Sitnitsa’s Mining and Dressing
Works Construction
Tender
3 February 2011
National Agency of Investment
and Privatization
Table of Contents
Sections
1. Executive Summary ………………………………………..…..3
2. Republic of Belarus, Pripyat Polesie Region..………….….…5
3. Project Overview ………………………………………………..8
4. Next Steps and Q&A ……………………………………….....18
Appendix
1. Questionnaire …………………………………………….……20
Executive Summary
3
Executive Summary
• Republic of Belarus is considering launching the tender (March 10, 2011) for the
right to sign an investment agreement to develop and operate 8,1 mln м³ of
granite per year in Sitnitsa (the “Project”)
• The proposed scheme is Design Build Finance and Operate (“DBFO”)
• The Project benefits from strong political support to satisfy a high demand of
granite for civil, industrial engineering and road building sector via attracting best
international and private sector expertise
• Full transparency and international standards of running the tender process is
demonstrated by the National Agency of Investment and Privatization
• Fast track project timeline (signing of the agreement is envisaged by 2011)
4
Republic of Belarus,
Pripyat Polesie Region
5
Republic of Belarus, Pripyat Polesie Region (1)
Belarus, Key Facts
• Territory of Belarus totals 207.6 thousand sq km
• Population – 9,45 millions
• 2010 GDP – 49 billion USD
Advantages to make business in Belarus
• Full protection given to foreign investments and there
are a variety of channels available to businesses to
engage with the government.
• Belarus is constantly developing new initiatives to:
• Reduce red tape for business: "one window"
approach
• Attract international small and medium
enterprises (SMEs)
• Provide preferential tax treatment for investors
• Belarus has a highly skilled workforce, a large scale
privatization
programme,
attractive
incentives,
including six Free Economic Zones and a specialist
High Technologies Park (HTP).
6
Republic of Belarus, Pripyat Polesie Region (2)
Pripyat Polesie Region, Key Facts:
• Area – 1,825,300 hectares
• Population – 568,4 thousand
• Supportive local authorities
Main resources:
Oil, potassium and rock salts, brown
coal, combustible shale, granite, raw
materials for the construction industry
Resources Utilization:
The state program of socio-economic development and comprehensive utilization of
natural resources of Pripyat Polesie in 2010 – 2015 is aimed at sustainable social and
economic development of the region. These goals can be achieved through
comprehensive natural resources utilization, attracting investments and promoting
reproduction of natural resources
7
Project Overview
8
Project Overview (1)
Project Highlights
Sitnitsa OMPW construction reason - shortage of crushed stone in Belarus, CIS and
several European states.
New raw-material sources of which the Sitnitsa deposit of structural materials is
considered to be the best prepared for mining works.
The exploration works carried out within the Sitnitsa deposit show that production strata
of the deposit are presented by granites and diorites.
The known reserves of structural materials are sufficient for the work of the enterprise
with annual volume of nonmetallic structural materials of 10 million tons for more than
90 years.
Investment Return
• Investments return is planned through the
income from selling crushed stone
9
Project Overview (2)
Description
• Commercial reserves - 236.06 mln. m3. Preliminary estimated reserves - 277.2 mln. m3
• The minerals to mine are granites and diorites that are found at depths of 9 to 64 m. The
overburden rocks are sand, siltstone and primary kaolins. Two aquifers occur within the
deposit area in the loose rock strata and in the upper part of crystalline rocks. The water will
come to the quarry with the precipitation and groundwater supply. The calculated water
discharge from the quarry will be 53.4 thousand m3/day at the final stage of development,
including 7.5 thousand m3/day due to groundwater discharge and 45.9 thousand m3/day
due to storm runoff
• Mined rock size - 0-300 mm. New ore mining and processing works the flow chart of
manufacturing assumes three-phase crushing:
- preliminary crushing with screenings
- crushing and selection of screenings 0-4 mm
- the circuit closed with the third crushing (last stage)
• The accepted "know-how" will provide crushed stone of the fractions meeting the
requirements of the European standard: 4-8, 4-16, 8-16, 16-32, and as a whole the volume
of small fractions will reach 41.4 % in the total amount of nonmetallic structural materials.
Screenings will measure 0-4 mm.
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Project Overview (3)
Description
• Three zones distinguished within
the deposit are as follow: zone of
weathered rocks 0.0-27.9 m in
thickness;
zone
of
slightly
weathered rocks 0.0-13 m in
thickness; zone of recent rocks
their exposed thickness ranging
from 22.8 to 92.4 m. The quarry
depth will be 150 m at the end of
the quarry working out. The deposit
will be mined by blast-hole drilling.
• The deposit is located 7 km west of the Mikashevichi town, 3.5 km east-southeast of the railway station of
the “GRANITE” RUIE. Railway line Gomel-Kobrin-Brest (EU border). An automated dock exists at the
station which is connected by a shipping canal with the Pripyat river. Motorway runs 2.5 km north of the
field. The power is supplied from the country energy power system.
• Objects planned to be constructed are as follow: “Sitnitsa” quarry with overburden rock dumps, a
crushing-screening plant, expansion of the existing storage facilities, power supply facilities, haulage
motor-road and dumping site with a descent, utility systems, and works of transport, communication, water
supply, sewage system, power supply, railway facilities.
11
Project Overview (4)
Project participants:
1. Foreign partner – any kind of participation (Investor, Coordinator, Subcontractor).
2. Ministry of Natural Resources and Environmental Protection of the Republic of Belarus –
Project Initiator and Coordinator.
3. The Ministry Of Architecture and Construction of the Republic of Belarus, RUIE “GRANITE”
– Project Executor and Subcontractor
The participation of one or other institution is specified in the course of negotiations.
Required Financial Assistance:
Funding required, type of financial assistance required:
Funding by strategic investor: representative of industry, engineering company, manufacturer
of equipments.
Funding sources
Foreign investment funds
Type of investment
Capital in equity, technology.
Financial institution involved:
No financial institutions involved
12
Amount (mln USD)
381.3
Project Overview (5)
Capital Investment Items (total investments in fixed
capital stock):
Project physical components
Purchase
of
manufacturing
equipment
Buildings and facilities including
construction works
Total (Indicative):
Operating and Maintenance Costs:
Capital investment Cost Items:
(mln USD)
199.6
Operating – 54.1
Maintenance – 36.0
181.7
Total amount
mln USD –
(Indicative)
90.1
381.3
Type of users/ markets, volumes, prices, revenues, calculated benefits:

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

Users: civil, industrial engineering and road building in Belarus, CIS and European countries
Production of nonmetallic structural materials in amount of 8.1 mln. m3, including 6.0 mln. m3 as crushed
stone
Price for nonmetallic structural materials for the domestic market will be USD 15-16 (manufacturing cost –
USD 10), for the foreign market – USD 19-20
Economic effect will result from a low cost of granite mining and processing and from a competitive price
established for the domestic, CIS and EU markets
Net income in the continuous mining period will be 69.4 mln USD per year, net profit – 55.1 mln USD per
Revenues, mln.USD (Indicative) - 159.5
Expected terms: Project realization term: 3 years
Project payback term: 9 years since the beginning of the project realization
13
Project Overview (6)
Key Risks Allocation
Key risks
Access to land resources
Country
Head
Contractor *

Technology performance

Maintenance and operating


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

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Insurance
Force majeure

Changes in regulation


Environment – subsequent
Contract termination – Grantor’s
fault
Investors**

Construction incl. design and
permits
Inflation and utilities prices
Sub
Contractor





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
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Subcontractors’ default

Conflict with inhabitance
(*) Head Contractor will bear allocated risks only during their involvement in the project (i.e. construction period)
(**) Creditors bear the residual project risk, to the extent not covered by contracts or mitigated by other means (insurance)
14
Project Overview (7)
Tender Process Phases
The tender documentation sets out the following tender process timeline:
Signing of Investment
Agreement
Bidding Phase
Tender Announcement
(March 10, 2011)
Selection of the Successful
Bidder (October 3, 2011)
Pre-qualifacation Submission
(June 1st, 2011)
Negotiations with the
Successful Bidder
Submission of Bids
(September 1st, 2011)
Signing of the Agreement
(December 1st,2011)
Selection of the
Successful Bidder:
October 3, 2011
Financial Close
(before the end of 2011)
15
Project Overview (8)
General Prequalification Criteria*
• Applicant shall not be subject to liquidation proceedings
• Shall not have undergone bankruptcy or insolvency proceedings within the last 5 years
• Shall not be indebted to the country of origin state budget or any regional or local budget in regards to
taxes, fees, and other mandatory payments in an amount exceeding 15% of the Applicant’s assets
Special Prequalification Criteria**
Financial
• Total assets of at least EUR 50 million (or equivalent) during each of the last 3 financial years
• Revenue in excess of EUR 50 million (or equivalent) during each of the last 3 financial years
• Profit (after taxes) during each of the last two years
Technical
• Appropriate fit between the Applicant’s business plan and Belarusian strategic procurement objectives
• Proposed project operator has delivered at least one similar project
• Demonstrates quality assurance, environmental management systems and compliance with all relevant
health and safety regulations
• Satisfactory client references and examples of similar projects
(*) – applicable to the Applicant and each member of the consortium
(**) – applicable to the Strategic Investor. Strategic Investor is a consortium member who has at least 25% interest in the consortium and
satisfy special prequalification criteria
16
Project Overview (9)
Indicative Bid Evaluation Approach
Second Stage*
Financial
First Stage
Technical & Legal
Technical
Legal
Financial
Up to 40 Points
Up to 20 Points
Up to 40 Points
• Each Bidder shall prepare detailed plans for granite
extraction and in particular
- Strategic Development
- Business Plan
- Construction Programme
- Risk Management
- Safety Management
- Environmental Management
- Technical Support
- Operations
- Output and realisation of recycled materials and energy
Evaluation Criteria:
• Up to 20 points - Technology track record and compliance
with output requirements (flexibility, facility outputs and etc)
• Up to 20 points - Operational track record and impacts
(reliability, enforcement, downtime, etc.)
• Each Bidder shall submit the mark
up of the Investment Agreement
• Separate document listing all
proposed amendments and
justification
• Signed Term sheet with the
Operator
•Signed Term sheet with the Head
Contractor
• Up to 40 points for financial
deliverability
- Bank Support Letter
- Shareholding Funding
- Commitment Letters
- Shareholder Approvals
- Financial Model
Acceptance of the Bid does not mean
acceptance of the proposed mark up
of the Investment Agreement
(*) Bids disqualified due to technical and legal reasons at the first stage will not be considered
17
Next Steps and Q&A
18
Next Steps and Q&A
• Republic of Belarus would like to sound out the market in relation to appetite, capacity and
capability for investing into the Sitnitsa’s Mining and Dressing Works Construction (or
participating as an operator, Head contractor, equipment supplier as part of a consortium)
• Recipients are therefore invited to provide responses to the questions set out in Appendix 1
of this presentation and to return them to the Advisor by the close of business of 7th of
March 2011
• Recipients are requested to send their response or address their inquiries to the
Advisor:
Ministry of Natural Resources
and Environmental Protection of the Republic of Belarus
Attn: Lis Anatoli
Attn: Karpuk Vladimir
Deputy Minister
Director of Department on Geology
Tel:+ 375 172 200 70 48
Tel.:+ 375 17 292 54 22
Mob:+ 375 296 56 51 56
Mob:+ 375 29 112 37 12
Email: [email protected]
Email: [email protected]
19
Appendix 1.
Questionnaire
20
Questionnaire
We appreciate your thoughts on the below questions:
• What is the degree of your general interest in participating in the tender
for the Sitnitsa Project?
• What is your experience and view on projects in Belarus?
• What new technology would you recommend to the Belarus?
• What are your thoughts on the proposed risk allocation?
• What would be your required return on investment for this type of project
in Belarus (nominal in EUR before tax)?
• How do you view the proposed Tender Process timetable?
• What is your anticipated level of equity investment / financial leverage for
the Project?
• How would you manage FX risk (given that project cashflows will be
denominated in roubles)?
21