በኢትዮጵያ ማዕድን፣ ነዳጅና ባዮፊዩል ኮርፖሬሽን

የአዶላ ወርቅ ልማት እንተርፕራዝ

/Adola Gold Development Enterprise/

VALUATION OF PROPERTY, BUILDING, PLANT

AND EQUIPENT FOR ADOPTION OF IFRS

FINAL REPORT

Dec 2019
Addis Ababa
 ADOLA GOLD DEVELOPMENT ENTERPRISE
TABLE OF CONTENTS
1. INTRODUCTION ................................................................................................................... 5
1.1 Background of the Assignment ........................................................................................ 5

1.2 Objective .......................................................................................................................... 6

1.3 Scope of the Valuation ..................................................................................................... 6

1.4 Purpose of the Valuation .................................................................................................. 6

1.5 Basis of valuation ............................................................................................................. 6

1.6 Valuation Date.................................................................................................................. 7

1.7 Background of the Company............................................................................................ 7

1.8 Organization of the Report.................................................................................................... 7

2. BRIEF REVIEW OF THE MAJOR FIXED ASSETS OF THE enterprise ............................ 7

2.1 General ............................................................................................................................. 7

2.2 Building and Civil Works ................................................................................................ 8

2.2.1 General ....................................................................................................................... 8

2.2.2 Location of the Buildings and Civil Works ............................................................... 8

2.2.2.2. Megado, Cheketa and Ula-Ulo Branch Building and Civil Works .............................. 8

2.2.2.3. Land Improvement ......................................................................................................... 9

2.2.3 Partial Listing and Conditions of the Buildings......................................................... 9

2.1 Machinery and Equipment’s .......................................................................................... 15

2.1.1 Placer Gold processing Plant ................................................................................... 15

2.1.2 Furniture and Fixture, Office and House Hold Equipment, &Medical Equipment . 22

2.3.6.1. Furniture Fixture .................................................................................................. 22

2.3.6.2. House Hold Equipment ........................................................................................ 22

2.3.6.4. Office Equipment’s, Computers & Accessories .................................................. 23

2.3.7. Special Equipment and Machines ............................................................................ 23

2.3.7.1. Surveying Equipment .......................................... Error! Bookmark not defined.

3. APPLIED Valuation METHODOLOGY .............................................................................. 23

3.3. Assets Verification ......................................................................................................... 24

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 ADOLA GOLD DEVELOPMENT ENTERPRISE
3.4. Conditions Assessment and Making Judgments; ........................................................... 24

3.5. Deciding on the valuation methods ................................................................................ 25

3.6. Estimation of the Current Values of Assets ................................................................... 26

3.7. Methodology employed to adjust the current RCN of fixed assets to the cut-off date,
Dec. 31, 2019/Jan. 1, 2020/....................................................................................................... 27

4. DEFINITIONS OF VALUES ............................................................................................... 28

4.3. Building and Civil Works .............................................................................................. 28

4.3.6. Condition Rating of Buildings ................................................................................. 29

4.3.7. Economic useful life ................................................................................................ 30

4.4. Machinery, Equipment and Tools .................................................................................. 31

4.4.6. Determination of the depreciation factor and calculation of Depreciated

replacement cost DRC ........................................................................................................... 32

4.4.7. Determination of Economic/Theoretical Useful Life (EUL) ................................... 32

4.4.8. Determination of Service Life/Actual service life/ .................................................. 33

4.4.9. Determination of the Present Condition and Condition Factor, CF......................... 34

4.5. Furniture Fixture, House Hold, Medical Equipment Office Equipment, Field Materials,
computer & accessories ............................................................................................................ 36

4.5.6. Valuation method ..................................................................................................... 36

5. CAVEATS ............................................................................................................................. 37
6. VALUATION RESULT........................................................................................................ 39
6.3. Valuation Summery tables ............................................................................................... 0

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 ADOLA GOLD DEVELOPMENT ENTERPRISE
List of Tables

Tables……………………………………………………………………………………….Page

Table: 2.1 Conditions of Buildings and Civil Works …..……………….……………….…11 - 17

Table: 2.2 List of Plant and Mining Machineries in Adola gold with their physical
condition…………………………………………………………………………………………19

Table: 2.2 List of Utility Equipment…………………………………………………………….20

Table:2.3 List of Workshop Equipment with their condition …………………………………21

Table: 2.5 List of Motor Vehicles ……………………………………….…………..………22- 23

Table: 4.1 Bench Marks for Present Condition Rating of Building and civil works…………….32

Table: 4.2. Showing the PD factor of each category of Condition Rating of Building….……..34

Table: 4.3 Economic useful life of Buildings and land improvement ………….……………….35

Table 4.4 Machinery, Equipment and Vehicles Theoretical/Economic Useful Life,

EUL…………………………………………………………………………………………….. 37

Table 4.5 Reservoir Economic/Theoretical Useful Life, EUL…………………………………….38

Table:4.6 Condition Definition and Rating Benchmarks for Machinery, Equipment and Tools.41

Table:4.7 Bench Marks for Present Condition Rating…………………………………………..40

Table 6.1 Valuation result summery table…………………………………………….…………46

List of Appendices
Annex Description Number of page
Construction Detail of Buildings , Civil Works and
1 Infrastructure 3
Machinery & Equipment’s, motor vehicles, utilities, ponds, plant
2
building, salt packing machineries, etc 37
Furniture, Fixture, House hold, Medical equipment and Field
3
material 19
4 Office Equipment, Computer and Accessories 6
5 Special Equipment 1
6 Medical Equipment

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 ADOLA GOLD DEVELOPMENT ENTERPRISE

Definitions of Abbreviation & Formula

• UGRC: Unit Gross Replacement cost

• TGRC: Total Gross Replacement cost
• DRC: Depreciation Replacement cost =GRC*DF
• DRV: Depreciated Replacement Value
• ESL: Expected Service Life
• EUL Economic Useful life = Age + ERL
• ERL: Estimated Remaining life
• CF: Condition factor (which includes physical deterioration, function obsolescence&
economical obsolescence)
• AGDE: Adola Gold Development Enterprise
• DF: Deprecation factor
• SN: Serial number
• CIS: Corrugated Iron Sheet
• HO: Head Office
• HCB: Hollow Concrete Block
• RCN: Replacement Cost of New
• GAAP: Generally Accepted Accounting Principle
• SLR: Straight line rate
• DDR: Double decline rate
• ADV: Annual Depreciated Value
• PD: Physical depreciated value
• IVS: International Valuation Standard

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 ADOLA GOLD DEVELOPMENT ENTERPRISE
Team Members of the valuation work

Team Members who has done the data collection, data integration, data analysis and Valuation
work

No Name Responsibility Qualification

1 YidnekachewTesera Planning Department MBA + BSC in Business + ACCA technical Level Certificate
Executive Officer
2 Shimeles Abebe Technic and Maintenance BSC in Mechanical Engineering + Civil Engineer 3rd Year
Team Leader complete
3 SadikKebir Medium Geologist BSC in Applied Geology
4 SitotawDesalegne Medium Accountant Degree in Accounting and Finance

5 TadeseMelese General Account Team Degree in Accounting and Finance + MBA 1st year complete
Leader

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 ADOLA GOLD DEVELOPMENT ENTERPRISE
1. INTRODUCTION

1.1 Background of the Assignment

Ethiopia is changing the financial recording and reporting system from GAAP to IFRS. In line with
this The Ministry of Public Enterprise ordered all public enterprises to adopt their financial
recording and reporting systems according to the requirements of IFRS. Adola Gold Development
Enterprise has been in a placer gold production and sale since 1935 E.C. The Enterprise has been
operating as an independent entity up to Dec. 2019. It is as of Tehasas 4, 2012 E.C. that the
Enterprise is merged with the Ethiopian Minerals, Petroleum and Biofuel Corporation following
the decision of the Council of Ministers while reorganizing the corporation. The Corporation is in
the middle of the process of implementing IFRS. Adola Gold Enterprise has been applying GAAP
up to the date of the merger. As one business unit in the corporation, all the financial recordings
and reporting of Adola should go in line with the running practice of the corporation. Hence, to
merge the financial records of the Enterprise with the records of the corporation the properties of
Adola must first be valuated as per the valuation standard of IFRS. One of the requirements of
IFRS is valuation of the existing fixed assets of the enterprises so that the value of assets reported
in the balance sheet nearly reflects their current replacement value. Thus, the Corporation
established the technique team to make the valuation of the fixed assets of Adola Gold
Development Enterprise.

To this effect, the management of the Corporation has assigned and ordered internal technical team
made up of professionals, who are trained in valuation of fixed assets for IFRS (IVS)
implementation by the experts of the Ethiopian Public Enterprises Property Administration
Agency. The team has also acquired actual experience through conducting the valuation work of
the Corporation and Afar Salt Production Share Company.

The corporation established a steering committee at the head office and assigned a senior worker
in Shakiso to facilitate the work for the technical team. The technical team is composed of an inter-
disciplinary professionals selected on the basis of their educational background and experience
from different functional areas. The team is involved in the work of assets identification,
verification, condition assessment and determination of the depreciated replacement values of the
assets.

To make the work of the team reliable and up to the standard the Corporation arranged on the job
training. The training is provided by the professionals in asset valuation working in the then

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Ministry of Public Enterprise. The training mainly focuses on the application of International
Valuation Standard as it is applied for IFRS purpose. The team has also been exposed to the
knowledge and skill of asset valuation by doing the valuation of sample items from different
categories of assets under the direct supervision of the trainers.

In addition the team has reviewed the experience obtained from the valuation work done in the
Corporation, Afar salt production share company, and also made an additional effort to review the
experience of other public enterprises, such as National Alcohols Factory and Paper and Pulp
Factory, who has employed external consultants for asset valuation.

This final report on the fixed asset valuation of Adola Gold Development Enterprise is prepared to
be presented to the Management Committee of corporation. The report focuses on the valuation of
buildings, placer gold washing machineries, workshop equipment, utilities /power and water
supply/, heavy duty and light vehicles, office furniture and equipment, computer & accessories,
and special medical equipment, administrative offices and staff residences. The report consists of
the valuation of all fixed assets of AGDE found in the Head office located in Shakiso and branch
office in Megado and Ulaulo.

1.2 Objective

The objective of the valuation work is to calculate the depreciated replacement Value (DRV) of
the fixed assets of the Adolla Gold Enterprise. The valuation work involves asset identification
and description, condition assessment and determination of realistic current replacement value of
the assets of the Enterprise for IFRS implementation.

1.3 Scope of the Valuation

The valuation work is limited to the determination of the depreciated replacement value of all
fixed assets of AGDE found in the head office and mining and production site.

1.4 Purpose of the Valuation

The purpose of this valuation is to determine or estimate the depreciated replacement value of all
fixed asset of AGDE for IFRS implementation.

1.5 Basis of valuation

According to the requirement of IVS 104 the purpose of the valuation dictates the basis of
valuation. As indicated above the purpose of this valuation is to determine the depreciated
replacement value of the fixed asset of AGDE for IFRS implementation. Thus the basis of the
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valuation is taken to be fair value as per IFRS 13. According to the requirement of IVS 105 the
cost approach is used to estimate the DRV of all fixed assets except motor vehicles for which open
market valuation approach has been employed.

1.6 Valuation Date

The assessment and investigation of the fixed assets of AGDE found in Shakiso and branch
production sites has been done from Dec. 2020 up-to January 2021. The cut-off date of the
valuation result is December 31, 2019.

1.7 Background of the Company

Adola Gold Development Enterprise (AGDE) is one of the major placer gold producing enterprise
for a long period of time in Ethiopia. The Enterprise is located in Oromiya Regional State in Guji
Zone in Megado Woreda located about 520km away from Addis Ababa. The Enterprise has been
playing a great role through producing and supplying placer gold to The National Bank of Ethiopia.
The Enterprise quit its operation and is out of work since 2005 E.C. due to disagreement with the
surrounding community. Currently the Enterprise is annexed as a part of the corporation as a
department in charge of placer gold production and marketing.

1.8 Organization of the Report

This report is organized in six sections along with detail information provided in Appendix part of
the report. The first sections provide background of the study. Description of the assets to be
valued is provided in Section II. The methodology applied is discussed in Section III, while Section
IV provides definition of values followed by caveats used in the asset valuation in section V.
Finally the valuation result is provided in Section VI. Detail information gathered for the valuation
works are provided in Appendix part of this report.

2. BRIEF REVIEW OF THE MAJOR FIXED ASSETS OF THE ENTERPRISE

2.1 General
This valuation report covers the valuation of fixed assets which include building, civil works, plant
machinery, work shop equipment; motor vehicles, furniture and fixture, computers and
accessories, and tools which are found in Shakiso and in different mining and placer gold
processing sites of the enterprise as of Dec 31 2019.

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 ADOLA GOLD DEVELOPMENT ENTERPRISE
2.2 Building and Civil Works

2.2.1 General
Adola Gold Development Enterprise’s properties are found in Addis Ababa and Oromiya Regional
State Guji zone specifically in Shakiso Woreda and Megado woreda where the administrative
facilities and mining and processing facilities are found. All the buildings and Gold processing
facilities in Shakiso and Megado Woreda that are owned by the Enterprise are covered by this
valuation. The Enterprise has the legal title deed for vast land on which the gold mining and
processing facilities, administrative offices, and residence buildings are located.

2.2.2 Location of the Buildings and Civil Works

2.2.2.1. Shakiso office Building and Civil Works

The head office of the enterprise is in Oromiya Regional State, Shakiso Woreda, Shakiso- town
located 485 km away from Addis Ababa. The Enterprise holds the title deed for 3.22 Square Kilo
meter land for the mining and production of placer gold. The Enterprises’ buildings within the
Shakiso town includes villa type office blocks which are constructed from HCB for general
manager, office for other staffs build from Pre-cast mold material, double height store building
which are constructed from Pre-cast molds, and also double height store building which are
constructed from HCB, double height work shop building which is constructed from Pre-Cast,
double height work shop building which is constructed from HCB, guard house buildings, 40 feet
container blocks, Pre-cast constructed Residences, HCB Residence, CIS house, Timber made
House and corrugated iron type Guard houses.

2.2.2.2. Megado, Cheketa and Ula-Ulo Branch Building and Civil Works

The Branch office and Residence of the Enterprise are located in Oromiya Regional State Guji
Zone under Shakiso Woreda in Megado town specifically Cheketa power station, and Ula-Ulo
mining site. These sites are found around 530 km away from Addis Ababa. The Enterprise holds
the title deed for 3.22 Square Kilo meter land in the area. The Enterprises’ buildings within the
Megado town includes Timber blocks residence house, Timber made Block work shop, CIS block
store, Timber made block cafeteria and HCB block store for Cafeteria.

The Enterprise holds the title deed for 15,555 Square meters area where different types of Building
and Civil works found in and around the Cheketa power station used for the production of

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 ADOLA GOLD DEVELOPMENT ENTERPRISE
Electricity. The Enterprises’ buildings within the Cheketa area are mainly Concrete block houses,
and timber block houses. In addition Ula-Ulo mine site buildings are only made of CIS with
eucalyptus tree post.

2.2.2.3. Land Improvement

A land improvement is any type of alteration to the land to make it more usable. Improvements
have a limited life and can be depreciated unlike land.

Land improvements are completely separate from the land itself. That is why land improvements
are considered a completely different asset than land. The money spent on improving land does
not get added to the original cost of the land. Instead, it is treated as a completely separate asset
purchase and is depreciated over its useful life just like other fixed assets.

Examples of land Improvement in the share companies are eucalyptus tree post barbed type fence
and concrete post barbed and mesh wire type fences.

2.2.3 Partial Listing and Conditions of the Buildings

Conditions of the above-described building and civil works are as provided in the table below:

Table: 2.1 Partial listing and Conditions of Buildings and Civil Works

No: Description Condition Remarks

A Shakiso Town Building and Civil Work

1 Office building Pre-Cast Concrete wall Good-2

2 Federal police Residence (pre-cast) Good-1

3 Manager office Good-2

4 Radio Operator room made from Timber house Poor-1

5 Dry Latrine poor-2

6 Ware house 1 (Store and office) Good-2

7 Ware house 2 Good-2

8 Spare-part Shelter (3-side open) Poor-4

9 Battery Room Poor-4

10 Guard house (CIS) Good-3

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 ADOLA GOLD DEVELOPMENT ENTERPRISE
No: Description Condition Remarks

11 Fuel Station office Good-3

12 Fuel Tanker Good-1

13 Work-shop 1 Good-2

14 L-shaped Work-shop and garage good-2

15 Car Wash (trench) poor-1

16 Ware house-3 good-1

17 Gold smelting room Fair

18 Gold retorting room poor-1

19 Dry Latrine good-1

20 Timber Block federal police residence Poor-4

21 Container 40'' Good-1

22 Steel Container finance doccument store Good-1

23 Timber House poor-1

24 Block house good-2

25 Block house good-2

26 Block house good-2

27 Timber House poor-1

28 Block house good-2

29 Timber House Fair

30 Block house good-2

31 Timber House Poor-1

32 Timber House Poor

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 ADOLA GOLD DEVELOPMENT ENTERPRISE
No: Description Condition Remarks

33 Timber House Poor-2

34 Timber House Poor-2

35 Block house good-2

36 Block house good-2

37 Block house good-2

38 Block house good-2

39 Block house good-2

40 Block house good-2

41 Block house good-2

42 Timber House poor-2

43 Block house good-2

44 Block house good-2

45 Block house good-2

46 Block house good-2

47 Block house good-2

48 Block house good-2

49 Block house good-2

50 Element house Good-2

51 Timber House Poor-2

52 Element house Good-2

53 Element house Good-2

54 Block house poor-3

55 Timber House Poor-2

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 ADOLA GOLD DEVELOPMENT ENTERPRISE
No: Description Condition Remarks

56 Block house Good-2

57 Block house (samuana baze) Good-2

58 Timber House Poor-2

59 Block house poor-3

60 Timber House Poor-2

61 Timber House Poor-2

62 CIS block Poor-1

63 C-Maired Kichen block good-2

Megado and Chekata area building

Timber House poor-2

Timber House poor-2

Timber House poor-2

Timber House poor-2

Timber House poor-2

Timber House poor-2

Timber House poor-2

Timber House poor-2

Timber House poor-2

Timber House Damage

Timber House poor-2

Timber House poor-2

Timber House poor-2

Timber House poor-2

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 ADOLA GOLD DEVELOPMENT ENTERPRISE
No: Description Condition Remarks

Timber House poor-2

Timber House poor-2

Timber House poor-2

Timber House poor-2

Timber House poor-2

Timber House poor-2

Timber House poor-2

Timber House poor-2

Timber House poor-2

Timber House poor-2

Timber House poor-2

Timber House poor-1

Timber House poor-1

Timber House Fair

Element Or Block Good-0

Timber House poor-2

Block house (CIS) Good-2

Timber House poor-2

Timber House poor-2

Timber House poor-2

Timber House poor-2

Timber House poor-2

Timber House poor-2

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 ADOLA GOLD DEVELOPMENT ENTERPRISE
No: Description Condition Remarks

Megado Work Shop (Timber) poor-2

Timber House poor-2

Timber House poor-2

Timber House poor-2

Timber House poor-2

Timber House poor-2

Timber House Damage

Timber House poor-2

Timber House poor-2

Timber House poor-2

Timber House poor-2

Block house Fair

Block house Fair

Timber House poor-2

Timber House poor-2

Timber House poor-2

Block house for power house good-2

Steel house Good-2

Timber House poor-3

Timber House poor-3

Ula-ulo Hadima area building

CIS residence poor-3

CIS residence poor-3

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 ADOLA GOLD DEVELOPMENT ENTERPRISE
No: Description Condition Remarks

CIS residence poor-3

CIS residence poor-3

CIS residence poor-3

CIS residence poor-3

CIS residence poor-3

CIS residence poor-3

CIS residence poor-3

CIS residence poor-3

CIS residence poor-3

CIS residence poor-3

CIS Cafteria poor-3

CIS residence poor-3

CIS residence poor-3

CIS residence poor-3

2.1 Machinery and Equipment’s

2.1.1 Placer Gold processing Plant

Adola Gold Enterprise processes and supply Placer Gold from Ula-Ulo and surrounding areas to
the National Bank. The mineral is mined and processed mainly using the plants found in Oromia
Regional state- Guji Zone, in Megado woreda, specifically in Ula-Ulo area.

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Placer Gold processing Plant

Feed Hopper Rotary Drum Vibrating

scrubber with Sluice
Ore
Feed Trommel Screen

Loader

Gold (AU) Melting Shaking Sluice

Furnaces Table/ Jigging Boxes

///Machine

The gold mineral is produced by washing with pressure water and separated by a set of sluice boxes
using gravity slope method.

Mining Machineries:

This category includes machineries used for placer gold ore preparation and transportation. This
includes: Caterpillar motor scrapers, Caterpillar Track type Dozers and Volvo loader. Most of the
machineries in this category are old and require major maintenance to be operational.

Table2.2 List of Mining Machineries along with their condition

No Machinery Description Qt Mining Age Current

up
y Machineries Year of to
Status
Conditio
Purchas Dec,
31, n
Mode e , GC
201
Brand l 9
Adola gold Development
1 Caterpillar Motor Scraper, 1 Caterpilla 621 G 2002 17 Not 0.40
r
Model=621G,
functiona
S/N=CAT0621GTCEP00353,
l
Engine power=330HP,
Payload=24 ton, Capacity=17
m3

2 Caterpillar Motor Scraper 1 Caterpilla 621E 1987 32 Not 0.35

r
621E, SN=6AB00869,
functiona
Capacity=Engine
l

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power=330HP, Payload=24
ton, Capacity=17 m3

3 Caterpillar Motor Scraper, 1 Caterpilla 621 G 2005 14 Not 0.60

r
621G Model=621G
functiona
,S/N=CAT0621GCDBB00663
l
, Engine power=365HP,
Payload=24 ton, Capacity=17
m3

4 Caterpillar Motor Scraper, 1 Caterpilla 631E 1987 32 functiona 0.50

r
Model=631E, SN=1AB00636,
l
Capacity=Engine
power=450HP, Payload=34
ton, Capacity=23.7 m3

5 Caterpillar Track type Dozer, 1 Caterpilla D9L 1987 32 functiona 0.30

r
D9L, Sn=14Y03663, Engine
l
power=460HP

6 Caterpillar Track type Dozer, 1 Caterpilla D9R 2002 17 functiona 0.45

r
D9R, Sn=, Engine power=400
l
Hp

7 Caterpillar D8L track type 1 Caterpilla D8L 1982 37 Not 0.30

r
Dozer, SN=53Y02640, Engine
functiona
power=335Hp
l

8 Caterpillar D9N track type 1 Caterpilla D9N 1989 30 Not 0.15

r
Dozer, SN=6XJ00894, Engine
functiona
power=370 Hp
l

9 Volvo Wheel Loader, 1 Volvo 4600B 1986 33 functiona 0.40

Model=4600B, Man No=2437
l

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 ADOLA GOLD DEVELOPMENT ENTERPRISE
2.1.2. Equipment

Workshop Equipment

This category includes equipment used for mechanical maintenance in repair workshop. Includes:
lathe and milling machines, shaper machine, welding equipment, hydraulic presses, drill machines,
engine hoists, and air compressor and so on. Most of the equipment in this section are old and
acquired during the DERG regime. Most of these machines are imported from USSR. Most of the
machines in this category are old and are in fair working condition. They are found in Shakiso and
Megado workshops.

Table 2.3, List of Workshop Equipment with their condition

No Machinery Description Location Condition

1 Power Hacksaw, Brand=Godina, Shakiso 0.70

2 Pedestal drilling Machine (large), Made in Shakiso 0.70
3 Vice with steel table Shakiso 0.60
4
Yugoslavia, drill capacity ø=3mm-16mm,
Metal shaper Machine, Short Stock, K700 Small, Shakiso 0.70
5 Model=STB
Lathe 132Made in USSR,
Machine, Shakiso 0.70
6
Model= KB-700, max shaping length=850 mm,
Surface plate table Shakiso 0.60
Model=TES32502000, Manual old, Motor power 5
7 max moving
Tool grindingdistance ofmade
machine, working table=710 mm
in Yugslavia, Shakiso 0.70
8 kw, Spindle Bore=40mm, C/C
Bench Pedestal Grinder (small) distance=2000 mm, Shakiso 0.70
9
Model=CBR-20-28
Double
width ofWheel Grinding
bed=250 machine
mm, Speed=40-1800 rpm Shakiso 0.65
10 Air Compressor, Model=MOSE220 Shakiso 0.70
11 Electric ARC Welding Machine, Model=SEAL Shakiso 0.60
12 Hand grinder, BOSH Shakiso 0.65
13 Hydraulics Press (40 Ton), Model=2135-1M Megado 0.50
14 Electric Arc Welding Machine TS-250 Megado 0.70
15 Lathe Machine (Medium), Motor Capacity=5.5 kw, Megado 0.50
16 Electric Welding machine (Mossa), mobile, 160 Megado 0.70
17
spindle bore dia= 40 mm, C/C distance=2000 mm,
Nozzle Tester Megado 0.50
KVA
18 width
Anvillof bed =250 mm, Megado 0.50
19 Anvill Megado 0.50
20 Anvill Megado 0.50
21 Bench Vice (Big) with table Megado 0.50
22 Bench Vice (Small) with table Megado 0.50
23 Bench Vice (Small) with table Megado 0.50
24 Air Compressor Megado 0.70
25 Drill Machine Megado 0.50
26 Grinding Machine Megado 0.50
27 Electrical Motor 50KW Megado 0.50
28 Hand Drill Machine Megado 0.50
29 Chain Hoist, manual, 3 ton Megado 0.50
30 Power Hacksaw, Brand=Godina, Shakiso 0.70
31 Pedestal drilling Machine (large), MadYugoslavia, Shakiso 0.70
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g e capacity ø=3mm-16mm, Model=STB 132
 ADOLA GOLD DEVELOPMENT ENTERPRISE
32 Vice with steel table Shakiso 0.60
33 Metal shaper Machine, Short Stock, K700 Small, Shakiso 0.70
34 Lathe Machine, Made in USSR, Shakiso 0.70
35
Model= KB-700, max shaping length=850 mm,
Surface plate table Shakiso 0.60
Model=TES32502000, Manual old, Motor power 5
36 max moving
Tool grindingdistance ofmade
machine, working table=710 mm
in Yugslavia, Shakiso 0.70
37 kw, Spindle
Bench Bore=40mm,
Pedestal C/C distance=2000 mm,
Grinder (small) Shakiso 0.70
Model=CBR-20-28
38 Double
width ofWheel
bed=250Grinding machine
mm, Speed=40-1800 rpm Shakiso 0.65
39 Air Compressor, Model=MOSE220 Shakiso 0.70
40 Electric ARC Welding Machine, Model=SEAL Shakiso 0.60
41 Hand grinder, BOSH Shakiso 0.65
42 Hydraulics Press (40 Ton), Model=2135-1M Megado 0.50

2.3.5.2. Utility Equipment

Utility equipment are those equipment and machineries not directly involved in production process
but provide a backbone supply required for production. They provide electric power and water
required for ore processing plant as well as for domestic use.

Adola Gold Enterprise owns Cheketa hydro-electric dam built by former USSR for power
generation. Cheketa power station has three main turbines each produce 500kw with three turbines
capable of generating up to 1.5MW of electricity. Out of the three turbines only one turbine is
operational the other two require vital spare parts for repair.

Electric power generating and supply equipment includes Hydro-electric dam with turbines and
transformers, Diesel engine driven pumps, Electric motor driven water pumps, power transformers
and etc.

Table 2.4, List of Utility Equipment

No Machinery Description Location Status Condition

IChekta Hydro-Power Plant

1 Hydro-Electric Dam :-Include all civil work Central/ 0.5
associated the Dam building ;- includes Cheketa Operational in
good condition
;Concrete Dam, canal, fire bay, pen stoke,
overflow canal, dike and Tail race canal

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2 Turbines with Generators: -Include all three Central/ 0.3
Only one
turbines with their respective Generators Cheketa turbine works
and all other accessories, each turbine (1/3

generate=0.5 MW, Total power generating capacity=0.5

Mw)
capacity=1.5 Mega watt
3 Transformers with power transmission Central/ 0.3
Lines_:-Include all step up and down power Cheketa Only one
Transformer is
transformers, power controls , electric poles,
operational
lines and all accessories

II Water Supply Pumps and Pipe Lines

4 Electric motor driven water pump, Pump Mormora 0.7
=Multistage centrifugal pump, Head Operational in
H=114m, Flow rate Q=300 m3/hr, Electric good working

motor=272 Hp, Complete with Electric condition

control panel and accessories

5 Diesel Engine Driven Water pump (Max Ula-ulo 0.4
Operational in
Head=75 m, Max flow rate, Q=12 m3/hr ) fair working
Engine=D7G Engine Cannibalized from condition
scrap dozer,
6 Diesel Engine Driven Water pump (Max Shakiso 0.4
Operational in
Head=114 m, Max flow rate, Q=300 m3/hr workshop
fair working
) Diesel Engine, Cannibalized from scrap condition
D8L dozer
7 Mormora to Megado 12 inch diameter Mormora 0.4
Scova type galvanized pipe line;-Includes to Megado Operational but
all necessary fittings, civil work, and in fair working
condition
accessories, Total no of pipes=450 pcs, each
6 meter in length (2.6 kilometer)
8 Megado to Ula-ulo 12 inch diameter Megado to Not-functional ( 0.2
Over 2/3 pipes )
galvanized steel pipe line;-Includes all Ula-ulo
damaged
necessary fittings, civil work, and
accessories, Total no of pipes=2000 pcs,
each 6 meter in length (16.5 kilometer)

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2.3.5.4. Motor Vehicles

This category includes light vehicles, Trucks and Fuel truck used for personnel transport and
logistics work.

Light vehicles includes: Toyota Land cruiser single cabin pickups purchased between 1987 to 2012
GC. Most light vehicles are in good condition

Trucks:-include IVECO Dump truck and old FIAT truck, BMW old dump truck

Table 2.5, List of Motor Vehicles in Adola Gold Development Enterprise

No Plate Number Vehicle Description YOM in GC Condition/ Status

1 3-50665 ET IVECO Dump-truck Capacity=15 m3 2012 Operational

2 4-00342 OR Nissan station wagon (8 persons +1 2000 Operational
driver)
3 3-48371 E.T Toyota single cab pickup (1 Person +1 2010 Operational
driver) 10 quintal
4 3-59878 ET Toyota Station wagon (Land cruiser 2012 Operational
Long base) person+ 1 driver)
5 4-18661 OR FIAT fuel Truck (Boti) 15 m3 1988 Not-Operational
6 3-59879 ET Toyota single cab pickup (1 person+1 2012 Operational
driver)
7 3-26154 ET Toyota Station wagon (Cobra or land 2005 Operational
cruzer) 8 persons+1 driver)
8 3-26155 ET Toyota single cabin 2005 Operational

9 3-26156 ET Toyota single cabin 2005 Not-Operational

10 4-01134 OR Toyota single cabin 1987 Not-Operational

11 3-25434 ET Toyota single cab pick up 2003 Operational
12 4-00344 OR Mercedes dump truck, Capacity=6 m3 1983 Not-Operational
13 4-01139 OR IVECO truck, capacity=110 quintal 1988 Operational
14 N/P Kato crane mounted with hydraulic 1979 Not-Operational
truck, 16 Tone capacity )

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2.1.2 Furniture and Fixture, Office and House Hold Equipment, &Medical
Equipment

2.3.6.1.Furniture Fixture
Furniture and fixture are found in all branches of the Enterprise. The valuation team has made a
physical inspection and collected data about these categories of assets in Shakiso and Megado to
verify their existence and make condition decision.

Furniture Fixture of the Enterprise include Conference Table, Office table, Wooden Book Shelf,
Gust chair, Swivel chair, Managerial Table, Office sofa, Steel File cabinet, Bed, Cupboard, Lateral
Filing cabinet, Wooden chair, Conference table, Sofa Table, Coffee Table Sliding shelf & etc.

2.3.6.2.House Hold Equipment

The Enterprise’s house hold equipment is mainly found in Shakiso Residence and some items are
also found in the cafeteria in Megado.

Assets categorized under the house hold equipment of the Enterprise among others include
refrigerator, TV, chairs, decoder, electrical oven, wooden bed, stove, water filter, bedside-box,
satellite dish and receiver, dining table, Bed made of steel, and etc.

2.3.6.3. Medical Equipment

In the enterprise’s warehouse some kinds of Medical Equipment are found but this equipment are
not registered in the fixed asset registry and also no one knows the monetary value of each of these
assets when the assets are brought into the store. The only information found about these assets is
they are donations from USSR and other western countries to Adola Hospital which is not existent
by now.

Although these assets are not properly recorded and included in the fixed asset registry of the
enterprise at the time of the donation, the valuation team has tried to select those medical equipment
and machines that are expected to have potential future economic benefits. Under this category
about 28 line items are identified and included in the valuation. Although most of these fixed assets
are in a good condition and can be put into operation they are relatively outdated as new similar
machines with new advanced features and technology are manufactured and marketed.

It is also known that the enterprise received about 48 standard hospital beds along with the hospital
equipment but the beds are given to the wereda health center to be used in the fight against COVID
19. The valuation team excluded the value of the beds following the principle of IVS which states
only fixed assets that under the control of the firm shall be included in the valuation.
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A significant number of medical tools, instruments, apparatuses, kits etc. found in a very good
conditions are also identified but because of their small individual values the valuation team have
excluded them from valuation. However the team wants to bring to the attention of the management
that these items are by no means shall be considered as scrape. They have to be properly recorded
and accounted.

An X-Ray machine with important accessories, facilities, and spare parts owned by the Enterprise
has been officially handed over to Shakiso Wereda Health Office. Therefore the valuation team
excluded this machine from the valuation. The transfer verbal is included in the appendix.

2.3.6.4.Office Equipment’s, Computers & Accessories

Office Equipment, Computers & accessories of the company include assets like computer, lab
top, printer, UPS, zip drivers, Scanner, Fax machine, Calculator, Mobile phone apparatus, I pad,
Samsonite & etc./details of the list of these assets is attached in the appendix------/

2.3.7. Special Equipment and Machines

Special equipment under this category is classified as: -

2.3.7.1. Surveying Equipment

Laboratory Equipment: -these include different equipment like hot plate, electrical analysis,
analytical balance Theodolite, Total station etc.

Other special equipment includes Radio Communication apparatuses.

3. APPLIED VALUATION METHODOLOGY

As it is stated in the introductory part, the valuation team consists of members from diversified
academic background and work experience. Besides, technical and senior workers from the factory
and major functional areas are assigned to work with the valuation team while doing the asset
identification, verification and condition judgment. The team has been divided into three sub teams
and each sub team has been assigned to go to the gold processing and mining sites to critically
observe, collect, verify and analyze data on the fixed assets of AGDE. The valuation of the assets
has been carried out in the following three stages:

v Asset verification;

v Conditions Assessment and Making Judgments;

v Deciding on the valuation method; and

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v Estimation of the current values of assets.

Each stage of the valuation is discussed briefly as follows.

3.3. Assets Verification

The valuation team has started its work applying two grand approaches. The first approach is that
the valuation work for building and other civil works, plant machineries, heavy duty machineries,
and light vehicles and trucks employed a strategy of making a physical observation, detailed actual
measurement and counting of the assets and then compare it with the existing fixed asset registry
of the company. Any discrepancy found while comparing is verified and taken into account in the
following ways. Assets that are physically found by the team but not included in the fixed asset
registry are included in the valuation; while assets that are found in the fixed asset registry but not
found physically at the time of valuation are excluded. The second approach is employed for other
fixed assets like office furniture, office equipment, computers and accessories, special technical
equipment, and household equipment for these groups the basis of valuation is the fixed asset
registry list provided by the company during the assessment. Based on this list the team has made
a detailed verification to check physical existence of the assets. Only assets that are physically
found are included in the valuation.

During this stage, various data such as assets name, assets code, origin, model, location, quantity,
capacity, acquisition price(for some categories) and year, dimension, etc. for machineries and
equipment have been recorded as much as the availability of information allowed. With regard to
buildings, the materials of construction for each component of the building, the area covered, time
of construction, etc. has also been recorded.

3.4. Conditions Assessment and Making Judgments;

For the purpose of this valuation, the current conditions of the assets are determined through
detailed physical assessment. A condition factor has been established for each fixed asset so as to
represent its current physical condition in the valuation. The depreciation factor attached for each
category of asset is determined taking into account their specific nature. Scrap and damaged items
in each fixed asset category are given the lowest condition factors and new items (if any) are
assigned higher condition factors while the remaining ones are given condition factors varying in
between.

During asset verification and condition assessment there was a limitation of getting the capacity of
some plant machineries, material of construction, year of manufacturing, year of installation and
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also the degree of functionality of old machines in use which will limit the cost estimate, however,
the valuation team has tried to close the gap through physical assessment and interviewing of the
respective area senior experts.

Similarly, for the used equipment and machineries found at the head office, and in the factory
scrape yard includes items such as, welding machines, workshop equipment, heavy duty machine,
there was very limited information that indicate their current technical status. Thus, additional
information on the functionality level, malfunctioning and missing components is necessary to
estimate the price of these items; however, the valuation team has filled the information gap
through physical assessment and interviewing senior experts of the factory about the history of the
equipment and decided to include such assets under assets held for sale.

The valuation details along with the data collected during asset verification of the buildings and
infrastructure; plant machineries and equipment; office furniture and equipment; and motor
vehicles are also presented in appendix part of this report.

3.5. Deciding on the valuation methods

The basic information used for the assets valuation is the current price data or the replacement cost
new (RCN), Open market Value (OMV) and historical data of some assets from the records of the
Enterprise. The Replacement Cost New (RCN) of the plant machinery and equipment had been
obtained from quotation of suppliers of similar new plant machinery and equipment, local agents
for similar machinery and equipment, internet sources, original acquisition price and offers
obtained for new similar assets that has been purchased and in the process of acquisition.

The cost of the buildings and other civil works of the company have been verified through
appropriate survey. During this stage of the study, size and type of construction materials for each
component of the building have been recorded so as to compare with the design that the building
is originally made and to estimate the cost of construction. The unit in place method has been used
for determination of GRC new.

The Open Market Value (OMV) of vehicles had been obtained from both local and international
suppliers of similar Vehicles, local agents for similar assets, internet sources, and original
acquisition price for some lately replaced items.

The Replacement Cost New (RCN) of the specialized equipment, field equipment & tools had been
obtained from both local and international suppliers of similar new machinery and equipment, local

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agents for similar assets, internet sources, and original acquisition price for some lately replaced
items.

Moreover, for those assets whose current FOB price information is obtained from local suppliers
& from international suppliers data about custom duty fees, transportation charges, installation,
and commissioning costs are considered with the current currency exchange rate in order to arrive
at current GRC

For example, for Plant machineries where it is impossible to obtain prices as the machines are old
model and currently their suppliers’ local agents are out of the business RCN is estimated by
officially requesting quotation through internet for FOB price of same capacity/function machine
from known suppliers and adding necessary additional costs as indicated below.

RCN=FOB price of Equivalent capacity/function machine + Custom duty cost + Freight and
Insurance cost + Installation and Commissioning cost

The valuation team ignored the valuation of those fixed assets judged to be scrape and selvage.
The team categorized these items in the list of assets held for disposal under each category of fixed
assets. As the assets categorized under held for sale are not going to be used in the normal operation
of the company /because of their poor efficiency and or high operational cost or any other reasons/
sooner or later they are going to be excluded from the balance of fixed assets through disposal. To
facilitate the company’s fixed asset disposal work by making available the estimated current
replacement value of such fixed assets with probable market demand the team estimated their GRV
using the cost approach or market approach. However, the team excluded the valuation of fixed
assets judged to be scraped or damaged such as furniture and fixtures, computer and accessories,
workshop equipment and factory utilities because these assets usually do not have market demand
while disposing. Thus, they continue to show their historical book value in the record until they
are disposed.

The Replacement Cost New (RCN) of office furniture and equipment, computers and accessories,
household equipment is obtained from the survey of the office furniture and equipment producers
and dealers currently operating locally.

3.6. Estimation of the Current Values of Assets

The valuation methodology used for each category of assets as presented is Depreciated
Replacement Value (DRV) method for plant and mining machineries, utility and workshop

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equipment, buildings, civil works, infrastructure; different kinds of other equipment, computers
and accessories, and tools. Open Market valuation method has been used for motor vehicles,

The DRC is the product of GRC and Depreciation Factor (DF). The GRC is estimated by using the
GRC index developed in a manner as discussed in the next section.

The valuation details along with the data collected during asset verification of building, civil
works, infrastructure; equipment, tools, office furniture and motor vehicles are provided in tables
in the Annex part of this report.

3.7. Methodology employed to adjust the current RCN of fixed assets to the cut-off date, Dec.
31, 2019/Jan. 1, 2020/
To determine the Depreciated Replacement value of the fixed assets of AGDE as at Dec. 31
2019/Jan. 1, 2020/ i.e. 12 months back from the current date /Dec, 31 2020/ of the fixed asset
valuation of the Company, the valuation team has gone through the following major steps.

• The Replacement Cost New of all fixed assets as determined as of Dec. 31, 2020 based on
the actual data collected from the open market systematically as described earlier in this
part is used as the base value for calculating the estimated Replacement Cost New of all
fixed assets as at Dec. 31 2019/Jan. 1 2020/
• A careful review has been made by the technique team on the current status of each fixed
asset to decide about the likely physical condition and corresponding value that could have
been assigned for each fixed asset 12 months back. To make the judgment reliable it has
been based on the information about the current physical condition and value assigned for
each fixed asset in the detailed valuation of Dec.31 in 2020. Finally, a new judgment is
made on the physical condition and value of each fixed asset as at Dec 31 2019. The new
judgment on the physical condition of each fixed asset will normally be higher/better/ than
the current physical condition and value attached to the asset on Dec. 31 2020.

• The other major variables involved in this valuation are the effect of rise in price as
evidenced by inflationary trend observed in the country and a significant change happened
in the currency exchange rate in the past 12 months/Dec. 2019 up to Dec 2020/. The
valuation team has identified the level of inflation in the year 2020 as compared to the base
year 2019 to be about 20.35%, /Central Statistics of Ethiopia/. The value of a Dollar, on
the other hand, has shown a significant rise against Birr during the same period. 1 USD
which was on average about 29 birr On Dec. 31 2019 has surged to around 35 birr during
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the end of 2020 showing more than 20.5% rise. This means as we go back to the year 2019
the value of birr has been devaluated by about 20.5% during the past 12 months. To
estimate a fair replacement cost new of each fixed asset 12 months back based on the RCN
determined as of Dec. 31 2020 the valuation team preferred to use 20.43% which is a simple
average of the inflation and devaluation figures/rates/ recorded during the past 12 months.
The team has tried to consider these effects while determining the GRC of the fixed assets.

4. DEFINITIONS OF VALUES

4.3. Building and Civil Works

All of the buildings and civil works of the Enterprise are found in Oromiya region in Shakiso town,
Megado town, Ula-Ulo mining site and Chakata Power station. Estimating the DRV of the building
on the basis of market or income approach is impossible as all of the above areas except shakiso
are dominantly occupied by artisanal placer gold processors who live in a camp like settlements.
Shakiso town is also a town which is not well developed for applying comparative income or
market approach. Thus, the valuation team preferred to use Cost Approach through the unit in place
method to the value the buildings.

The Gross Replacement Value (GRC) of a building is the estimated cost of erecting the building
or the modern substitute building having the same internal area as of that existing and the ancillary
site works together with the relevant professional fees and other associated expenses directly
related to the construction of the building and site works.

To arrive at the gross replacement cost of the building and other civil works the unit in place
method is used. Unit in Place Method is a simplification of the quantity survey method. It is also
called the segregated cost method. It finds the sum of the cost of installed materials such as the
cost to installation, foundation, supper structure, interior wall, exterior wall, roof, plumbing,
wiring, etc. the sum of the units representing the total cost of the building.

Depreciated replacement cost (DRC) of a building, civil works and infrastructure is the Gross
Replacement Value (GRV), depreciated according to the condition factor

The calculation/estimation of the remaining economic life of the buildings and infrastructure/civil
works is based on the information on asset registrations book and information gathered from senior
professional and technical persons of the company to determine the Age, History, construction

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materials of the buildings and civil works. The actual physical condition is taken in data
gathering/inspection time.

The decision about the current physical conditions and remaining economic life of the
buildings/civil works and land improvement is based on the information obtained about the
buildings and civil works from the asset registration books and information gathered from senior
professional and technical persons of the share company about the age, history, construction
materials of the buildings and civil works. The valuation team has used the above relevant
information to make the decision on the physical condition of the building and civil work.

4.3.6. Condition Rating of Buildings

The decision about the physical condition/ status/ of the building at the time of the valuation is
based on the best judgment of those persons familiar with the physical characteristics and condition
of the building and civil works of the enterprise and on site observation of the valuation team
members. The American standard on the condition rating techniques of building has been reviewed
from literature and considered in the condition rating decision.

Table: 4.1. Bench Marks for Present Condition Rating of Building and civil works

NO RATING RATING DESCRIPTION

1 NEW The building and or the civil work is new with zero loss in value arising from
wear and tear. It is in a perfect operational and aesthetical condition to serve
the purpose for which it is intended.
2 EXCELLENT The building or the civil work is in a nearly new physical condition and is
perfectly suitable for the purpose for which it is constructed with a minor
wear and tear.
3 VERY GOOD The building or the civil work shows a smaller amount /level/ of wear and tear
but is suitable for continued use with minor maintenance. The approximate
restoration cost is less than 10 percent of building replacement value.
4 GOOD The building or the civil work has shown a visible wear and tear and requires
normal restoration to present acceptable conditions. The approximate
restoration cost is 10–15 percent of building replacement value.
5 FAIR The building or the civil work Requires moderate updating or restoration to
continue to give the service it is intended to give. The approximate restoration

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cost is 15–30 percent of building replacement value. The physical conditions
may have an effect upon building operations.
6 POOR The building or the civil work Requires significant updating or restoration to
continue to give the service it is intended to give. Requires with possible need
to overhaul building subsystems. The approximate restoration cost may range
from 30–45 percent of building replacement value. The physical conditions
adversely affect building operations.
7 DAMAGED Should be demolished or abandoned because the building is unsafe and/or

/SCRAPED structurally unsound, irrespective of the need for the space or the availability
of funds for a replacement. Additionally, If a building is scheduled for
demolition, its condition is reported in this category, regardless of condition.

Table 4.2, PD factor of each category of Condition Rating of Building

Condition Depreciation (%) CDF (CF)

New 0 =1
Excellent 8 0.92
V. Good/Good-4/ 16 0.84
Good 17-46 0.83-0.54
Fair 47 0.53
Poor 53-82 0.47-0.18
Scrap/Damaged 83-100 0.17 - 0.00

4.3.7. Economic useful life

The theoretical useful life or economic useful life of buildings and civil works is estimated taking
into account the materials used to build the houses and other civil works and the way the buildings
are constructed. The team has consulted senior workers of the company to know about each
building and civil work and reviewed the industry experience about the decision over the economic
life of different types of buildings.

The following table shows the basis for the decision about the economic life of the buildings.

Table 4.3, Economic useful life of Buildings and land improvement

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No Building Type Economic Useful life EUL

1 Standard Block wall house, with RC column and Beam, 50

Foundation Shallow isolated RC footing Pad
2 Corrugated metal sheet wall and roof buildings, with 20
round wood column and horizontal bracing with stone
masonry foundation, stone hardcore and cement screed
finish floor
3 Chika Block Buildings with stone masonry foundation and 30
stone hardcore and cement screed finish floor, outside
wall rendered with cement mortar

4 Treated Timber wall house, foundation isolated round 40

solid wood anchored on ground, with rectangular timber
column and beam, with timber floor
5 RC pre casted wall buildings, with RC column and Beam, 50
Foundation Shallow isolated RC footing Pad
6 Standard steel container, with no support and roof 20

It is recommended that all the buildings, civil works and land improvements to be depreciated
under the straight line rate method over their remaining economic life.

4.4. Machinery, Equipment and Tools

The Open Market Value (OMV) of plant machinery and equipment is the costs of acquiring and/or
installing new assets, or the modern substitute assets having the same production capacity as the
existing ones, together with the associated expenses directly related to the installation of the assets.

The Depreciated Replacement Value (DRV) of the plant machinery and equipment is the estimated
costs of acquiring and installing the new or the modern substitute assets having the same production
capacity as the existing one less all forms of deterioration

The valuation of all mining machineries, equipment and utility items except motor vehicles used
the cost approach mainly because most of the plant machineries, equipment and utilities used in
the factories are unique and specialized to use a comparative income and market approach. The
team applied the open market approach for the valuation of Motor vehicles.

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4.4.6. Determination of the depreciation factor and calculation of Depreciated
replacement cost DRC
In order to get or calculate the depreciated replacement cost of each asset the following parameters
are used for calculating all sorts of depreciation. The system and procedures employed for arriving
at DRC are defined and presented as follows:-

DRV= [GRCN-All sorts of Depreciation] = [Replacement cost of New (RCN)-[(Physical

Deterioration (PD) + Functional Obsolescence (FO) + Economical Obsolescence (EO)]]

DRV= [RCN-(PD+FO+EO)]

DRV=OMV for motor vehicle

Physical Deterioration (PD):-is a form of depreciation where loss in value or usefulness of an

asset due to the using up or expiration of its useful life caused by wear and tear, deterioration,
exposure to various elements, physical stresses, the passage of time, and similar factors. It is
calculated by determining present condition of the asset through condition factor (CF) rating set
based on observation and experience

PD=RCN*PDf, where PDf is a physical deterioration factor/percentage of deterioration

PDF= [Effective age (Eage) /Economic Useful Life (EUL)]

=Eage/ (Effective age (Eage) + Estimated Remaining Economic life (ERL))

=Eage= {EUL- Estimated Remaining Economic life (ERL) }

= [EUL-ERL]

ERL=EUL*CF

PDf= (EUL-ERL)/EUL =(EUL-EUL*CF)/EUL =EUL(1-CF)/EUL=(1-CF)=1-(ERL/EUL)

where

Effective age (Eage) is the apparent age of a property in comparison with a new property of like
kind; that is, the age indicated by the actual condition of a property

Eage=EUL-ERL

4.4.7. Determination of Economic/Theoretical Useful Life (EUL)

The theoretical Economic useful life is the expected total service life of the asset based on the
assumption that it has been and will be used and maintained as per the recommendation of the
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suppliers of the assets. In determining the theoretical useful life of the assets, the valuation team
reviewed the international trends and practices in setting the theoretical useful life of fixed assets,
the estimated useful life of fixed assets of different categories determined by other professionals
involved in the work of assets valuation in deferent public enterprises, and the national experience
of determining the useful life of fixed assets for preparing tax reports in Ethiopia. Based on the
analysis made on the above experiences the economical useful life of Machineries, Equipment and
Motor vehicles in Adola Gold Development Enterprise is set as shown in the following table

Table 4.4, Plant Machinery, Mining machineries and Motor Vehicles Theoretical/Economic Useful
Life, EUL

Economic Useful life

No Asset types description
EUL, in Years

1 Gold processing plant machineries 15

2 Mining Machineries 15

3 Utility Equipment 15

4 Workshop Equipment’s 15

5 Motor Vehicles 10

Table 4.5, Concrete water reservoir/Theoretical Useful Life, EUL

Economic Useful life

No Asset types description
EUL, in Years
1 Hydroelectric power 50

4.4.8. Determination of Service Life/Actual service life/

The service life of the assets is the total life that the asset provided useful service under proper
operating and maintenance condition. The service life of the assets is determined based on the
information provided by the company’s employees, especially considering the data obtained from
the name plate of machinery and their historical background. Even though service life could be
determined based either on the date of purchase or on the date of commissioning, for the purpose
of this valuation installation date is taken for some plant machineries and purchase date as obtained
from purchasing documents for some other plant machineries and workshop equipment. To arrive
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at a reasonable service life, the team has exerted maximum effort to collect data in relation to the
year of installation and the operation history of each machine from the documents collected and
from interview of senior experts of the company. The determination of the service life of most
technical and special equipment and office machines is ignored by focusing on the use of EUL and
PD to arrive ate DRC.

4.4.9. Determination of the Present Condition and Condition Factor, CF

After machinery and equipment identification and listing is done by recording their brand name,
model number, capacity, serial number, physical size and age the present physical condition
judgment and condition rating has been determined considering international trends, interviewing
experienced workers of the Share Company, investigating each fixed asset found in all branches
through physical observation made by the valuation team. Condition definition and rating bench
mark have been set as shown in the following table.

Table 4.6, Condition Definition and Rating Bench Marks for Machinery, Equipment and Tools

Condition
Condition
Condition Abbreviation Definition Factor
%
(CF)

New N Not used before, no loss in value due to physical 95-100 0.95 - 1.00

Excellent E Nearly new condition. little use, recently purchased 90-94 0.90 - 0.94

Very VG Exceptional good mechanically in good condition,

Good may have been overhauled or may not have been 80-89 0.80 - 0.89
used enough to require overhaul

Good 3 G3 In good operating condition, may require

replacement or repair due to working parts. No 70-79 0.70 - 0.79
known mechanical defects

Good 2 G2 In good operating condition, may require

replacement or repair due to working parts. with
minor defects and functionalities like AC, Interior 60-69 0.60-0.69
seat and other not work properly, but with frame,
exterior body , engine and transmission has no defect

Good 1 G1 In good operating condition, may require

replacement or repair due to working parts. with
body damage and worn out additionally with minor
defects and functionalities like AC not work due to 50-59 0.50-0.59
age, Interior seat and other interior cabin parts not in
good condition or old but with no known frame,
transmission and engine problem

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Fair F May require overhaul soon. Has seen lots of service
40-49 0.40 - 0.49
or suffered hard use, with functionality problems

Poor P Is worn and needs repair. Has seen hard service 10-39 0.10 - 0.39

Salvage S Salvage value in unit components as reusable or

5-9 0.05-0.09
spare parts. Little Value

Scrap X No longer serviceable and no value other than for

0-5 0.00 - 0.04
material only

Functional Obsolescence (FO):- the loss in value or usefulness of a property caused by

inefficiencies or inadequacies of the property itself, when compared to a more efficient or less
costly replacement property that new technology has developed.

Most of the machineries and equipment in Adola Gold Development Enterprise are up to date and
capable of delivering their expected output and most are unique in nature.

Because of the above reasons the asset valuation team ignored depreciation caused by functional
obsolescence (FO)

Economic Obsolescence, EO:-is the loss in value or usefulness of a machinery and equipment
caused by factors external to the asset. Unlike physical depreciation and functional obsolescence,
economic obsolescence is not related to the inherent characteristics of the assets.

By the assessment and verification done by the valuation team machineries and equipment’s in
AGDE are not subject to economic obsolescence. Therefore depreciation caused by External or
Economic obsolescence is not considered in the determination of DRV. Thus the determination of
the DRV used the following formula:

DRV=RCN-PD

DRV=OMV for Vehicles

Determination of RCN for Machinery, Equipment and Tools

For estimating replacement cost new/RCN/ of machineries the following approaches have been
used

Plant machineries

For standardized industrial plant machineries

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• RCN has been obtained by officially requesting the current cost of same or equivalent
capacity, and model machines from authorized dealers /local agents for each brand and
adding necessary duty costs, installation and commissioning costs as described below:
ü RCN=Current cost of same/equivalent capacity machine +Custom Duty cost+
Installation and Commissioning cost + Transport and Insurance cost
ü RCN=FOB price of Equivalent capacity/function machine+ Custom duty cost+
Freight and Insurance cost+ Installation and Commissioning cost

For Heavy duty Machineries, Utility equipment’s

RCN was obtained by officially requesting the current cost of new same model or equivalent
capacity model of each machine from authorized dealers and adding installation and
commissioning, transportation costs as follows

ü RCN=Current cost of new same or equivalent capacity machine or vehicle obtained

from Authorized dealers+ Installation and Commissioning costs +transportation
cost, insurance during transit, custom duty cost and other costs incurred directly
related to the acquiring and getting the assets ready for use.

4.5. Furniture Fixture, House Hold, Medical Equipment Office Equipment, Field
Materials, computer & accessories

4.5.6. Valuation method

The valuation of assets in these categories has been made by adjusting their GRC with their
respective physical depreciation factor calculated based on the present condition of the asset. The
decision on the current condition of each equipment, furniture, computer and accessories ranges
from 95% for a nearly new assets and as low as 15% for those assets in a poor condition. Furniture,
fixtures, equipment, computers and field materials judged to be in a very poor condition are given
less than 15% and categorized as assets held for sale.

The Gross Replacement Value (GRC) of office Furniture and Fixture, House Hold, Medical
Equipment Office Equipment, Filed Materials, computer &Accessories is an estimated cost of
acquiring the new substitute assets having the same function and capacity as the existing. The
Depreciated Replacement Values (DRV) of office furniture and equipment is the estimated costs
of acquiring and installing the new or the modern substitute and depreciated according to their
condition factor.
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Table: 4.7, Bench Marks for Present Condition Rating for furniture, fixtures, office equipment, and
computers

Notes
Condition Depreciation (%) CDF (CF)
New 0-5 1.00-0.95
Excellent 6-10 0.94-0.90
V. Good 11-15 0,90-0.85
Good 16-35 0,84-0-55
Fair 36-55 0.56-0.35
Poor 56-85 0.44-0.15
Scrap 86-100 0.15-00

Table 4.8. Selected Depreciation methods and Residual value amounts

Description of the Valuation Suggested Depreciation Method, Annual Residual/Salvage

No Assets Approach depreciated rate, ADR Value in %
Used
Method Rate
1 Buildings and civil Cost Straight Line Method 1/ERL 3% of DRV
works
2 Land Improvement Cost Straight Line Method 1/ERL 3% of DRV
3 Plant machinery (Stand) Cost Straight Line Method 1.5*(1/ERL) 0 % of DRV
4 Mining Machinery Cost Straight Line Method 1.5*(1/ERL) 10 % of DRV
5 Utility equipment’s Cost Straight Line Method 1.5*(1/ERL) 0 % of DRV
6 Workshop Equipment Cost Straight Line Method 1.5*(1/ERL) 10 % of DRV
7 Motor Vehicles OMV Straight Line Method 1.5*(1/ERL) 10 % of DRV
8 Reservoir Cost Straight Line Method 1/ERL 0.00
9 Furniture and Fixture Cost Straight Line Method 1/ERL None
9 House Hold Equipment Cost Straight Line Method 1/ERL None
10 Office Equipment, Cost Straight Line Method 1/ERL None
11 Computer and Cost Straight Line Method 1/ERL None
Accessories
12 Special Equipment Cost Straight Line Method 1/ERL None

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5. CAVEATS

Our Valuations has been completed subject to the following caveats:

1) Adola Gold Development Enterprise’s placer gold Minerals deposits found around Ula-Ulo.
The mining License has been revoked since 2012 E.C. by the Federal Ministry of Mines and
Petroleum. Therefore by now the enterprise has no right to mine and process placer gold in
the area. Thus, giving value for the land which the company is using for gold processing
facilities and resident area is not logical.

2) We have not arranged for nor carried out any mechanical or electrical tests for assets that are
not operational or dismantled at the time of asset verification, limiting our examination to the
outward physical appearance and to information received as to the history and condition of the
assets.
3) The enterprise’s mining license has expired and has been cancelled. Besides the right to mine
the gold mineral have never been valued and included in the balance sheet of the company up
to now and therefore we have not made the valuation of mineral reserve of the enterprise in
this report.

4) We have assumed that the assets are fit for the purpose for which they shall be used and comply
with all statutory and local byelaws and regulations.

5) The asset verification, determination and condition judgments are carried out up to Dec 31,
2019. Any addition or deletion of the property which might have occurred after the completion
of the technical assessment will not be part of the cost estimation.

6) We have identified that Placer Gold washing Machine, which has been owned and used for
processing placer gold before 2005 E.C./a year the Enterprise has been forced to stop its
operation due to community disapproval/ is not available in the site. Through further
investigation the valuation team made, it is revealed that the machine has been rented to a
third party officially, unfortunately by now the party who rented the machine is not willing to
continue to pay the rent and even to allow us to visit and include the machine in this valuation.
Thus, this machine is not included in this valuation. The officials in the enterprise are trying
to get the machine back and the case is under legal proceedings.
7) We are not aware of any proposed works which would affect the value of the property.
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8) We have no knowledge of any hidden or unapparent physical deficiencies or adverse

conditions of the property (such as, but not limited to, needed repairs, deterioration, the
presence of hazardous wastes, toxic substances, etc.) that would make the property less
valuable, and has assumed that there are no such conditions and makes no guarantees or
warranties, express or implied.

6.VALUATION RESULT

The asset valuation team has done this valuation by applying the basic concepts from International
Asset Valuation Standard. The team declares the result of the asset valuation of the company as
of Dec. 31, 2019/Jan. 1, 2020. The total Depreciated Replacement value (DRV) of the fixed assets
of Adola Gold Development Enterprise, /AGDE/ as at Dec. 31 2019 as described in this report in
detail and shown in the accompanying Table 6.1 is Birr 132,117,614.79 (One hundred thirty two
million one hundred seventeen thousand six hundred fourteen birr and seventy nine cents).

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6.3. Valuation Summery tables
Table 6.1 Valuation result summery table

Branch DESCRIPTION OF TGRC ( Birr) PD (Birr) DRV( Birr) OMV ( Birr) TOTAL
APPENDICES ASSETS (Dec.31,2019 DEPRICATED
GC ) REPLACEMENT
VALUE

A Adola Buildings and civil 68,574,145.65 28,060,511.41 40,513,634.24 - 40,513,634.24

works
Land Improvement 5,322,400.48 1,943,769.23 3,378,631.25 - 3,378,631.25

Lease right 90,970.94 - 90,970.94 - 90,970.94

B Adola Furniture and Fixture 2,743,024.00 1,172,280.10 1,570,743.90 - 1,570,743.90

Office Equipment, 198,931.00 71,602.95 127,328.05 - 127,328.05

Computer and 280,200.00 93,425.40 186,774.60 - 186,774.60

Accessories
Special Equipment 2,701,119.00 1,350,559.50 1,350,559.50 - 1,350,559.50
Medical Equipment 413,532.90 161,709.73 251,823.17 251,823.17
House Hold Equipment 626,725.00 232,194.10 394,530.90 - 394,530.90

C Adola Workshop Equipment 2,809,083.00 1,040,519.90 1,768,563.10 - 1,768,563.10

Utility Equipment 51,155,305.00 34,265,713.50 16,889,591.50 - 16,889,591.50
Plant Machinery 4,356,000.00 871,200.00 3,484,800.00 - 3,484,800.00

Mining Machineries 137,325,225.00 87,214,601.35 50,110,623.65 - 50,110,623.65

Motor Vehicles - - 11,999,040.00 11,999,040.00

Grand Total 276,596,661.97 156,478,087.18 120,118,574.79 11,999,040.00 132,117,614.79

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Reference.

Detail Annexes are attached in Excel.

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