Stone quarry expansion - capital investments option from Caspian Trading Inc.

Investment case. A privately held invest fund has a major interest in an acting stone quarry located in Western Kazakhstan not far from town Atyrau. The quarry provides a host of Kazakhstan’s constructing companies with granite, marble, limestone and other building materials used in house and infrastructure construction. The invest fund’s idea is to expand the business, equip it with modern mining facilities to integrate it into another project of ours (construction and development) in order to create a vertically integrated holding with diversified operations, which could be sold into strength to strategic investors. Our point is to make use of current market weakness to save money, while markets are frozen and prices are relatively low.
Finance. In late August 2009, a conservative evaluation of the business rendered a value close to $40 mln, which implied limited growth potential of the enterprise. Given considerable investments in the pipeline (ca. $20 mln), we can expect the quarry to be worth some $80 mln, including licences, government approvals and current contracts. Fully invested, the quarry would generate $5-6 mln in yearly net income, which implies a forward P/E ratio of 13-16. On the operational side, we see significant growth potential. Upon modernization, the quarry’s capacity would increase by 40% to produce 0.8 mln tons of marble, 2 mln tons of granite and 1.2 mln tons of other rocks per annum.

Project progress. At this point we are upgrading the mines and implementing a new costly security system to prevent professional accidents. We are also looking for investors willing to become partners in the invest project and invest some money into new equipment and business expansion.