Trillions in the ground: Why the West is hesitant to invest in lithium, titanium, and uranium extraction in Ukraine.
Ukraine is offering the West the opportunity to extract strategically important minerals such as lithium, titanium, graphite, and uranium. However, investors will immediately encounter a number of challenges on this path. In this article, journalist Dmitry Sidorov from RBC-Ukraine discusses the mineral reserves in Ukraine and the feasibility of tapping into this potential.
"Ukraine is home to natural resources, including critically important metals worth trillions of US dollars. This includes uranium, titanium, lithium, graphite, and other strategic and strategically valuable resources that will enhance global competition—either for Russia and its allies or for Ukraine and the democratic world," said President Volodymyr Zelensky while presenting the Victory Plan in the Verkhovna Rada on October 16 last year.
Photo: Volodymyr Zelensky's speech in the Verkhovna Rada (Vitaliy Nosach, RBC-Ukraine)
Ukraine is proposing special agreements to its partners in the US and EU for joint protection, investment, and utilization of the aforementioned natural resources. The specifics of the proposals from the Ukrainian authorities are detailed in confidential appendices that have been provided to select partners.
Some may have been surprised by Zelensky's statement amid the ongoing war. However, this is not the first attempt to invite investors to extract critical mineral resources in Ukraine. Back in January 2021, the president invited Elon Musk, a current ally of Donald Trump, to visit Ukraine via Twitter (now X). The Ukrainian lithium deposits could attract one of the world's largest electric vehicle manufacturers, as explained at that time by Igor Zhovkva, Deputy Head of the President's Office.
More specifically, plans to extract critical materials and create products from them were discussed by Deputy Prime Minister and Minister of Economy Yulia Svyrydenko at the Ukraine Recovery Conference in London in June 2023, referring to "the largest lithium, titanium, and significant deposits of other minerals in Europe" found in our country. This point was identified as one of 9 strategic sectors that should drive Ukraine's recovery over the next 10 years.
Uranium, titanium, and graphite have long been extracted in Ukraine, while lithium extraction is still in the "discussion" phase. Attracting investments is hindered not only by military risks. There is at least a need for further geological exploration of the deposits. Additionally, there are complicated legal proceedings surrounding the rights to exploration and extraction of minerals. Investors will also face issues related to land allocation for extraction activities. These problems have previously inhibited investment inflows and remain unresolved today.
RBC-Ukraine reached out to the Ministry of Economy regarding the interest of potential investors in Ukrainian subsoil resources and the challenges they may face. At the time of publication, the ministry had not provided a comment to the publication.
Resource Wealth
According to the Investment Atlas of Subsoil Users from the State Service of Geology and Subsoil, Ukraine's lithium reserves amount to about one-third of the proven reserves in Europe (approximately 3% of global deposits). Our country also ranks among the top five nations in terms of graphite reserves. Furthermore, we are in the top ten countries for explored titanium reserves, with the Stremigorod titanium ore deposit in the Zhytomyr region being one of the largest in the world. In uranium ore deposits, Ukraine ranks first in Europe and 11th in the world.
Of the mentioned minerals, only one deposit and a site with lithium reserves (in the Donetsk and Zaporizhzhia regions, respectively) are located in temporarily occupied territories, along with some rare earth metal deposits. Most strategic raw material deposits remain in controlled territory, where geological exploration and extraction can be conducted.
"We have significant reserves of these minerals. At one point, we estimated that about 20% of the world's titanium reserves are located in Ukraine, but they are at different stages of exploration. Currently, among European countries, only Norway is developing a titanium deposit. In terms of graphite and lithium, we also have substantial reserves. We have been extracting uranium for a long time," explained Elena Remezova, head of the mineral geology department at the Institute of Geology of the National Academy of Sciences of Ukraine, to RBC-Ukraine.
Ukraine also possesses reserves of other critical raw materials: manganese, iron, gold, lead, zinc, cobalt, nickel, copper, zirconium, and more.
Challenges for Investors
Ukrainian strategic raw material deposits are already being developed by well-known players, such as the Turkish company ONUR Group (which also engages in road construction) and the Ukrainian BGV Group (founded by Gennady Butkevich, co-owner of the ATB supermarket chain). However, there are numerous obstacles to attracting new investors, especially from the West, that need to be addressed.
There is geological information on strategic minerals in Ukraine, much of which was obtained during the Soviet era and requires updating. In recent years, for the convenience of investors, the State Geological Service has digitized a lot of information and created additional maps. However, the archaic (dating back to the Cold War) ban on publishing the quantities of lithium, titanium, and uranium reserves still remains in effect.
"When communicating with investors, government officials are not allowed to provide information on the volume of these minerals, which does not foster trust and partnership. The removal of these restrictions is outlined in several international documents. I hope that these limitations will be lifted soon, substantially improving how our international partners perceive Ukraine in this area," said Roman Opimakh, former head of the State Geological Service (2019-2024) to RBC-Ukraine, adding that this data has been held by the aggressor country since Soviet times.
Due to high costs, projects in the field of subsoil use are typically financed by investors—either through bank loans or by issuing shares on Western stock exchanges. Initially, it is necessary to assess the reserves of a deposit according to international classifications, such as the Australian JORC system. This involves drilling a network of wells, extracting rock samples for analysis in the presence of an internationally accredited expert, and conducting laboratory tests in accredited laboratories, which are lacking in Ukraine.
Photo: Extraction of ore minerals (Getty Images)
These investigations form the basis of a report provided to creditors so they can assess the feasibility of allocating financing. According to Opimakh, such studies for a single deposit typically take an average of 5 years and cost around 10 million dollars.
"It is clear that the state does not have such funds. Moreover, in international practice, governments do not finance these works. The responsibility for bringing the quality of geological information up to the standards necessary for attracting additional capital should rest solely with private business," Opimakh believes.
He also noted that Ukrainian companies already have successful experience in confirming reserves according to international standards and attracting capital based on these studies. This is true for almost all oil and gas extraction companies and some market players involved in iron ore, graphite, and titanium extraction.
Additionally, investors are concerned about land allocation issues for extraction activities and negotiations with subsoil users who acquired licenses solely for resale. Another issue is the legal entanglement surrounding licenses. It often happens that the rights to subsoil use may have a long history of legal claims from previous owners, which means that an investor buying such a right may still have to defend it in Ukrainian courts.
To address these problematic issues, the government can today lift outdated restrictions on the confidentiality of geological information, Opimakh states. The government can also update geological information on deposits with the greatest potential by investing relatively small amounts—around 10 million hryvnias for each deposit—in exploratory drilling. Fiscal incentives, lower import duty rates on essential exploration and extraction equipment, and guaranteeing land access rights should also be introduced.
National legislation provides for two mechanisms for obtaining a license for the exploration and extraction of minerals: purchasing a special permit at an auction conducted by the State Geological Service or entering into a production sharing agreement with the government. In the first case, investors compete for the right to obtain a special permit at auction, with the highest bidder winning.
In the case of production sharing agreements, the government and investors negotiate, agreeing on the terms under which part of the extracted mineral is transferred to the state in kind or monetary form, and upon reaching an agreement, such contracts are signed for a duration of, for example, 50 years. For strategic raw materials, this latter mechanism is considered more realistic by Opimakh.
When evaluating Ukraine as a location for investment, potential investors will consider not only our reserves but also those of other countries. According to the US Geological Survey, as of January 2024, the largest lithium reserves in the world are found in Chile, Australia, Argentina, and China, while the largest titanium reserves are in China, Australia, India, and Canada. In terms of investment attractiveness, Ukraine significantly lags behind countries like China, Australia, or Canada.
The global market for strategic raw material extraction (such as lithium) is already dominated by major players. According to the International Energy Agency, as of 2023, the total global demand for lithium was 165,000 tons, fully met by supply. The