Ukraine has a geological card, but don’t use it

In the bowels of our country there are nearly hundreds of minerals, the market value of which, according to scientists, is estimated at $ 7.5 trillion.

Україна має геологічний козир, але не використовує його

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In the bowels of our country there are nearly hundreds of minerals, the market value of which, according to scientists, is estimated at $ 7.5 trillion. In total the mineral resource base of Ukraine is 20 thousand deposits and occurrences, of which 7.8 thousand are explored and developed only 3.3 thousand. Traditionally, Ukrainian enterprises producing iron, manganese, uranium, ilmenite ore, coal, natural gas, oil (and condensate), zircon, kaolin (clay, salt, graphite, non-metallic raw materials for metallurgy, facing and building stones, mineral waters, precious and base metals.

But the development of the domestic mining industry is insufficient: the availability of the full production cycle (from mining to finished products from them) can boast of only some industries (metallurgy, cement and petroleum products). Some need the last redistribution (with a powerful raw-material base of the titanium industry, for example, produces titanium mill products, other extracted raw materials. For example, to the full supply capacity of nuclear energy, which produces half of the electricity in the country, it is necessary to increase uranium production three times.

At the dawn of independence, Ukrainian officials discouraged international investors who want to invest in mining. Since then, the trust has not been restored – the foreigners agree to engage in the production of hydrocarbons.

Bias

In fact, the extraction and processing of minresurs has always formed the backbone of the economy of Ukraine, but in recent years their value has increased significantly. If in the early 1990s, the development of mineral resources, accounting for 23?25?% The country’s GDP and a third of foreign exchange earnings, it is now the exploitation of the raw material base gives 42?% GDP and two-thirds of the foreign exchange inflow. And it happened not because the development of mineral resources foreign investments flooded. Just at the beginning of the nineties the processing promsektor had a larger share in the economy. Developed countries, says the head of the Department of mineral resources, Institute of geological Sciences of NAS of Ukraine Leonid Galetsky, the role of the mining sector in the economy is deliberately limited.

With the increased importance for the Ukrainian economy the mining industry is in the stage of deep stagnation. The extraction of minerals compared with the peak in 1970? we dropped to the mid-1990s and remains at this level. If in 1975 Ukraine produced 123 million tonnes of iron ore 215,7 million tons of coal, 68.7 billion cubic meters of natural gas, 12.8 million tons of oil and 6.5 million tonnes of manganese ores, in 1995, mining ore and coal decreased by 2.5 times (to 50.7 million tons and 83.8 million tons), natural gas – by 3.8 times (up to 18.2 billion cubic meters) of oil – 3% (to 4.1 million tons) and manganese ore – by 2 times (to 3.2 MT)

Exception

Out of the General trends of iron ore segment: mining of iron ore raw materials (IORM) from 1995 to 2013 increased by almost 70%. But in this sector laid the bomb. “Today violated the basic law of mining: mineral reserves should outpace the volume of their production, says haletskiy. And now almost no one is building inventory.”

Ukraine uses the iron ore deposits that have been explored and prepared for development in 1980 that is, According to the Institute of geological Sciences, certain metallurgical enterprises of iron ore is from 10 to 120 years, an average of 50?60. “For the development prospects of the steel sector need to take action to replenish stocks of iron ore,” – said the expert. In other words, you should invest in the exploration and development of new fields.

Especially because they are in the land of plenty. In Ukraine there are 80 deposits of iron ore (32 billion tons of ore, or 6?% world reserves), of which only operated 30. The largest producing fields – Inguletska (reserves of 1.1 billion tons of ore), Pervomayskaya (989 million tons), Michael (760 million tons), as well as most of the mines of Krivoy Rog iron ore basin. Undeveloped – Belanovsky, Kremenchug, Populatemsi, Vostochnoslavjanskii, Pereverzeva, Severnobanatski, Proletarian, and Orekhovsky.

Parish

Analysts and scholars argue that Ukraine is developing the raw potential is one-sided. By producing a limited number of minerals that are used in the chain coal – iron ore – steel, the domestic industry is left untouched reserves of rare metals. To compete with such large companies of the same iron ore as China, Brazil or Australia (collectively produce two-thirds of the iron ore in the world) Ukraine failed because of the lack of large-scale investments. Global commodity giants – Australian companies BHP Billiton and Rio Tinto and Brazilian Vale – prefer to invest in someone you want rudodobiv, not Ukrainian.

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From the latest iron ore projects are the plans of Rio Tinto to develop the world’s largest iron ore Deposit Simandou in Guinea to invest $ 20 billion (including the construction of railway lines and ports). It turns out, compared to the Ukrainian investment climate of African countries more attractive for investors (even given the protracted legal war with Vale, Rio Tinto for the right to develop Guinea mine).

However, experts do not believe in the iron ore segment we can expect the arrival of large foreign investors. They simply were not allowed the domestic metallurgical financial-industrial groups. “Ukrainian companies are interested in mining iron ore – said the Director of GP “ukrpromvneshekspertiza” Vladimir Vlasyuk. – This is obviously due to the unresolved questions of processing of oxide ore and run Krivorozhsky GOK of oxidized ores, which were interested in global steel giant arcelormittal and the Chinese company SinoSteel.

It is also worth mentioning the activities of the canadian company Black Iron, which since 2010 is trying to do iron ore Szymanowska (reserves 645,8 million tons) and Semenovskogo deposits (reserves are estimated, both in Dnipropetrovsk region). To move the project from the dead point (in particular, the company ran into problems with land acquisition around Szymanowski field that effectively deprived the investor of any prospects of its development and threatened with loss of license for development) was possible only after connecting to it the Ukrainian “Metinvest” Rinat Akhmetov. Last summer, the company “Metinvest” for $ 20 million and acquired a 49?%-shareholding of Black Iron (2018 companies plan to start commercial production ore). “I look forward to close cooperation with Metinvest, – to celebrate, then said CEO of Black Iron Matt Simpson. Together, we can build in Ukraine, the new mining world-class manufacturing”.the total project cost of development of these deposits are estimated at $ 1,094 billion.

Care

Ukraine gained the reputation of an unreliable partner among international mining companies back in 1990?. “10?15 years ago, global commodity companies came to Ukraine, says haletskiy. – Some I’ve led.” For example, Zakar Resources LTD, Korab Resources Ltd, Supatcha Resources Inc., Northland Power Ink, Aurora Pacific, ValGold Resources Ltd, CCI Holding Ltd, GEUS, Emerging Markets Investments, Yalta AG, DTP Terrassement, etc. were willing to invest in the mining of gold, diamonds, iron ore and energy commodities…

And they all left empty-handed. “There is a non-public the price of entry, it is embedded in a particular project,” shares the characteristics of business administration in Ukraine, the head of risk management international law firm Integrites Yevgeniy Timoshenko. Usually it is a “gross payment” after which a foreign company gets carte Blanche to operate in the country. But this is more or less civilized country, where in return for “private payment,” the official guarantee investors the most favored nation. In Ukraine in the late 1990s, even after stimulation of civil servants to achieve from them it was impossible. “As soon as the “smell of money”, – complains Galetsky, Ukrainian authorities abruptly changed tactics – exposed investor from Ukraine, arguing the decision with that the state itself develop these areas”. As a result, the country was left with nothing – without investors and without products.

The most striking example of this is the practice of attracting and repelling) of capital in gold mining. In 1996, for the development of Ukrainian gold mines company Ashurst Technology Corp. Ltd. created venture’s “daughter” Ashurst Resources International, which in the framework of the agreement on joint activities and investment (signed with the state JSC “Ukrzoloto” in March 1997) has been raising financing on the London and Toronto stock exchanges and the US OTC market. “Ukrzoloto” had the right to develop the five deposits (Sergeev, Klintsovskiy, Yur, Golden Beam and Wide Beam), which are located in the Dnipropetrovsk and Kirovohrad regions and is estimated by geologists about 95 million UAH. According to the agreement, the canadian company was to receive 20?% the newly launched SP – Ukraine Gold International. – if will provide about $ 30 million investment.

Україна має геологічний козир, але не використовує його

But after the resignation of then-Prime Minister Pavlo Lazarenko gold projects were blocked. In October 1997, the new Prime Minister Valery Pustovoitenko eliminated “Ukrzoloto” under the wording “unsatisfactory activity of the economic experiment to attract private investment in the development of gold mining and solitairebala industry.” Ashurst, in turn, sent to the address of the liquidation Committee official (and still not satisfied) the claim in the amount of $ 4.1 million.

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A similar story happened with the Transcarpathian gold. In 2003 Musievske field (proven reserves of gold – 40?50 mg, zinc – 300 thousand tons of lead and 700 thousand tons) went to an Australian company Zakar Resources, buying a 6.3?% shares of LLC “Zakarpatpolimetally” (another part remained in the SJSC “Ukrainian polymetals”). Strategic development program provides for investments by foreigners about $ 70 million and production of 1.5?2 t of gold per year. But the company managed to provide, and mine to master – only about $ 1 million that went into the production of 161 kg of gold in 2004 and 185 kg in 2005 At the end of 2006 production had ceased?for the lack of funding from the founders. There is a paradoxical situation: the state, which was 93.7 per?% shares, could not inject funds, and the investor could, but under 6.3?%-and the package would not. In 2007, the Executive Director Zakar Resources Chris Barker stated the readiness to invest 100 million UAH on the changing size of the Charter capital of LLC “Zakarpatpolimetally” and, accordingly, increasing the share in the company to 75?%. But the Ukrainian government did not hasten to meet old investor and considered the possibility of joining the founders of the LLC. Artem Basmadjan, then. . Chairman of the Board SJSC “Ukrainian polymetals” in 2008, told the press about the interest in the development of English gold European Minerals Corp (EMC), which has already received support at the highest level. “The President of Ukraine Victor Yushchenko submitted to the Cabinet mission: to help EMC and its representative – “the World,” said Basmajian. The result Zakar Resources left Ukraine, and “the World” and began development in Muzhieve.

“The classic situation for any mining project in a developing country like Ukraine is such that without the support of public authorities, Central or local, to implement the project practically impossible, no matter how attractive it looked on paper – says the analyst of investment company Concorde Capital Roman Topolyuk. – To risks that threaten project success, investors tend to attribute the possible loss of rights to develop the field. However, if such risks are often implemented in a country, the attitude towards such a state a negative”.

This attitude has formed in relation to Ukraine. As noted by Executive Director of “Canada-Ukraine chamber of Commerce Emma Turos, corruption, total corruption, the lack of investment protection and effective methods of defending their interests (including through court) – the main reasons of failure of foreign investors in Ukraine. “In terms of business, when all are equal but some are more equal than others” should be very high yield,” says Turos, and that Ukraine can not boast. Besides the mining industry requires large capital expenditures for which funds are, as a rule, are involved in stock markets. For example, on the Toronto Stock exchange, which specializiruetsya on the shares of companies in the mining industry (57% of all public companies engaged in mining, listed on this site). “Such capital raising requires in the first place confidence for issuers,” – emphasizes Turos. And if the company is unable to implement the project, which involved dozens, if not hundreds of billions of dollars, the confidence of investors losing not only the Issuer but also the whole country.

Expectations

Many analysts believe that the era of primary accumulation of capital, the so-called wild capitalism, Ukraine has already experienced. The arrival of the global extractive sector firms, such as Chevron, Shell and ExxonMobil, shows the formation of capital. According to Leonid Galetsky, a lot of foreign players are ready to return to the Ukrainian market and work in new economic conditions (at least this was announced at the economic forum “Ukraine-Canada 2014”, which took place in Lviv on 28?May 30, 2014).

“Potentially, our country is able to attract about $ 2?3 billion investment in the mining and refining of solid minerals”, – predicts Vladimir Vlasyuk. While in the long term, said Eugene Tymoshenko, a multi-billion investment inflow to Ukraine may increase to several tens of billions of dollars. The same Australia, for example, the recent annually receives an average of about $ 200 billion investment in the mining sector (capital cost of the project excluding taxes and fees).

 

Titanium potential

Acute issue of providing raw material and titanium production (actually, the existence of titanium industry in Ukraine is also in question), because most of the quarries ilmenite ore has been under development for 50 years. Exhausted Leninskoe and Renske group of fields (leaving only man-made products).

Introduced in the development of mezhdurechenskiy and prepare Slobodskoe, tarasovskoe, left Bank, Krapivinskoe and Motrona-Annovskiy plot of Malyshevsky Deposit. “Of course, the best deposits of titanium ore already developed, says otdelom minerals, Institute of geological Sciences of NAS of Ukraine Leonid Galetsky, and available – more complex, they require new approaches and solutions, as well as large investments”. According to the scientist, for the exploration and preparation for exploitation of the Deposit, as Zlobychi (Rosine; minerals are close to the surface of the earth) with reserves 3010,6 thousand tons of ilmenite, should be about $ 6 million But in order to begin operation Stremigorodskoye field (indigenous; minerals at a depth of several tens to several hundred meters), with reserves of 1.3 billion tonnes, needs about $ 600 million, “Stremigorodskoye Deposit is the largest in the world; to develop his plan of structure of Dmitry Firtash, – said the Galetsky. – By the way,?the threat of joining titanium GOK (iranskogo and Volnogorsk) to “Crimean Titan”, which is on the territory occupied by Russia, the Ukrainian government’s decision not to renew the lease (ends in September 2014) looks reasonable.”

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In addition to these, there are still a number of promising mining as placer and indigenous. In total, Ukraine is concentrated 20?% world reserves of titanium ore. Two deposits over the level of reserves are unique, 12 large and 10 medium. 12 fields explored in detail and transferred to industry, 8 – developed. World production of ilmenite concentrate Ukraine’s share is 11.5?%, rutile is 8.5?%, titanium dioxide 3?%, titanium sponge – 5?%, titanium slag is only 0.7?%. “It is a distortion of the Ukrainian capabilities – emphasizes the Galetsky. – We work at the level of titanium concentrates, although the objective is to produce finished vysokoperedelnyh product. Titan resources allow Ukraine to take leading positions among manufacturers of heavy-duty metal and its products”. In the world only the USA and China have a vertically integrated titanium capacity. But the paradox is that in the list of the largest producers of this metal include Russia, did not develop their own fields (company “VSMPO-AVISMA” titanium ore is imported mainly from Ukraine).

 

Україна має геологічний козир, але не використовує його

Haletskiy,
head of the Department of mineral resources, Institute of geological Sciences of NAS of Ukraine

– Why Ukraine was not able to develop their raw potential?

– Resource potential of Ukraine has always been developed one-sidedly. So, the development of rare metal-redkozemelnye industry persistently restrained by Soviet power. During the years of independence the mineral resources is generally acquired the outlines of hypertrophied model. Relying on heavy industry, where the mining and metals sector cover 64% of the economy of the country, Ukraine received the status of a raw appendage of the world. Whereas, for example, USA, France, Japan would push this figure above 30?% in his economy. In these countries the emphasis is on “light-duty”, high-tech industry, characterized by low energy and resource consumption, limited akoulina. For Ukraine’s transition to the production of high quality products requires accelerated development and the development of several deposits of rare metals and rare earth elements.

– Does the country have reserves of these rare metals?

Ukraine possesses considerable reserves and resources of rare metals. In a unique and large deposits are Iranskoe (beryllium), Azov (rare earth, zirconium), Mazurovskoe (niobium, tantalum, zirconium), Pulkovskoe (lithium), Bridge (tantalum), Novo-Poltavka (a complex phosphate of rare earth and rare metals ores) etc. We have a real opportunity to enter the world market with pure and ultrapure metals – gallium, indium, thallium, beryllium, germanium, palladium, lead, tin, bismuth, scandium, tellurium (nomenclature of rare earth products consists of 400 items), the issue of which it is possible to establish in Ukrainian institutes and laboratories where are still preserved the experience and potential of Russian scientists.

A representative example is Kazakhstan, which is actively pursuing rekomendovan programs at the national and international level. Also instructive is the experience of China, which over the past decade, tremendous developed rare metal-rare earth industry and took the leading position in the production of these products, significantly surpassing Western partners on the market of tantalum, niobium, vanadium, etc. an increasingly important position in this market gaining Australia.

And in Ukraine, meanwhile, is gaining momentum giant adventure called “shale gas”. In our country there is no one studied and investigated shale gas, which would be placed on the state balance. The earlier forecast and geological studies of deposits of this type were not made among promising as the nature of the raw materials and the likely negative environmental consequences of their development. Now started exploration work on the exploration of the deposits has not yet changed this assessment.

– What is the point of the investor to look for?

For shale gas easier to obtain a license. Leading the development on these sites, you can find conventional natural gas. That’s what guided the global company.

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