Ukraine updates the rules of the game in the minerals market – licenses are being checked
28 May 09:00
Ukraine will review existing mining licenses. Minister of Ecology Svitlana Hrynchuk said this in an interview with Reuters , according to
Ukraine is actively working on reforming its minerals sector, which has suffered significant losses due to three years of full-scale war with Russia. Despite the occupation of some deposits and bureaucratic obstacles, the country is striving to unlock the industry’s huge potential by attracting billions of dollars in foreign investment. A deal with the US on minerals could be a catalyst for the sector’s development.
Ukraine’s potential – strategically important minerals for the EU and the world
Ukraine has deposits of 22 out of 34 types of minerals that the European Union defines as critical. These are the resources needed for the defense industry, high technology, green energy, construction, and the production of ferroalloys, precious and non-ferrous metals.
However, for a long time, this sector remained underdeveloped. It was hampered by the outdated Soviet bureaucracy, which led to low investment attractiveness.
“Mining is a capital-intensive and long-term activity,” emphasized Hrynchuk, “Currently, the industry’s contribution to GDP is about 4%, although the potential is much higher.”
The war caused huge losses to the industry
Due to the occupation of part of its territories by Russia, Ukraine has lost control over a significant part of its resources. Approximately 50% of mineral resources and 20% of the territory are under temporary occupation. Coal, lithium, and manganese deposits have been particularly seriously damaged.
Greenchuk estimates that the total losses of the industry amount to about 70 trillion hryvnias ($1.7 trillion).
Digitizing data and verifying licenses is a step towards transparency
To revitalize the industry, the government, together with the European Commission and the EBRD, is implementing a project to digitize Soviet-era geological data. The goal is to cover up to 80% of the information. As of now, about 40% has already been digitized.
In addition, the government is auditing more than 3,000 existing mining licenses. According to the minister, about 10% of them may be inactive.
“We are interested in making sure that appropriate management decisions are made with respect to those assets that are valuable to the state and have not been in operation for 10 years or more,” said Hrynchuk.
The license review is expected to be completed in 2024-2025.
Auctions continue, investors are interested in strategic minerals
Despite the war, Ukraine does not stop holding auctions. In 2023, the state received UAH 2.4 billion from the sale of 120 licenses. In 2024, 32 new licenses have already been issued, mostly for the extraction of building materials and amber. At the same time, interest in resources such as oil, gas, titanium, graphite, and manganese is growing.
“We sincerely hope that the agreement with the United States will draw more attention to this sector and make foreign investment more understandable and attractive,” emphasized Hrynchuk.
As reported by
According to Oleh Hotsynets, Head of the State Service of Geology and Subsoil of Ukraine, one of the country’s tasks under Chapter 13 of the Ukraine Facility Plan in the area of Critical Materials Management is to approve and publish a portfolio of investment projects in the extractive industry for critical raw materials.
The agency is to prepare a list of solid minerals sites that will be offered for development through the mechanism of electronic auctions and production sharing agreements (PSAs).
Subsoil agreement: key provisions
- Full ownership and control remain with Ukraine.
All resources on our territory and in our territorial waters belong to Ukraine. It is the Ukrainian state that determines where and what to extract. Subsoil remains in Ukrainian ownership – this is enshrined in the agreement.
- Equal partnership.
The Fund is being created on a 50/50 basis. We will manage this Fund jointly with the United States. Neither party will have a majority vote, and this will reflect the equal partnership between Ukraine and the United States.
- National property is protected.
The agreement does not change the privatization process or the management of state-owned companies – they will continue to belong to Ukraine. Companies such as Ukrnafta or Energoatom remain in state ownership.
- No debts.
The agreement does not mention any debt obligations of Ukraine to the United States. Implementation of the agreement will allow both countries to increase their economic potential through equal cooperation and investment.
The agreement is in line with the Constitution and does not change Ukraine’s European integration course.
The document is consistent with national legislation and does not contradict any of Ukraine’s international obligations. It is important that the agreement will signal to other global players that it is reliable to cooperate with Ukraine in the long term – for decades.
- The Fund will be filled with revenues exclusively from NEW licenses.
We are talking about 50% of the funds from new licenses for projects in the field of critical materials and oil and gas that will go to the budget after the Fund is created. Revenues from projects already launched or budgeted revenues are not included in the Fund. The agreement refers to further strategic cooperation.
- Legislative changes are only point changes.
Only amendments to the Budget Code are envisaged for the Fund to function. The Agreement itself must be ratified by the Verkhovna Rada.
- The US will help attract additional investments and technologies
The Fund is supported by the U.S. government through the DFC agency, which will help us attract investment and technology from funds and companies in the U.S., the EU and other countries that support our fight against the Russian enemy. Technology transfer and development is an important component of the Agreement, as we need not only investment but also innovation.
- The Agreement provides tax guarantees
The Fund’s income and contributions are not taxed in the United States or Ukraine to ensure that investments yield the greatest possible results.
How the Fund will work
The United States makes a contribution to the Fund. In addition to direct funds, they can contribute NEW assistance, such as air defense systems for Ukraine.
Ukraine contributes 50% of the state budget revenues from NEW royalties on NEW licenses for NEW fields. Ukraine can also make additional contributions beyond this basic one, if it deems it necessary. We are talking about cooperation for decades to come.
The Fund then invests in mining and oil and gas projects, as well as related infrastructure or processing. Ukraine and the United States will jointly determine the specific investment projects to which the funds will be allocated. Importantly, the Fund can invest exclusively in Ukraine.
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The minerals agreement covers 57 types of minerals
The agreement sets out a list of minerals whose extraction it covers.
The Minerals Agreement covers 57 types of minerals. Assets related to natural resources means areas, reserves and deposits on the territory of Ukraine of aluminum, antimony, arsenic, barite, beryllium, bismuth, cerium, cesium, chromium cobalt, copper, dysprosium, erbium, europium, fluorine, fluorspar, gadolinium, gallium, germanium, gold, graphite, hafnium, holmium, indium, iridium, lanthanum, lithium, lutetium, magnesium manganese, neodymium, nickel, niobium, palladium, platinum, potassium, praseodymium, rhodium, rubidium, ruthenium, samarium, scandium, tantalum, tellurium, terbium, thulium, tin, titanium, tungsten, uranium, and vanadium, vanadium, ytterbium, yttrium, zinc, zirconium, oil, natural gas (including liquefied natural gas) and other minerals or hydrocarbons otherwise agreed upon by the principals.
It also stipulates that in the event of new military assistance from the United States (including the transfer of weapons systems, ammunition, technology, or training), the partner’s capital contribution will be considered increased by the estimated value of such military assistance.
