London:
The financial gains from the emerging mineral trade between Ukraine and the United States might take over a decade to materialize, largely due to the numerous challenges investors face in establishing new mines in a country still recovering from war.
It typically takes between 10 to 20 years to develop mines that can extract vital minerals, even in countries with robust mining industries like Canada and Australia, as noted by a mining consultant recently.
Compounding the issue, the majority of mineral deposits in Ukraine lack sufficient data to determine if they’re economically viable. Investors also have to funnel their resources into a nation still grappling with the aftermath of Russia’s invasion three years ago, while dealing with severely damaged infrastructure, including electricity and transportation, not to mention the lack of security assurances for the future.
“If anyone thinks that all these minerals will just be whisked out of Ukraine, they’re living in a dream world,” remarked Adam Webb, the mineral director at Consulting Benchmark Mineral Intelligence.
“The stark reality is that if faced with an option to invest in crucial minerals within a war-torn country, justifying that investment becomes quite a challenge.”
While the economic advantages of this transaction are unclear, Ukrainian officials are viewing it as a significant political milestone. They hope it will bolster U.S. support for Kyiv, especially given the frustrations they felt during Donald Trump’s presidency.
Ukraine is in dire need of U.S. assistance, particularly in the form of weapons and funding, to fend off ongoing Russian military threats.
On the American side, Trump has been pushing for easier access to contracts, particularly concerning Ukraine’s rare earth element deposits essential for everything from mobile phones to vehicles. This suggests that government policies might facilitate quicker investments.
Interestingly, the U.S. has not been a major player in producing rare earths and has intensified its trade disputes with China, which is the leading supplier.
A transaction document signed in Washington indicated that revenue for the Reconstruction Fund would come from royalties, licensing fees, and production sharing agreements.
However, details regarding the financial terms were omitted, and the text noted that limited partnership agreements involving the U.S. International Development Finance Company and public-private partnerships in Ukraine still need to be addressed.
Ukraine’s data reveals it has deposits of 22 out of the 34 minerals that the European Union considers critical, including rare earths, lithium, and nickel.
Willis Thomas from a consulting firm pointed out that the shift from identified resources to economically viable reserves demands significant time and investment, which have been hindered not just since the onset of war but even before.
Data from the Ukrainian Ministry of Finance indicated that in 2024, the state earned around 47.7 billion Hryvnias (roughly $1 billion) and around $1 billion from other fees tied to natural resource exploitation.
Nonetheless, the funds generated through this transaction will only derive revenue from new licenses, permits, and production agreements initiated after the deal takes effect.
A slow pace of mining licenses
Prior to the full-scale invasion by Russia in 2022, Ukraine had been quite slow in issuing new natural resource licenses. Between 2012 and 2020, around 20 licenses were granted for oil and gas, with one each for graphite, manganese, and copper, amidst a total of 3,482 existing licenses.
The newly formed agreement creates a limited partnership, suggesting both nations may be considering direct government investments in mining enterprises, as analysts have noted.
Chile, as the largest copper producer in the world and owner of Codelco, its state mining company, might serve as a model for this approach, according to Webb.
Another challenge is that some potentially lucrative projects sit on land occupied by Russia, and the agreement lacks security guarantees. Washington asserts that its interests will deter invaders.
Of the 24 potential mining projects identified, seven are located in territory under Russian control, encompassing lithium, graphite, rare earth elements, nickel, and manganese.
Officials from a small Ukrainian company holding a license for Europe’s largest Polokivskelithium deposit admitted it would be tough to develop without reassurance of Western security.
“This agreement ties the U.S. more closely to Ukraine because it creates a greater vested interest in the ongoing conflict, helping to develop these resources,” Webb concluded.
