designed capacity should be 9 years. This project started the preparation work in February 2011 and will start construction in June 2011, shall be completed in late May 2013.Gross investment of project is RMB 532,960,000, including construction investment of RMB 229,880,000, interest in construction period of RMB 10,680,000, working capital of RMB 26,400,000, and investment in mineral right of RMB 266,000,000. Other Sources of funding besides the investment in mineral right: 70% of the loans; 30% of the self. Long-term interest rate: 6.6%; short-term interest rate: 6.06%. According to the current gold market, the price of gold concentrate is RMB 180 / g. In the year reaching the designed capacity, the revenue will be RMB 246,490,000, total cost will be RMB 175,350,000, gross profit will be 69,160,000, and profit after tax will be 51,870,000.According to the sensitivity analysis, the reduction of product prices is the most sensitive factor, followed by the increase in operating costs. On the internal rate of return point of view, the project still has a certain ability to resist risks.Break-even analysis shows that as long as the company's production capacity can reach 63.77% it can keep the breakeven. It also shows that the project has strong ability to adapt to the market and resist risks.It shows from the above financial appraisal index that, the project NPV> 0, the project IRR is higher than the industry benchmark rate of return, the total investment can be recovered in 5.9 years, the total investment internal rate of return IRR = 12.51% (after tax); 10% higher than the basic return rate. The average annual state tax revenue is RMB 17,290,000, which shows that the project profitability is good.In summary, the project is economically feasible, and should be due as soon as possible in order to obtain economic benefits.The project is in line with national strategic policy, environmental protection, energy conservation. It should stimulate domestic demand, improve the employment, increase tax revenues, driven regional economic development, and the social benefits are particularly significant. The main risks of the project are engineering technology, markets, resources and policy changes. This paper gives measures to prevent and reduce risks.This paper is based on the project investment estimation. Through the determination of ways of fund raising, product capacity, product sales prices, product cost estimation, and tax rates, this paper calculated the financial net present value, internal rate of return, investment recovery period and did the sensitivity analysis and the breakeven analysis. At last this paper proved the rationality and feasibility of the project investment..The project is advanced in technology, extensive in product market, considerable in economic benefits, and feasible in economic. If it can schedule up to production, it will be a successful investment.