Raw materials deal with Ukraine
Ukraine is rich in natural resources – but many mines and open-pit mines are outdated. The planned raw materials deal with the US is fueling hopes.
Water trickles into the heart of the mine, 40 meters deep. A frozen, emerald-colored lake has formed down there. The oxidized veins of gray graphite, exposed last year, have turned turquoise. The overburden excavators are at a standstill: work in the open-pit mine has been virtually suspended since November 10, 2024. The mine, located in the village of Zavallya in the Kirovohrad region in central Ukraine, is the first exploited natural graphite deposit in Ukraine and Europe. It contains 95.3 megatons of graphite ore and 5.8 megatons of graphite. The ore is crucial for the production of batteries, brakes, refractory products, and is used in nuclear reactors. The Zavallya mine is also mentioned as a key region for graphite deposits in a joint European and Ukrainian report from 2023, "Ukraine's Strategic Minerals and Their Investment Potential." Nevertheless, the mining company is in decline.
While production in the early 1990s was more than 40 kilotons, it has fallen sharply and, according to a 2023 Ukrainian-European geological study, is now only four to eight kilotons of graphite concentrate per year.
About 100 meters from the mine is the graphite processing plant. No hum of machinery can be heard, only the cry of a bird nesting in the building. Valeriy Kharkovets, one of the plant's senior managers, surveys the crushers and mills. "The refinery is dead," he says. "If there is no investment, we will close."
The Soviet industrial conglomerate, founded in the 1930s, has lost its former glory. The open-pit mine, which was in operation between 1958 and 1969, became one of the most successful in the former Soviet Union. The operation financed the construction of residential buildings, the Palace of Culture, and two schools. "The mine was the heart of Zavallya. The town had about 4,500 residents, of whom 2,000 to 2,500 worked here. That's why the ties between the town and the mine are so close," says Kharkovets.
The residents of Zavallya have worked in the mine for many generations. The older ones are nostalgic. Sitting in front of a house, enjoying the first rays of spring sunshine, are their neighbors Natalia, 60, Tatiana, 81, and Boris, 79, a former refinery worker. They all praise the bygone era. "There was work, the town was alive," the retiree assures, immediately interrupted by Natalia: "The streets were full. People from all over the Soviet Union wanted to work here. There was a real mix of young people from all the Soviet republics."
All that remains of this heyday are a few black-and-white photographs, which Boris carefully preserves at home. "I'm not sad for myself, but for the boys, because it was good work," explains the old man. His late wife, he says, would have preferred him to work in a less harmful profession: "We used acid to treat the graphite. That's bad for your health, as are the vibrations from the machines in the factory. But on the other hand, we had everything we needed. Everything was going well. Today, no one works anymore, which is sad."
The mining complex, which employed 250 people at the beginning of the Russian invasion in 2022, now has only 90. Most of them have other jobs on the side when operations at the mine are suspended. Work in the open-pit mine and refinery only occurs when the mining company receives orders for graphite from its customers—and that isn't the case every day.
In addition, the machines do not function in the harshest winter months: While in Soviet times a heating system ensured that the machines had a suitable temperature despite the cold outside, the increased electricity prices in Ukraine – not least due to the energy infrastructure destroyed during the war – would lead to high production costs.
Now, as this winter draws to a close, three employees are busy with an order for several tons of graphite ore for Japan. Customers in Austria are also currently being supplied. That's all they have to do. Customers in Italy and the Czech Republic have been lost.
Oleksandr attaches a sack almost as tall as himself to the filling machine. It immediately spits out fine graphite particles, and the sack fills. A silver cloud escapes as the worker firmly presses the ore. Every square centimeter of the factory building is covered with a fine layer of graphite. Oleksandr's boots also appear to be made of silver. Even his face is covered in this silky dust. A mask protects his respiratory system, but the father of an eight-year-old daughter is not naive: "I will never allow my daughter to work here one day. It's far too damaging to her health. The acid used in graphite production is toxic, and the graphite particles we inhale are bad for our lungs."
Oleksandr's monthly salary is between €221 and €265. He has no alternative to working in the mine: "There's no other work here. But the shareholders are afraid to invest in the mine because of the war," he believes. After all, no one can know what will happen tomorrow: "A rocket could hit, what will happen then? We need new tires for the trucks and new machines because everything is old, but the company has no money. I'm afraid of losing my job because the mine is doing poorly. How will I raise my daughter if that happens?"
Ihor Semko has been the manager of the Zavallya mine for five years. He explains to anyone who will listen: "Currently, we only mine ore for one or two months a year, compared to eight months previously." Semko also says: "Everyone is talking about Trump. They say, 'Trump will steal the resources.' But our company is 70 percent Australian-owned. They haven't invested a cent in three years." In 2021, the Australian company Volt Resources acquired a majority stake.
In fact, Volt Resources CEO Prashant Chintawar praised the results of the Ukrainian mine in an interview. In an interview he gave to a financial analysis firm in January, he stated that the company is targeting new markets such as North America and India. They also want to explore new financing options. The Australian company did not respond to specific inquiries from taz via email.
On site in Zavallya, mine manager Semko is pinning his hopes on the Americans. The signing of a raw materials agreement , which could be part of a US-negotiated ceasefire deal between Ukraine and Russia, is viewed positively in Zavallya. Semko hopes that the signing of an agreement on Ukrainian resources between Washington and Kyiv will spark interest from foreign companies in Ukrainian mines – including the one in Zavallya.
"I'm very supportive of this agreement, and so are the people I work with. If the agreement is signed and the US invests in our company, that would be really good," Semko believes. He says: "American or European, it doesn't make a difference; we just want investors to be able to continue working."
For over a decade, it hasn't been the war against the Russian invader, whose front line rages some 270 kilometers away, but rather the lack of mining contracts that has forced many residents to leave the town in search of work and a steady income. Those who remain in the quiet village are waiting for a miracle.
As night falls, Sasha sits with some friends in front of his grocery store. The 46-year-old shopkeeper spent two years on the front lines. There's a certain fragility in his eyes, something often seen in those who served in the war. The town lost 42 men on the battlefield. In the semidarkness, with homemade liquor in hand, tongues loosen.
Sasha says, "Many of us stay here because we hope the factory will one day return to normal operations. If it closes completely, it will be even worse than it is now. It will no longer make sense to live here. I don't care where our ore goes; what matters is that we can continue to work and live here."
Sasha worked at the Zavallya mine until 2002. His friends believe the reason for the private company's difficulties is that there are too many decision-makers who are incapable of pursuing a coherent strategy. Everyone is driven by their own interests.
The fact that so many mines went bankrupt after the collapse of the Soviet Union is a problem that goes beyond Zavallya: "Investors were deceived by officials or businessmen. They invested money and were cheated. Corruption is the root of the lack of investment," laments geology professor Volodymyr Mikhailov from within the walls of his classroom at Taras Shevchenko University in Kyiv.
Indeed, in November 2021, the National Bureau for Combating Corruption indicted eight individuals who allegedly caused $51.17 million in losses for three state-owned mining companies in Ukraine between 2016 and 2018. The defendants allegedly ensured that only one company won 69 tenders. This company then allegedly acted as an intermediary, selling goods to the state-owned companies at inflated prices, preventing them from negotiating directly with suppliers.
As recently as August 2022, miners from western Ukraine gathered and publicly expressed their fears of a return to the corruption that once dominated the country's coal industry. They blockaded the office of Mine No. 9 in Novovolynsk to prevent a controversial new director from taking office there.
The attractiveness of the mineral deposits depends primarily on the country's territorial security: Without a peace agreement with Russia, no mining company will risk exploring and exploiting resources in an area of more than 600,000 square kilometers. 18.2 percent of this area is now occupied by the Russian army.
Ukraine is known for having deposits of minerals considered critical, i.e. highly important, by the European Union and the United States: titanium, lithium, rare earths, graphite and scandium, which are essential for the development of batteries, space travel, nuclear energy and the defense industry.
However, the actual extent of the deposits of these raw materials – which also occur in even larger quantities elsewhere in the world, such as Africa and South America – remains unclear. A large portion of the mapping was last carried out during Soviet times, when materials such as rare earths, lithium, scandium, and graphite were not as important as they are today. At that time, the USSR focused on uranium, manganese, and titanium for defense and space travel.
Almost ten years after Ukraine's independence, between 2000 and 2009, 8,000 deposits and 12,000 additional potential deposits of various sought-after raw materials were discovered. However, due to a lack of funding, the investigations were halted. It wasn't until 2011 that the first list of critical raw materials was drawn up at the European level. "We're just getting started in this area," says geologist Mykhailov. "Scandium, rare earths, and lithium were explored but not exploited. We found deposits, traces of these materials. But we couldn't fully explore them as we should because we lack the very expensive extraction technologies."
Mykhailov says: "Trump thinks he can come tomorrow and just take whatever he wants, but that's a fantasy; it doesn't work that way." A view shared by Daniil Lubkin, a co-founder of a startup specializing in exploring the Earth's surface composition using satellite imagery. The entrepreneur says: "Imagine the agreement is signed tomorrow and mining companies start searching for resources on the site. If they discover something, they will first invest in exploration and research and build infrastructure. But it takes 10 years for the mine to generate its first economic return. Sometimes it takes 12 to 15 years."
The discovery of a deposit does not automatically lead to its exploitation. If production costs are too high compared to the market value of the ore, a company will abandon the project. Ukraine ranks seventh in the world in terms of iron ore deposits. However, the low iron concentration in the ore forces relatively more digging. This reduces competitiveness.
But the idea of a "Gold Rush 2.0" persists in Ukraine. As persistent as the shock triggered by Donald Trump's blackmail, which demanded the repayment of $500 billion in American war aid in the form of rare earths. The Kiel Institute, a German think tank, estimates that the US has actually paid only $119 billion in aid to Ukraine.
The joint US-Ukrainian fund for the exploitation of natural resources is also worrying visitors to the Natural History Museum in Kyiv. "What do we have beneath our feet? Why do we have rare earths? In what quantities? Normally, this information is confidential," reports geologist Vova Grytsenko, standing in the corridors of the museum he directs. In front of the display cases installed during the Soviet era, which display crystals and rocks, children marvel at the colors and brilliance of the minerals. The adults, on the other hand, express bitterness about the planned agreement on subterranean resources. One visitor observes: "They are reducing Ukraine; our country is being divided and sold off," says one. No one here trusts the US as their "ally" anymore.
