By Vladislav Vorotnikov

The Ukraine government plans to sell 30 deposits to domestic and foreign investors through competitive bidding procedures in 2021, the government agency UkraineInvest said in a statement on January 26.

The deposits currently owned by the Ukraine mineral resource agency Gosgeonedr could bring up to $10 billion to the national budget, UkraineInvest estimated.

The deposits contain a broad range of various metals and minerals, including lithium, titanium, nickel, tantalum, niobium, beryllium, zirconium, scandium, molybdenum, gold and uranium. Most of them have never been produced in Ukraine before.

The government expects foreign investors to participate in the upcoming competitive bidding procedures actively. “The direct foreign investments in the Ukraine mining industry has been steadily growing since the early 2000s, reaching $5.2 billion in 2019, or 50% up compared to the previous year,” Director of UkraineInvest Sergey Tsivkach said.

The investment flow slightly decreased in 2020, but this was a temporary phenomenon, associated with the general downward trend on the global mineral resources market. The government expects foreign investments in the Ukraine mining industry to start growing again in 2021, Tsivkach added.

The authorities are eager to promote the deposits among potential investors and have already presented a map containing detailed information on all deposits planned for sale.

Ukraine plans to sell deposits through a new system and guarantee state support to all new mining projects in order to begin production of the promising minerals.

“This is expected to be the first time when mineral resources deposits in Ukraine are sold through fully transparent electronic competitive bidding procedures,” Tsivkach said, adding that the electronic system was already tried in the Ukraine mining industry when it was used to sell a gold deposit in late 2020 and the second sell-off is slated for February 15, this time of a zirconium deposit.

“The electronic auctions would guarantee equal game rules for everyone and that the privatization process would be fully transparent, involving the fairest prices,” Tsivkach said.

“We can no longer just speak about Ukraine’s [investment] potential. We are switching from potential to pragmatism — specific projects.”

The government plans to run the competitive bidding procedures have been welcomed by local market participants and lawmakers.

“The Ukraine mining industry has always had a bad reputation among businesses as one of the most corrupt. I hope that the winners of the auctions would not be one-day intermediate firms, but respectable international companies,” said Musa Magomedov, member of the Ukraine Parliament, explaining that corruption in his opinion was one of the reasons why the production of some national resources was not growing in the country in the past years.

However, Ukraine must consider limiting foreign presence in some areas of particular strategic importance for the country, Magomedov said.

New projects in the Ukraine mining industry are expected to be eligible for state support. A few days earlier, the Ukraine Parliament passed a law on state support of foreign investments, under which the authorities guaranteed to subject all foreign projects with the investment cost more than 30 million euros to state support limited to 30% from their capital costs.

“The law guarantees state aid to investors who intend to not only mine mineral resources and export them, but also build processing and enrichment facilities, which would create new jobs and secure additional tax incomes for the national budget,” Tsivkach said.

Previously, the Ukrainian government offered state aid only to some projects in the domestic mining industry, negotiating with investors on the terms and conditions in every particular case.

The new state aid scheme is called to encourage investors to pump money into promising minerals. According to Roman Opimakh, chairman of Gosgeonedr, both foreign and local investors were reluctant to embark on projects in some segments of the mining industry during the past few years.

“Unfortunately, the metals of the future, which are used for innovative technologies, are almost not manufactured in Ukraine, while the demand for them is growing worldwide,” Opimakh said.

According to him, a similar situation is observed with the metals of “a low-carbon future for high-tech industries.” Their production in Ukraine could give a strong impetus for development for some innovative industries.

“Now it is essential to increase their production, create capacities for their enrichment and primary processing. Available resources and prospects for the development of minerals of the future will pave the way for developing new modern industries in Ukraine. This indicates their strategic importance for establishing Ukraine in the international arena in a new role,” Opimakh summed up.