The Ukrainian government rolled out a privatization plan for the United Mining and Chemical Co. (UMCC), which is slated to be auctioned out on August 31 with a starting price of UAH3.7 billion ($135 million).

UMCC mines 500,000 metric tons (mt) of raw concentrates per year, accounting for 2.3% of the world’s ilmenite production, 6.2% of the rutile production, and 1.4% of zircon production. The company is the biggest miner of ilmenite and the only miner of rutile and zircon in Europe.

“Preliminary interest in the object has been expressed by a broad range of investors, some of which are foreigners,” said Dmitry Sennichenko, head of Ukraine’s State Property Agency. “We anticipate a strong competition and a fair price from selling [the company] at a transparent auction.”

Up-to-date information about the UMCC’s resource base has been shared with potential investors, Sennichenko said. UMCC estimated its resource base at 4.426 million mt for ilmenite, 274,000 mt for rutile, and 142,000 mt for zircon. Local analysts estimated that at current prices, the value of UMCC’s ilmenite reserves exceeds $1 billion.

The winner will have to invest at least UAH 400 million ($14.5 million) in the production modernization and pay dividends to the state for 2020-2021 if they would not be paid before the deal is closed, the State Property Agency said. The new owner is also prohibited from dismissing employees for six months since the deal is closed and must fulfil a set of social obligations.

UMCC’s sell-off is expected to be the biggest privatization deal in Ukraine in nearly two decades.

The privatization’s eventual goal is to make mining assets more effective, Ukraine President Volodymir Zelensky said.

“The state is not the coolest and most effective manager. The government has no billions to modernize production facilities,” Zelensky said, adding that the auction price didn’t really matter, unlikely the expected tax income from privatized assets in the future.

UMCC exports concentrate to 35 countries, with 39% of products are exported to China, 12% to Japan, 9% to Turkey, 8% to Mexico. Only 8% is landed on the domestic market, UMCC management estimated. The company is a major raw material supplier for Boeing, Lincoln Electric and DuPont’s subsidiary Chemours.

In 2020, UMCC generated net revenue of $120 million, which was by a factor of 4.2 times higher compared to 2019, and a net profit of $30 million, 11.5% down compared to the previous year, the company said in its annual report.

The company runs Vilnohirsk Mining and Metallurgical Combine, developing the Malyshevske Deposit in the Dnipropetrovsk Region and Irshansk Mining and Concentration Combine, developing the Mezhyrichne Deposit in Zhytomyr Region.

UMCC’s privatization is a part of a major sell-off campaign in the Ukraine mining industry the government embarked on in 2020. In total, up to 30 deposits are planned to be sold to private investors in the coming years, bringing up to $10 billion in the state treasure, the government agency UkraineInvest estimated.