Inar OTR Retreading Project

Project brief

Argentina is having a strong mining development propelled by hi prices of metal-bearing minerals [1]. Nowadays there are more than 15 mining projects in a productive stage. Between this in production projects the most important are: Veladero in San Juan, “Bajo la Alumbrera” in Catamarca and “Cerro Vanguardia” in Santa Cruz.

Furthermore, there are at least 20 additional projects with proved feasibility and several more ready to start up in the next years. Some huge projects ready to launch in San Juan are “Pascua Lama” (gold and silver) and “El Pachon” (cooper)[2].

All this mining projects continually need to move millions tons of earth. Most of this movement is done using heavy off the road (OTR) machinery like loaders, dozers, graders and earth-movers which allow to haul hundreds of mineral's tons per trip.

Almost all this machinery moves over rubber tires. For this reason tires become an indispensable supply for metal-bearing mining productive process. OTR mining tires could have very big sizes up to 4 meters of diameter and up to 5 tons of weight. Last year in Argentina mining companies spent more than 45 million of dollars on OTR tires. This OTR tire's demand is growing and prices are rising worldwide.

Retreading of used tires allow very important savings, it reduces more than 15% of the tires costs and even it reduces more than 25% of the tires cases to be discarded and its environmental impact.

Inar wants to take part in this new OTR tire market for mining and building companies. Inar is working in order to offer retreaded tires, tire's maintenance, repairing and retreading services for this market.

The projected plant will be placed in San Juan in a 1000 m2 building. This plant will be able to process up to 1400 OTR tires per year employing the state of the art technology.

Project start up require 2.5 million dollars of initial investment and 4 month for plant deployment. Most of the budget will be applied into machinery and the initial raw materials provisioning. The project will be financed by a bank loan and domestic and foreign funding.

Retreading services are high added value services. Besides the current and projected market behavior offer an excellent business profitability and a very short ROI period. The plant require a small staff, about 15 people for production and administration tasks. Most production costs are variable. These facts make the business very profitable and attractive.

In the more conservative scenario IRR is over 50% and the ROI period of 3 years or less. In a more probable scenario, if Pachón, Pascua Lama, Gualcamayo y Casposo projects start to produce within the next five years then IRR could grow over 75%.

Vision

As project promoters our vision 3 or 4 years ahead is:

The plant placed in the Industrial area in San Juan is full operative. The company has offices or representatives in the main mining provinces and in Buenos Aires. The company has in-site workshops in all main clients who have fully outsourced the OTR tire management and handling with us. The company is focused on and specialized in bigger size OTR tires and, in this market, it has more than 60% of Argentinean market share and more than 70% of San Juan market share. Annual sales over 3.5 millions dollars with an gross profit margin over 50%. Company staff is near 20 highly trained and qualified employees with more than 3 years experience in the company. Main activities in the company are sales, production, plant maintenance and administration. Retreading services will be provided applying the best retread and rubber compounds technology in order to guarantee the client that retreaded tires will be as good or better than new ones. This quality commitment is reflected by ISO9000 and ISO14000 company certificates. The company is looking for vertical integration and expanding its field of activities to a more complete offer of services for OTR tires including maintenance, control, reparation and tire management either from inside or outside the clients' facilities. The company will be present in the main mining and construction expositions and workshops. Looking for the innovation and continuos-improvement in our products and services we are keeping cooperation agreements on I&D with local universities, suppliers and clients.

Mission

The main project's purpose is:

To extend useful life of OTR tires, to reduce tire related costs and minimize environmental impact of worn out or damaged tires. In order to do that It will provide a full range of OTR tire related products and services as retreading, repairing, maintenance and management. To guaranty its product and services assuring that all the retreaded and repaired tires will have at least the same useful life and safety conditions than a new one. To design products and services thinking in the specific needs and requirements of mining projects and big construction companies. To keep a close relationship with clients and providers looking for an effective integration of the value chain with them.

Business objectives

Project long term objectives are:

To have a dominant position in the market niche of products and services related with OTR tires, specially the biggest size tires for mining and the construction.
To capture the main potential clients and for discourage the potential competitors applying an aggressive marketing strategy, specially during early business stages.
To establish the company name as a strong trade mark
To make medium and long terms agreements with clients and suppliers. (vertical integration)
To keep company competitive worldwide by apliying the best technology available.
To assure quality through a strict facilitie's maintenance and control plan.
To obtain quality ISO certificates (at least ISO9000 and ISO14000)
To maintain the competitive advantage by continuous improvement in process and materials.

Current project stage