MIZAN-TEPI UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF MANAGEMENT
COURSE TITLE: PROJECT MANAGEMENT
ASSIGNMENT ON PROJECT DEVELOPMENT
Project title: Gold mining
Prepared by:
NAME OF STUDENT ID No NAME OF STUDENT ID No
1. Bantayo Abebe 0S9/09 7, Desta Elias 0048/09
2. Besha Tiruna 0001/09 8,Bishaw Werku 0013/09
3. Abay Zeleke 0014/09
4. Amir Zinabu 0043/09

5. Benatlay Zemesgen 0069/09

0058/09
6. Amsal W/Gabriel 0075/09

Submitted to; Abebash K (MBA)

August, 2021

Mizan, Ethiopia

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 Table of content

Contents

Table of content...................................................................................................................................I
1. Introductory statement.............................................................................................................................1
1.1. Executive summary..............................................................................................................................2
2, Cardinal Values of the project.................................................................................................................2
2.1 Vision.................................................................................................................................................2
2.2. Mission.............................................................................................................................................3
2.3 Strategic objectives............................................................................................................................3
2.4. SWOT analysis...................................................................................................................................3
3. Project analysis........................................................................................................................................3
3.1. Technical aspect analysis..................................................................................................................3
3.1.1 Material......................................................................................................................................3
3.1.2 Man power..................................................................................................................................4
3.2. Financial aspect analysis...................................................................................................................4
3.3. Economic aspect analysis.................................................................................................................4
3.3.1. Economic Benefit of the project................................................................................................4
3.4. Social aspect analysis.......................................................................................................................4
3.5. Commercial and business aspect analysis.........................................................................................4
3.6. Environmental aspect analysis..........................................................................................................5
3.7. Organizational - managerial aspect analysis.....................................................................................5
3.7.1 Site analysis................................................................................................................................6
3.7.2 Legal ownership of the company................................................................................................6
3.7.3. Job description for owners.........................................................................................................6
3.7.3. Organizational structure.............................................................................................................7
4. Marketing plan........................................................................................................................................7
4.1. Pricing..............................................................................................................................................8
4.2. Distribution.......................................................................................................................................8

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5. Financial plan and analysis......................................................................................................................9
5.1 Net present value at discount rate 15%..............................................................................................9
5.2.Net present value at discount rate 20%..............................................................................................9
5.3 INTERNAL RATE OF RETURN (IRR)...........................................................................................9
5.4 Payback period................................................................................................................................10
6. Risk assessment.....................................................................................................................................11
7. References.............................................................................................................................................12

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 1. General information

Project title------------------------------------------------------------------ Gold mining

Legal form------------------------------------------------------------------ Partnership

Name of organization --------------------------------------------------- Medemer gold mining company

Address ---------------------------------------------------------------------Shakiso woreda

Telephone-------------------------------------------------------------------0929246197

fax --------------------------------------------------------------

e mail--------------------------------------------------- --------

2. Project summary

Organization ------------------------------------------------ Medemer god mining

Location of project ---------------------------------------- Shakiso wored, Oromia regional state, Ethiopia

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Sector of intervention-------------------------------- -----Gold mining & processing

Project manager--------------------------------------------- Muliken Mariye

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1. Introductory statement
Ethiopia is located in East Africa occupying a land area of 1.14 million km2 with a population of
over 70 million. Geographically the country is located between latitudes of 30 N to 150 N and
longitudes of 33 0 E to 48 0 E. and bounded with Kenya to South, Djibouti & Somalia to the
East, Sudan to the West and Eritrea to the North.

The main economic basis of the country is Agriculture. Over 80% of the population is engaged
on Agriculture & related activities. The major export of the country also comes from this sector.
The mining sector is becoming a significant source of foreign currency earnings. Gold, tantalum,
gemstones and dimension stones are the export minerals of Ethiopia.

Despite the fact that Ethiopia has a long mining history, the development of the mining industry
and its contribution to the national economy stayed at lower level. The government led economic
policy for about two decades and the existence of low level geological data have contributed for
the under development of the mineral sector. The change in policy to market oriented economic
policy has brought the promulgation of mining legislations aimed at promoting and attracting
private investment to the mining sector of the country.

The private investment in the sector is rising from time to time and the sector’s contribution to
the national economy in the form of foreign currency earnings, revenue generation, job creation
and input Mineral resources being non-renewable natural resources require sound systems of
governance to bring sustainable development. It is also very important to establish transparency
and accountability in the management of revenue generated by extractive industries through
active participation of stakeholders including civil society organization. To the construction and
other industries is also growing.

The history of gold mining in Ethiopia dates back to biblical times. Gold has been traditionally
mined from placer deposits. Semi-mechanized gold mining began in 1930's after the discovery of
placer gold in Bedakessa valley in the Adola belt.

The only large scale primary gold mine in the country is the Lege Dembi gold mine that started
production in the late 1980s with an annual production capacity of 3 tons of gold.

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1.1. Executive summary
Gold mining in Ethiopia has a long history. But the gold deposit has been mined traditionally by
the traditional miners for several thousand years. This traditional mining system has been a
primary source of employment for job seekers from various parts of the country. The number of
peoples entering this sector is significantly increasing.
This Gold has been traditionally mined for many years in disorganized manner in different areas
of the country. Medemer gold mining company has analyzed and decided to work on this mineral
in organized and modernized way. Medemer gold mining company is dreamt to be incorporated
in Oromia region Guji zone which is thought by many for having high amount of gold reserve.
The company has planned to invest around 1.2 million to build this modernized company. The
activities under our company are gold exploration, processing and commercialization of these
mineral. In doing so, incorporating modern mining company in the area, we are going to solve so
many problems. Among these problems are:-

 Traditional miners are exposed to communicable diseases like, malaria, water born
diseases, cholera.
 Most miners work seasonally returning to their subsistence farms when agricultural work
is required in order to supplement their insufficient incomes.
 Most are subsistence (survival) miners.
 Most traditional mining sites are in remote rural areas scattered throughout the country.
 The vast majority of miners and mineral traders are operating informally without a valid
license.

We can call our company’s incorporation in the area as a one step forward of the sector.

2, Cardinal Values of the project

2.1 Vision
The company’s dream is to dig out around 1.5 ton gold per annum.

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2.2. Mission
We are committed to enhance value for its shareholder by pursuing long term prospects for
stability, growth and diversification while harmonizing safe and efficient business practices with
the social and environment needs of its host communities

2.3 Strategic objectives

sustainable cash generation to underpin value distribution.

2.4. SWOT analysis

A SWOT analysis is a matrix representation of comparisons of four aspects concerning the
internal and external factors that affect the project.

Strength
 There will be a significant cost
advantage due to economies of scale.
 The project will maximize the wealth of
stockholders due to jewelry is expensive
product.
Opportunities
 There is a large demand for Gold
jewelry in Ethiopia that does not meet
by existing miner.
 Availability of labor force .
 Priorities low risk high risk return
acquisition opportunities in region
where we already have a presence.
Weakness
 The project requires high capital startup
cost.
 Lack of a detailed research and
development program that is designated to
explore markets.
Threats
 Poor management team.
 Unavailability of relevant technology.
 Changes in government policies may lead to
unfavorable working climate (tax system).

 Grow cash flow per ounce.

 Government encourages Gold mining

project and thus an opportunity for gold
miners.

3. Project analysis

3.1. Technical aspect analysis

3.1.1 Material
The most expensive things in gold mining industry are the materials. The gold indicators, bull
dozers, Reverse Circulation (RC) drill rig 98 etc...These 3 materials are the basic ones. Besides
these, there are also so many other materials.

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3.1.2 Man power
When we come to the manpower requirement gold mining industry needs at least 10000 workers
including the managerial team. The top level workers are first there is a general manager/chair
man, deputy chair man then a product line manager, Employee administration controls, finance
director, technical director.

3.2. Financial aspect analysis

Medemer gold mining company is financed by 80% equity and the rest 20% is obtained from
bank loan. The company has got great appreciation and good loan provision from the bank
managers to promote the new business. We sincerely want to thank the managers and other
workers of the bank.

3.3. Economic aspect analysis

Our company’s operation is so useful for the citizens of the area in so many angles. The one is its
role in the gross national product. Since giant companies are owned by Ethiopians it has great
advantage on saving foreign currency.

3.3.1. Economic Benefit of the project

- The project - The society
- The students - Partnership
- Employers

3.4. Social aspect analysis

The most important is its reduction of unemployment rate in the country. Since there is high
amount of unemployment in Ethiopia every company opened in the country is highly welcomed
by the government. Areas like mining industry needs many workers/5000 up to 50000/. You can
see how many employment chance we are going to create in the area.

3.5. Commercial and business aspect analysis

As economy of countries is growing & demand of gold is increasing, technology on the mining
industry is growing. The need of peoples for purchasing prestigious product like gold is rising.
But entrance of investors on this industry is not as fast as the need of gold in the market. That’s
why we are so eager to invest on this area. Midroc gold mining launch its new project to invest

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on gold extraction work, as expressed by the directors that may cost them around 6 billion birr.
It’s the only company to launch their project next to our company.
The only fierce competition we might face in the future is from this company. So to take
advantage of the supply of traditional miners to our company we have developed a strategy. The
strategy developed concerns about building facilities for the citizens like school, health centers,
sanitation etc…this strategy makes us to be closer with the citizen (traditional miners) of the
area. The reason why we developed this strategy is to take over the competition with midroc
company because the traditional miners produce/dig out one fifth of our gold production.

3.6. Environmental aspect analysis

By its nature mining industry needs huge capital and high effort to be successful. It’s also highly
risky for life because of the explosions which happen by sudden accident. The main drawback of
this work, as we portray it earlier, is its accident. Ones the accident appears it might kill
thousands. medemer gold mining company has a mission of building a huge name in the industry
by providing high amount of gold to the national bank of Ethiopia and makes the working area as
much as safe for employees.
Three are so many things we need to have to achieve our goal. Amongst these needs
infrastructure is the one and the major criteria. the area in which the company is built have good
infrastructure like light, water, transportation, telephone access, health centers for employees
etc…these facilities are easily accessible with fair price. Especially in the future when the grand
renaissance dam is finished it makes the access of light cheaper and easily accessible since it is
(the dam) found in the regional state of oromia. All of these elements are what the mining
industry needs most. Without these infrastructure facilities one cannot get success whether it’s a
big or small business.

3.7. Organizational - managerial aspect analysis

As we explained it earlier medemer gold mining company is currently located in Oromia
regional state Guji zone. The reason behind our selection of the area is that the region especially
Guji zone rich in gold reserve. Several other natural minerals has been found in this region,
beside gold, all of which is ready for commercial exploration, even as deposits of platinum,
tantalite, iron, copper, lead, zinc, nickel and other base metals do exist. Petroleum and gemstones

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 have also been identified. Industrial and construction minerals have identified. But the reason
why we select to do in gold is that its amount. There is huge amount of gold in the region.

3.7.1 Site analysis

Our gold extractor company is located specifically in shakiso woreda the area which is believed
to have high gold reserve in the region. There is also high amount of extracting activity in
traditional way. Because of its traditionalistic way of mining citizens are supposed to dig
manually and that’s time taking and needs high force.

3.7.2 Legal ownership of the company

Basically there are three basic legal forms corporation, partnership and sole proprietorship.
Medemer gold mining company is formed under the basis of partnership with 15 friends came
together with the same idea of creating a profitable and huge gold mining company.

3.7.3. Job description for owners

Medemer gold mining is a privately held partnership owned by majority of its funder and
manager Mesfin Adane. There are 15 partners including the manager.

Name University Education Profession Experience

Muluken Mariye MTU 2nd degree in management Chairman 5 years
1
Abraham Abebe MTU 2nd degree in management Deputy chairman 0 years
2
Suleman Seid MTU 2nd degree in management Manpower 0 years
3 manager
Mustefa Hussen MTU 2nd degree in management Product line
4 manager 3 years
Abdisa Gadissa MTU 2nd degree in management Finance director
5 0 years
6 Aster Bekalu MTJU MSc degree in engineering Technical 4 years
director

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6 Asrat Mengesha MTU

3.7.3. Organizational structure

The organizational structure of our company is a little complex because of the company’s
broadness and its many departments. There is a general manager at the top level which controls
and manages the whole company. A product line manager controls the dig out process of the
gold. Employee administration controls and governs the employees. Under this there is a sub
branch of employees union.

Chair man

Product line Deputy chair man Man power Finance

manager manager director

Quality control Technical director Employee affair

4. Marketing plan
Ethiopia is a country with high natural resources potential, being mining one of the sectors with
possibilities of development, therefore, promoting both national and international investment in
mining and creating the means to contribute to an easy access of investments is one of the
priority State Policies. The mining industry is becoming on the future to be one of the
cornerstones of Ethiopian economy concentrating a number of activities and processes where
different areas of professional knowledge and fields converge. The demand of gold is highly
increasing worldwide. We can see the table below how the market demand is growing rapidly:-

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 Years Gold in tons
1998 872
1999 998
2000 1034
2001 1103
2002 1200
2003 1630
2004 1893
2005 2078
2006 2370
2007 2920
2008 3400

In today’s growing gold market, to be successful means to dig more.

So our main target is to increase our supplying capability by modernizing the traditional mining.
Instead of all of these things we face some weaknesses in our work. Among the weaknesses are
the citizens know how about how useful the company is for their market, lack of skilled
personnel to operate the highly mechanized machineries, lack of finance for our operation, lack
of experience of the managerial department. The goal/objective of our company (as we discussed
it earlier) is to become the giant gold miners in the continent.

4.1. Pricing
The pricing condition in gold market is fixed. For instance the current price of a 24 carat gold is
birr 845.50 per gram that means the price of a 1 kilogram gold is 845500 birr. We can see how
profitable it will be.

4.2. Distribution
After the gold is mined out and processed its size to one kilo, the final job is to provide the gold
to the National bank of Ethiopia. The transportation of gold needs so much care. Because the
main problem for gold processers in transportation is robbers (well equipped robbers). So to
avoid this problem we move our gold to Jimma in a highly secured way then we transport it to
Addis Ababa by air plane.

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5. Financial plan and analysis
The financial plan includes the following:-
Cash flow analysis-- Cash flow statement indicates the difference between actual cash received
and cash actually dispersed. It san over view of the cash we anticipated in to our business based
on sales forecast minus the anticipated cash expenses of running the business.

5.1 Net present value at discount rate 15%

NPV = Σ Pt/(1 + r)t

Where Pt is the net cash flow in year t, r discount rate= 15%, and t is the time period.
NPV=a0 + a1/(1+i)1 + a2/(1+i)2 + a3/(1+i)3 + a4/(1+i)4 + a5/(1+i)5
= -1,200,000+200,000/(1.15) 1+300,000/(1.15)2+400,000/(1.15)3 + 500,000/(1.15)4 +
600,000/(1.15)5
= -1,200,000+1,248,563
= 48,563
Interpretation The project support 15% discount rate and still generate a surplus of benefit
over cost, after allowing for timing difference in these, of approximately 48,563.

5.2.Net present value at discount rate 20%

NPV=a0 + a1/(1+i)1 + a2/(1+i)2 + a3/(1+i)3 + a4/(1+i)4 + a5/(1+i)5
=-1,200,000+200,000/(1.2)1+300,000/(1.2)2+400,000/(1.2)3+500,000/(1.2)4
+600,000/(1.2)5
= -1,200,000+1,088,720
= -111,279

5.3 INTERNAL RATE OF RETURN (IRR)

IRR is defined as the discount rate at which an investment has a zero net present value.
IRR =L+C (NPV1/E)
L= Lower Discount rate =15%
C = Difference between the two discount rate 20-15=5
NPV1=Present value of the lower discount rate = 48,563
E = |NPV1|+|NPV2| = 48,563+111,279
=159,842

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IRR=15+5(48,563/159,842)
=15+5(0.3038)
=15+1.50
=16.5%
Interpretation This result shows that at the discount rate 16.5% the project worth zero, thus its
break even interest rate is 16.5%.

5.4 Payback period

The length of time taken to repay the initial capital cost or a time period required to recover the
cost.
PBP = year before full recovery + unrecovered cost
Annual flow during the next year

= 3+ 100,000
500,000
=3 year, 2 months and 12 days
IRR = 16.5%
Year Investment at the Investment at the end Amount recovered from Uncovered balance
beginning of 16.5% investment at the end
1 1.2 million 1,398,000 200000 1,198,000
2 1,198,000 1,395,670 300000 1,095,670
3 1,095,670 1,276,455 400000 876,455
4 876,455 1,021,070 500000 521,070
5 521,070 600,000 600000 0

Interpretation the last return at the end of the project period is 600,000 and will not be invested
(it will be generated).

6. Risk assessment
Risk assessment is implemented to analyze the various risks facing the project by looking to all
aspects of the project and their potential impact on the overall goal of the company. Knowing the

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level of the impact various elements have on a project can assist management with getting
priorities to more quickly achieve the end result. The potential hazards facing our company are:-

 Entrance of new big gold extracting companies. Companies like midroc gold mining are
entering in to the market which gives you no way to compete because of the huge capital
they are investing on it.

 Fluctuating price of gold in global market. Fluctuation of price of gold is the main
problem facing all gold miners around the world. And this is one of the factors which
may lead companies to loss.

 Explosions happening on digging process. This might kill thousands of workers. To avoid
this problem a fire extinguisher is preferable.

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7. References

 Snapshot: the Ethiopian Mining Industry, Mayer brown, July 2012

 Unlocking the mineral potential of Ethiopia, 2012
 Artisanal Mining Activities in Ethiopia:- Challenges & Opportunities
 the extractive industry in Ethiopia
And efforts made to join & implement the extractive industries transparency
initiative in Ethiopia

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