1

PLANT
FOR BASALT FIBER BASED FABRIC PRODUCTION. (Preliminary Economical Evaluation). 1. PREVIEW.
The main product is a natural, inorganic fibrous material in industrial textile form (strands, yarns, inorganic woven and knitted fabric, etc.), based on man-made fibers from basalt rock mineral. It is targeted for the protective clothing market, fire-resistant upholstery, wall covering applications, reinforcement materials market in specialty thermoplastic and thermoset resin applications. In these and other applications it could cost and technical effectively competes and substitute currently used glass fibers, some earlier asbestos fibers, and some others (like steel, kevlar etc. fibers).

It is important to point, that basalt fiber based applications, even with the equal economic indexes to fiber glass based one on the very beginning of the manufacture, - are suitable to fill the gap between glass fiber and more resistant but much more expensive fibers based goods (such as ceramic, carbon etc.). 1.1. Relative technical advantages of BASALT FIBERS based fabrics.
The specialty continuous fibers derived from basalt rock have proven technical characteristics, performance specification and apparent superior cost-effective position in comparison with the commonly used glass fibers. The main technical characteristics are: - High chemical resistance, including to concentrated acids based; - High thermal resistance (thermostability) and low flammability; - Low degradation of strength at temperatures as high as +700-900 deg. C., as low as 250 deg. C, and high humidity; - High thermal and acoustic insulation properties; - Excellent adhesion to polymer resins and rubbers; - Relatively high mechanical strength, abrasion resistance and elasticity; - High dielectric properties; - Low water absorption; - Ecologically clean and non-toxic.

1.2. Main applications derived on base of basalt fabrics.

High basalt fibers physical-mechanical properties stipulate its based fabrics introduction into production of wide range of new high efficient structural and technical composite materials, which can replace asbestos, metal, timber, plastic materials etc. The following list represents some of main groups of products, based on basalt fabrics, in research and manufacturing those we experienced: - Soft body armor (ballistic protection); - Heat, flame, chemical and abrasion resistant clothing; - Incombustible containers for shells, rockets and other military hardware;

- Carpet and upholstery manufacturing for military technique (tanks, ships, aircraft etc.) - Foil clad basalt based laminates; - High and low temperature heat insulation for aircraft, ships, refrigerators and other compound technique; - Light honeycombed construction for radar, panels etc, based on basalt knitted fabric; - Different industrial filters, nets for landscaping, rock fall protection. - Reinforced thermoplastics for tubes, container casing, lining, bodies blades, etc.

1.3. Product forms and uses.

When examining potential applications of basalt fibers, the following major PRODUCT FORMS must be addressed, depending on the degree of processing and extend of integration with other materials that characterized the application: PRODUCT FORMS A. Continuous fibers, chopped or strand. B. Laminated or paneled fibers. C. Fibers incorporated in polymers and rubbers. D. Fibers processed into fabric and hybrid fabrics.

As a general guideline, potential demand for basalt fibers, in one ore more of the processed forms listed above, can be found within the following application USES (PURPOSES): USES 1. Mechanical reinforcement additives to concrete, polymers and other mixtures. 2. Chemical, flame and abrasion resistant products.

1.4. Market segments.

The typical application MARKET SEGMENTS where demand for basalt fibers in one or more of the processed forms and uses are listed above is expected are: MARKETS a. Chemical/oil industries. b. Construction and power engineering industries. c. Storage and transportation media. d. Agriculture and land reclamation. e. Furniture and decor. f. Electronic industries. g. Personal security. h. Defense industry.

2. PRODUCTION FACILITY.
Targeted production and sales capacities for the commercial facility were set at 3000 ton/per year (TPY), to be gradually achieved by the fourth operating year, starting with 70% of capacity in the first operating year. It is assumed that 60% of capacity (up to 1800 TPY) will be sold to export markets. The remaining 40% (1200TPY) will be sold locally.

2.1. Sequential production units.

Identification of the specific production units and the sequential manufacturing of the different product forms are illustrated schematically.

2.2. Schematic diagram of the major process steps in basalt fiber production and processing to mats and fabric.

Crushed & sorted

Auxiliary materials

basalt rock materials

Fiber strands & chopped

Continuous fibers & complex filament production

Production of nonfabric materials

Roving, chopped laminated & paneled products

Complex filament processing for woven end-uses

Fabric production

Knitted fabric production

3. CAPITAL INVESTMENT AND OPERATING COST. 3.1. Raw materials.

Water

Basalt rock pre-treatment

Binding material s and additive s

Weaving of Processing of Furnace thread toNormal & hybrid Winding/spo fibers to fabrics, FIRE Fillers Processing Threading industrial and continuous oling RETARDANT to Reinforcement plastics & other Additive additives textile cloth THREADS additives CLOTH reinforced industrial fibers long products. s

Melt

Processing of threads to textile REINFORCEMENT mats and cloth. TEXTILE FIBER

The main raw material is basalt-type rock, usually founded in abundance in natural reserves of almost every country. Targeted current price is approximately 20$/ton crushed basalt stone ex-quarry. The quantities of crushed stone needed are 1.1 tons/stone per ton of continuous fiber strands, or 3300 TPY for planned 3000 TPY commercial facility.

3.2. Cost of land.

The required area for the production plant and all supporting activities are estimated at 5500 sq. m., of which 2500 sq. m. (45%) for covered structures. Required area for the production plant and basis for the estimated cost of structures. Facility Production structures Basalt rock storage (open) Finished products storage Parts and accessories storage Maintenance workshop Laboratory Offices and administration Subtotal operating floor space Access-ways, yard, parking Total plant area Area (sq. m.) 2000 200 200 100 100 50 100 2750 2750 --------------5500 Unit cost ($/sq. m.) 300 50 300 400 400 600 600 40 Cost (K$) 600 10 60 40 40 30 60 840 110 950

3.3. Estimated fixed capital investment in the production plant (excluding structures and other civil works).
Fixed capital investment in production facilities (excluding structures) Delivered cost of major units: Basalt rock pre processing/conveying Melt furnaces (3) Fibers processing to continuous strands Winding, spooling and basic threading Basic cloth weaving. Subtotal delivered cost of major units: Installation of major units (18%) Utilities systems (installed): Effluent water treatment Electricity transformation (distribution) Steam boiler and fuel system Gas/liquid raw materials storage 1000$ 150 1700 120 170 400 -----------2540 460 150 70 150 110 % of TOTAL

49%

Subtotal utilities Support facilities: Tools and maintenance equipment Laboratory equipment Office and warehouse equipment Subtotal support facilities Total direct costs Contingencies (15%) Eng. design, const. Supervision (15%) Handling and transport vehicles: Forklift (2) Transport van Private car (2) Subtotal vehicles TOTAL FIXED CAPITAL INVESTMENT

480 140 120 60 320 3800 570 650 70 40 60 170

9%

6%

11% 12%

3%

5190

3.4. Unit costs of raw materials and utilities.

Raw materials and utilities Raw materials and chemicals: Crushed Basalt rock Lubricant/stabilizers Basic cloth treatment chemicals Subtotal raw materials Utilities and services: Electricity Fuel oil Water Subtotal utilities and services SUBTOTAL VARIABLE OPERATING COSTS MWH Ton Km3 1.7 0.60 0.50 76 160 300 129.2 96.00 150.00 375.2 419.7 Ton Ton Ton 1.1 0.03 0.03 20 400 350 22 12.00 10.50 44.5 Unit Quantity (Unit/Ton) Price ($/Unit) Cost ($/Ton)

3.5. Direct labor requirement and

Labor type Plant manager Plant engineers Technicians Skilled maintenance workers Skilled operators Unskilled workers TOTAL MANUFACTURE LABOR No. of workers 1 2 3 2 11 18 37

cost.
Cost/worker ($/yr.) 60,000 55,000 40,000 40,000 36,000 24,000 Cost (K$/yr) 60 110 120 80 396 432 1,198

3.6. Indirect operating expenses (excl. depreciation).

Indirect operating cost component AS&G Labor: General manager Marketing staff Financial manager Administration Subtotal AS&G labor Other: Auditing fee: Insurance Local municipality taxes Maintenance of vehicles General and admin. Expenses Total other indirect expenses No of workers 1 2 1 3 Cost/worker ($/yr.) 65,000 55,000 60,000 30,000 Cost (K $/yr.) 65 110 60 90 325 % of inv. $/m2/mo. 1.5% 1.2 20 100 85 80 90 375

4. ECONOMICAL

EVALUATION.

4.1. Per-Ton operating profitability at full capacity operation.

Price/Cost/ Profit component Sales quantity (TPY) Product price (Average) Variable operating costs: ------------------------------------Raw materials Utilities Marketing commission/logistics Subtotal variable operating costs Variable profit margin Fixed operating costs: --------------------------------Direct manufacturing labor Other direct fixed costs Indirect operating expenses Capital recovery (10%, 10 yrs) Subtotal fixed operating expenses Operating profit Corporate tax (25%) NET PROFIT Per-Unit cost profit ($/ton) 3,000 3,240
% of average price

100%

44.5 375.2 162 --------582 2,658

1.4% 11.6% 5.0% --------18.0% 82%

399 182 233 358 ---------1,172 1,486 372 --------1,114

12,3% 5.6% 7.2% 11,0% ---------36,2% 45.9% 11.5% --------34.4%

4.2. Operating profitability and return on investment analysis.

The venture is characterized by an average profit margin on sales of 82%, considered very high for the business segment, due to the low cost/price ratio of raw materials and energy. The operating profit is expected to reach appr. 1,500$/T, or appr. 46% of the weighted average price of appr.3,200 $/T. After application of a 25% corporate tax rate, the net per-ton profit is appr.1,100$/T, or appr. 34% of price It is expected that there will be a net profit already in the first operating year. Under full capacity operation, annual net profit is expected to reach $2.8 million, or appr. 29% of sales. The venture cash flow analysis over 10years period shows that the venture is attractive, with a net present value (NPV) of appr. $8.4 mln. (computed at an equity discount rate of 10%), and an internal rate of return (IRR) of 32%. The payback period on invested equity (PBP) is close to 5 years (or 3 years from initial commercial operation).

5. COST AND TECHNOLOGY ADVANTAGES OVER GLASS FIBER PRODUCTION. 5.1. Production cost comparison between glass fibers and basalt fibers.
Production cost component (Partial list) Raw materials & chemicals Energy & utilities: Electricity Fuel oil Water Subtotal Return on capital (10%/yr.) Total Capacity (TPY) Fixed investment 3,000 $4.3 mln. 3,000 $5.2 mln. Price $/unit Quantity (Unit/T) Glass Basalt fibers fibers Unit Cost ($/T) Glass fibers 245 Basalt fibers 45 Diff. -200

Units

MWH Ton K m3

76 160 300

1.6 0.5 0.7

122 80 210 412 700 1,357

129 96 150 375 847 1,267

7 14 60 -37 147 -90

It can be seen that the expected higher fixed capital investment in the basalt fibers plant (21% higher for a 3,000 TPY plant) is more than offset by 36% lower variable production costs of raw materials and utilities.

5.2. Technological and process advantages over glass and other fiber production.
The following main technological or process advantages can be attributed to the basalt fibers manufacturing process, in comparison with standard glass fiber production technology: - Since the basalt fiber is a uni-component material, manufactured essentially from a single raw material, no extraction, transporting, separate storage, weighing and mixing of different ingredients are needed in raw materials preparation. - The melting process of the basalt rock is simpler than in multi-component composite materials (such as glass, kevlar or nomex). - The basalt rock is available in ample quantities almost in every country from operating quarries. Its relatively high worldwide availability will enable technology applicability in many countries. - Variability in composition of basalt rock in the every country is low. This insures products with uniform composition and comparable properties. - The handling of the raw materials and the various stages of the production process are environmentally clean and do not pose any health or safety hazard or ecological treat, unlike known health and safety hazards associated with the handling and manufacture of glass and different polymer fibers.

Dr. Michael Ziv. Contacts: 974-4-8522934.