Executive Summary DIAMOND PURCHASE, SALE AND MANUFACTURING PROJECT (Project Name) Abdoul Rahim AbdoulKarim (Senior Contact) Republic of Guinea, West Africa (Project Location) $5,000,000 (Total Project Investment Cost) $5,000,000 (Funding Request to Funders Group) The Project will involve the purchase of rough diamonds and unrefined gold in the Republic of Guinea, West Africa. The Project’s major emphasis will be on diamonds, which will be sold to dealers in the United States. After the third year following funding, the Project will expand into the manufacturing, i.e., cutting, of diamonds. See Appendix A. (Brief Information on Project) The primary emphasis of the Project’s marketing strategy relates to its presence as a purchaser of rough diamonds in Guinea. There, the Project will emphasize payment to product owners within “24 hours” and the maintenance of an office open for business on a daily basis. There is no significant buying presence in Guinea operating according to these principles. There is a very high unsatisfied demand for the products in the United States and worldwide. See Appendix A. (Brief Information on Marketing Strategy) Summary five-year financial projections are set forth in Appendix B. (5-year Financial Projections) Abdoul Rahim AbdoulKarim, Darryl A. Carter and Eric Mumford are the Shareholders, Directors and Officers of the Project entity, which is a limited liability company. Mr. AbdoulKarim is an attorney and owns 75%. Mr. Carter is a small business proprietor and owns 20%. Mr. Mumford is an accountant and owns 5%. See Appendix A. (Management and Ownership Information) A.R. AbdoulKarim can be reached at 526 Superior Avenue, Cleveland, Ohio 44114, USA; Tel: 216.771.9300; Fax: 216.771.9307; abdlkarim@aol.com Mr. Carter can be reached at Tel: 951.696.5076; dac7952@hotmail.com (Contact Information of Principals)
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Appendix A DIAMOND PURCHASE, SALE AND MANUFACTURING PROJECT Republic of Guinea, West Africa Quality, Source and Availability of Diamonds and Gold in Guinea Guinea is well recognized as a source for high quality diamonds and gold. It is equally recognized for the “under exploitation” of those resources. It has been reported that approximately 90% of the diamonds mined in Guinea are of “gem” quality and that its unrefined gold typically is between 20 and 23.5 karats. Government sources in Guinea estimate that diamond reserves are between 25 and 30 million carats. Gold reserves are estimated to be between 200 and 1,000 metric tons. In 2000, an estimated 220,000 carats of rough diamonds were expected to come from small-scale operators, the so-called Artisanal operators. The government reported that in 1999, “The Artisanal sector alone produced about six tons of gold.” The Company expects to buy its unrefined gold and rough diamonds from the Artisanal production sector, which, overwhelmingly, is the major source of unrefined gold and rough diamond production in Guinea and is a fragmented, open, cash-purchase driven and largely undedicated market. Historically, Belgium has been the major purchaser in the market but this relates more to presence and convenience than loyalty. Product Purchase After two fiscal quarters of transactions and because of the reputation in the market of its principals, the Company believes that it will be recognized as a significant purchasing presence in the market and will be sought out by sellers of rough diamonds and unrefined gold at the dealer as well as the miner level. This will enable the Company to buy rough diamonds and unrefined gold on the open market directly from the miners, the ultimate source of supply. The Company believes that given the fragmentation of the Artisanal market, the relative significance of its initial “in country” transactions and the reputation in the market of its principals that the Company will be able to establish a consistent, high quality supply of rough diamonds and unrefined gold for resale. The Company believes there is no substantial competition or barrier to the Company entering the Guinea market to purchase rough diamonds and unrefined gold. Product Sale The market for rough diamonds and unrefined gold in the United States and worldwide is highly fragmented, with fewer and fewer manufacturers having reliable sources of supply, particularly with regard to rough diamonds. This situation is exacerbated by a recent 25% to 30% reduction in the number of entities to which De Beers is selling rough diamonds. Add to
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this situation, the inclination of most diamond manufacturers to wait for some diamonds to come to them, which creates a nearly captive market. The majority of diamonds bought on the open market are flown directly to Antwerp or to other trading centers, such as, Tel Aviv, New York and Bombay. New York is often described as the most skilled cutting centre because it polishes many of the larger very high quality diamonds, usually specializing in diamonds of 2 carats and over. As of 2000, there were reportedly about 100 manufacturers employing about 600 cutters in New York. The Company expects to sell the majority of its diamonds in the United States through the New York market or through dealers or manufacturers connected to organizations headquartered in that market. The Company currently has customers in waiting for diamonds. Eventually, the Company may sell rough diamonds in the Asian or Eastern European markets. The United States is the world’s biggest diamond market. For instance, New York alone has about 1,800 dealers supplied mainly through about 20 to 25 De Beers Sightholders, and there is a long-running concern about obtaining sufficient supplies of rough diamonds to meet demand. This concern has been exacerbated by the recent reduction in the number of De Beers Sightholders. The Company expects to exploit this concern, which has caused a recently reported 10% to 25% increase in the price of rough diamonds. The general pricing for rough diamonds in the United States can be extrapolated from a current industry-pricing guide fixed at $700 for a one carat, rough diamond judged to be of the best color and quality. Imports of rough diamonds to the United States are duty free. Manufacture of Diamonds In its fourth year following funding, the Company’s financial projections call for its entry into diamond manufacturing. That is, it will begin to cut and polish the rough diamonds that it purchases. Presently, the Company plans that the manufacturing operations would be located in either Conakry, Guinea; Puerto Rico or the mainland United States or a combination of the foregoing. The Company will investigate acquisition opportunities as well as establishing its own operation from the ground up as the mechanism for entering this line of business. The Company believes this entry can be financed from cash flow and would double its profit margins on purchased rough diamonds. The Company’s Competitive Advantages in Guinea The Company’s operations in Guinea will be “seller oriented.” That is, the Company’s aim will be to help the person holding the rough diamonds and/or unrefined gold sell to the Company and receive cash in hand quicker than is the current practice in Guinea. In this context, the Company believes that its major competitive advantage in the purchase of rough diamonds and unrefined gold in Guinea will be the demonstration of its
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commitment to always pay “hard currency” to a seller within 24 hours of the conclusion of the Central Bank authentication and certification process. No dealer in Guinea is currently operating according to such a protocol. The Company’s other competitive advantages in Guinea will be that it will be relatively well capitalized when compared to other dealers in the market and that it will be maintaining an office with regular hours and an available buying staff. Both these advantages go back to having the ability to enable the seller of rough diamonds or unrefined gold to receive cash for product in hand quickly. All these are features of great interest and attractiveness to a person with a rough diamond or unrefined gold in his or her possession. That person’s major objective is to turn that diamond or gold into some amount of cash as quickly as possible. The Company believes that its emphasis on “cash for purchases within 24 hours” will quickly and easily cut into the Belgium scenario of market dominance. The Company believes that it will be able to establish a consistent, high quality supply of rough diamonds and unrefined gold for resale. This belief is based upon the following factors: (i) the fragmentation of Guinea’s Artisanal production sector for unrefined gold and rough diamonds, (ii) the Company’s intention to have all its purchase transactions executed on a swift turnaround “cash for product” basis, (iii) the Company’s establishment of a rough diamonds and unrefined gold buying presence through its opening of a staffed office in Conakry and (iv) the reputation of its principals and facilitators. MANAGEMENT TEAM
Abdoul Rahim AbdoulKarim, President Mr. AbdoulKarim has served on the Board of Directors and as President of the Company since its inception. He also has been Honorary Consul for the Republic of Guinea since 1996. Mr. AbdoulKarim is an attorney with a private practice and has been engaged in the practice of law for more than 30 years. He has served on the Boards of Directors of FirstEnergy Corp., an electric utility holding company, between 1994 and 1998, and FirstMerit Corporation, a bank holding company, between 1990 and 1997. Mr. AbdoulKarim is a graduate of Dartmouth College and Harvard Law School. Darryl A. Carter, Vice President Mr. Carter has served on the Board of Directors and as Vice President of the Company since its inception. He is the owner of Carter Global Trading, a sole proprietorship involved in sourcing and brokering goods and commodities since 2000. Mr. Carter began doing business in the Republic of Guinea in 1997. He attended the Cleveland State University. Eric Mumford, Treasurer Mr. Mumford serves on the Board of Directors and as Treasurer of the Company. He is a public accountant with a practice focusing on small businesses and nonprofit organizations. Mr.
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Mumford has been engaged in public accounting practice for more than 30 years. He is a graduate of the University of Cincinnati. Appendix B DIAMOND PURCHASE, SALE AND MANUFACTURING PROJECT The Republic of Guinea, West Africa Estimated Expenses and Revenues - 5 Years ITEM OF EXPENSE Product Cost Wages Travel Accommodations Licensing Consulting & Security Export Expenses Import Expenses Equipment & Training Offices Legal & Accounting Benefits & Taxes Marketing NET EXPENSES
QTR 2 $ 2,050,000 114,000 84,000 40,000
QTR 3 $ 2,550,000 198,000 84,000 40,000
QTR 4 $ 3,300,000 217,000 84,000 40,000
121,000 15,000 67,000 26,000 15,000 9,000 15,000 15,750 6,000 1,510,750
25,000 114,500 53,700 5,000 30,000 10,000 39,900 12,000 2,578,100
25,000 139,500 64,000
25,000 177,000 70,000
30,000 10,000 69,300 15,000 3,224,800
30,000 10,000 75,950 15,000 4,036,450
1,650,000
3,950,000
5,446,875
6,667,500
139,250
1,371,900
2,222,075
2,631,050
QTR 5 $ 4,200,000 521,000 88,000 40,000 15,000 25,000 223,000 79,000 5,000 30,000 10,000 182,350 15,000 5,433,350
QTR 6 $ 4,950,000 521,000 88,000 40,000
REVENUE
PROFIT
REVENUE
PROFIT
ITEM OF EXPENSE Product Cost Wages Travel Accommodations Licensing Consulting & Security Export Expenses Import Expenses Equipment & Training Offices Legal & Accounting Benefits & Taxes Marketing NET EXPENSES
QTR 1 $ 1,100,000 45,000 76,000
$
QTR 7 5,700,000 521,000 88,000 40,000
$
QTR 8 6,450,000 521,000 88,000 40,000
25,000 260,500 65,000
25,000 298,000 92,000
25,000 335,000 98,000
30,000 10,000 182,350 15,000 6,206,000
30,000 10,000 182,350 15,000 7,001,350
30,000 10,000 182,350 15,000 7,794,350
8,163,750
9,476,250
10,788,750
12,101,250
2,730,400
3,270,250
3,787,400
4,306,900
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DIAMOND PURCHASE, SALE AND MANUFACTURING PROJECT The Republic of Guinea, West Africa Estimated Expenses and Revenues - 5 Years ITEM OF EXPENSE Product Cost Wages Travel Accommodations Licensing Consulting & Security Export Expenses Import Expenses Equipment & Training Offices Legal & Accounting Benefits & Taxes Marketing NET EXPENSES
$
QTR 9 7,200,000 539,000 88,000 40,000 25,000 25,000 373,000 106,000 15,000 30,000 10,000 188,650 15,000 8,654,650
$
QTR 10 7,950,000 539,000 88,000 40,000
$
QTR 11 8,700,000 539,000 88,000 40,000
$
QTR 12 9,600,000 539,000 88,000 40,000
25,000 410,500 114,000
25,000 448,000 120,000
25,000 493,000 129,000
30,000 10,000 188,650 15,000 9,409,650
30,000 10,000 188,650 15,000 10,033,650
30,000 10,000 188,650 15,000 11,197,650
REVENUE
13,413,750
14,726,250
16,038,750
17,666,250
PROFIT
4,759,100
5,316,600
6,005,100
6,468,600
ITEM OF EXPENSE Product Cost Wages Travel Accommodations Licensing Consulting & Security Export Expenses Import Expenses Equipment & Training Offices & Shop Legal & Accounting Benefits & Taxes Marketing NET EXPENSES
$
QTR 13 10,560,000 845,000 120,000 100,000 50,000 75,000 543,840 211,200 500,000 60,000 10,000 295,750 75,000 13,445,790
$
QTR 14 11,600,000 845,000 120,000 100,000
$
QTR 15 12,800,000 845,000 120,000 100,000
$
QTR 16 14,100,000 845,000 120,000 100,000
75,000 597,400 232,000
75,000 659,200 256,000
75,000 726,150 282,000
60,000 10,000 295,750 75,000 14,010,150
60,000 10,000 295,750 75,000 15,295,750
60,000 10,000 295,750 75,000 16,688,900
REVENUE
31,680,000
34,800,000
38,400,000
42,300,000
PROFIT
18,234,210
20,789,850
23,104,350
25,611,100
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DIAMOND PURCHASE, SALE AND MANUFACTURING PROJECT The Republic of Guinea, West Africa Estimated Expenses and Revenues - 5 Years
ITEM OF EXPENSE Product Cost Wages Travel Accommodations Licensing Consulting & Security Export Expenses Import Expenses Equipment & Training Offices & Shop Legal & Accounting Benefits & Taxes Marketing NET EXPENSES
$
QTR 17 15,500,000 1,240,000 200,000 100,000 50,000 125,000 798,250 310,000 25,000 60,000 10,000 434,000 125,000 18,977,250
$
QTR 18 17,000,000 1,240,000 200,000 100,000
$
QTR 19 18,700,000 1,240,000 200,000 100,000
$
QTR 20 20,500,000 1,240,000 200,000 100,000
125,000 875,500 340,000
125,000 963,050 374,000
125,000 1,055,750 410,000
60,000 10,000 434,000 125,000 20,509,000
60,000 10,000 434,000 125,000 22,331,050
60,000 10,000 434,000 125,000 24,259,750
REVENUE
62,000,000
68,000,000
74,8000,000
82,000,000
PROFIT
43,022,750
47,491,000
52,486,950
57,740,250
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