Please adhere to following steps to develop the project evaluation of Bharatiya Zinc and explain whether it is financially viable or not.

Introduction: Bhartiya Zinc, one of the frontrunners amongst Zinc-Lead & Silver businesses across the world, is a focused and responsible mining & metal Company. It embraces measures that improve its productivity, efficiency, safety and conservation of precious natural resources, through technology & innovation.

Bhartiya Zinc currently have multiple extrusion plant the largest one in Udaipur and is planning to set up yet another one in Rajasthan. The company is leader player in the Zinc industry in the country offers a wide range of alloys. The basic steps in the manufacturing of Zinc is the process which include (1) preparation of a zinc sulfate solution by leaching zinc oxide calcines (produced by the roasting of sulfide concentrates) in dilute sulfuric acid, (2) purification of the resulting zinc sulfate solution, and (3) electrolysis of the purified solution. Production: The company is proposing to set up a new production facility and would cater to the same market where additional production will be absorbed.The company proposes to operate an 100000 tonne per annum Zinc Smelter at Udaipur, in-line with availability of mined metal. The facility would also supplies surplus zinc oxide, an intermediate product, to our other zinc smelters. The cell house in the new plant will be set up s to increase safety, productivity and efficiency. Marketing and Distribution : Existing distribution network will be used to reach the customers with additional products.

Capacity :The proposed capacity of the plant and the capacity utilisation is given below: Third year onwards the project will stabilize at( plus /minus )100 per cent of the capacity utilization. Utilization of capacity was ascertained as 75 percent in the first year , around 80 percent in the second year; nearly 100 per cent in the third year onwards till an estimated life of ten years.

Zinc Unit Installed Capacity First Year Second Year Third Year Tonnes 1000000 750000 800000 1000000

SRevenue Projection : Zinc is expected to be sold at Rs per ton Rs2.1 lakh.

Cost of the Project: The cost of the project works out as below: a) Fixed Assets or Long Term Loan: Rs 3145 crores b) Working Capital : The working capital requirements were Rs 431 crores at 75% capacity; Rs 459.73 crores at 80% capacity and Rs 574.67 crores at full capacity utilization. Interest rate for working capital were @12.5 %. Means of Financing: The project would be financed by equity of Rs 942 crores and rest by term loan financing amounting to Rs 2203 crores . Interest on term loan was @11.50 %. The companys share is listed in NSE . The risk-free rate of return is 8.00% assumed by the company and the market rate of return is 18%. The Beta of the company, as reported in the pink press was 1.17. Marginal tax rate of the company is @ 27 %. The project does not enjoy any tax exemption. It is expected the project will be implemented in an years time.

Life of the Project : For all estimation purposes life of the project would be 8 (eight) years. The project enjoys 2 (two)years moratorium in terms of repayment of instalment payment .

In rest of the six years, instalments of the principal will be paid uniformly. However interest payment will be from the first year of operation.

Salvage Value of the Project : Rs 310.

Manpower of the Project: Since company is already running a plant of similar type and of bigger capacity , the company is confident to draw competent human resources required for the project.

Availability of Raw Material : The company is in possession of mine rights of Zinc Mine , there will be no difficulty to obtain needed raw material .

Technology and Process Knowhow :The company will be using BayerHall-Herout commercial technology, for the production of Zinc.

Fuel Usage: To ensure reliable low-cost power for the units operations and to achieve self-sufficiency of energy needs, the company proposes to set up captive power plants (CPPs) to cater to the power requirements of its smelters and mines. Besides a large part of coal for the CPPs is high GCV imported coal. The price of coal since remains to be volatile the company is examining critically ,setting up installed thermal captive power plants (CPPs). As of now it would buy power from outside.

Risk Analysis- an indicative list only :(a)Changes in the market prices of Zinc, could adversely affect the results of operations;(b)Operating results are affected by movements in exchange rates; (c) The companys energy requirements are met by power supply of electricity boards , any changes in the state governments policy could increase production costs. (d) The company has to obtain a steady supply of Zinc ore at reasonable costs otherwise results of operations may be affected.

Domestic Industry Outlook: Domestic Zinc consumption has been witnessing strong growth spurred by investments and industrial growth. The outlook for future demand remains upbeat as economic activity in key Zinc consuming sectors continued to be fast paced. The company estimates with this capacity expansion its share in global market will be around 7%.

Project Implementation :A combination of cutting-edge technology-driven equipment and know-how of global mining experts will help us develop the mines. These initiatives will ensure high productivity levels at low costs, enabling us to maintain our position as one of the lowest-cost producers globally.

Revenues and Cost Structure (%) Cost Components as % of Revenue Raw Material 0.049 Salaries 0.034 Finance Cost 0.14 Depreciation 0.18 Power Fuel Water 0.050 Other Expenses 0.250 Sub Total .703

Assignment: You are to prepare (i)Cost of Production and Profitability Statement .(ii) Cash flow Statement.(iv)Calculate the cost of Capital; (v) NPV of the Project;(vi)DSCR.