Minerals were all the talk at the largest Ukraine Recovery Conference

After two days of talks and panel discussions in Rome at the fourth Ukraine Recovery Conference (URC), there was one topic that stood out from the rest: critical minerals.

During a packed workshop on July 11 with representatives from Ukraine’s Economy Ministry, minerals and financial sector, as well as investors, and the U.S. government agency the International Development Finance Corporation (DFC), the message was loud and clear — Ukraine’s minerals are going to bring a plethora of opportunities.

"This is the URC of private equity and this is the URC of critical minerals," Olena Kosharna, CEO and co-founder of Ukrainian private equity firm Horizon Capital, said at the workshop.

After a series of tense negotiations, Ukraine and the U.S. signed a deal on April 30 to create a fund that will invest in and share profits from Ukrainian resource and infrastructure projects. While the agreement has been dubbed the "minerals deal," the fund — called the Reconstruction Investment Fund — set up under the deal can invest in natural resources, including oil and gas, and related infrastructure, and even defense projects.

Minerals appear to be the deal's starting point, however, with a lithium deposit slated as the fund's pilot project while the DFC and Ukrainian Support Public-Private Partnership Agency (PPP Agency) continue to develop the fund. Ukraine houses key materials like lithium, graphite, and titanium that have caught the eyes of global investors keen to strike a blow to China’s dominance of the minerals market.

The issue is that while Ukraine has the critical raw material (CRM) deposits, it doesn’t have the money to fully utilize them. Building up the necessary projects isn’t just going to be a job for the U.S.; it will require multiple countries, meaning there will be investment opportunities for Europeans too, the panelists said.

Since the deal's inception, concerns have arisen over whether the agreement interferes with a critical raw materials partnership signed between Brussels and Kyiv in 2021, and could threaten Ukraine's accession to the EU.

"I don't think this is a competition between the U.S. and Europe; they can develop and empower each other — Europe has very good production and the U.S. has a very good IT and technological sector," Serhii Voitsekhovskyi, board member of Ukrainian mining giant BGV Group Management, told the Kyiv Independent on July 12.

"All CRM projects need funding, technologies, and access to the market — to create value with all these three things, it is better and faster to use the power of all these countries," he said.

What do Ukrainian companies think?

There's an air of excitement among Ukrainian extraction companies as the Dobra lithium deposit attracts the first investor to the fund, the DFC-backed firm TechMet. The ground floor of the URC hosted an exhibition of Ukrainian businesses, including titanium producer Velta, which advertised a new $142.5 million CRM cluster project of materials, covering materials like ilmenite, clay, and kaolin.

The project claims to be the first of its kind globally by establishing a vertically integrated cluster “starting from the mining and going up to the final product,” which in this case is finished parts from titanium powder that is used in 3D printing, Olena Lesnyak, deputy CEO of Velta, told the Kyiv Independent on July 11.

Velta is looking for funding to get the project going over the next two to three years and is in discussions with major U.S. private and governmental institutions, including the DFC, for financing certain parts of the project. Seeing that the DFC is interested in Ukraine’s minerals has amped up excitement from other investors, too, Lesnyak noted.

"It seems like something is already changing in that the U.S. looks ready to support, to invest, and to change the landscape here in both the energy sector and in mineral resources," Lesnyak said.

"This deal makes us very happy and very hopeful because we've got the resources in the ground and we've got an experienced, knowledgeable team, and we believe that this deal creates this win-win partnership where we would be happy to be part of and proud to be part of."

There are only a handful of minerals companies in Ukraine that are suitable for investment opportunities, and the DFC is in talks with other big players too. One of those is BGV, which is discussing mining opportunities with the DFC, although details are currently classified.

Working with the DFC on a project doesn’t mean that BGV will disregard Europe. Instead, Voitsekhovskyi envisions an “ecosystem” of partners. On the final day of the URC, BGV signed a mandate letter with the European Bank for Reconstruction and Development (EBRD) to develop the Balakhivka graphite deposit in central Ukraine.

The parameters of the $450 million project are still not finalized. But the plan is for a plant that produces ultra-high-quality graphite called spherical graphite (SPG) that can be used in lithium-ion batteries for electric cars.

Currently, Europe doesn’t have the capability to commercially produce SPG. BGV successfully tested the Balakhivka graphite in lithium-ion batteries earlier this year, which could reignite Ukraine’s ailing graphite sector and wean Europe and the U.S. off Chinese graphite.

What do investors think?

One of the key messages coming out of the URC this year was that Europe and the U.S. are in this together, Secretary General of the International Chambers of Commerce (ICC) John Denton told the Kyiv Independent. He praised the DFC for creating opportunities for investors, particularly on Ukraine’s critical materials.

"(Ukraine’s recovery) is not an isolated bit of activity by Europe. This is a global interest, and for the U.S., there are enormous opportunities — that's where the critical minerals deal comes in," he said.

Another familiar face at the URC was Australian mining tycoon Dr. Andrew Forrest, who previously announced a $500 million Ukraine investment fund in tandem with BlackRock, an investment giant, at the URC in 2023. This time, he participated in the minerals panel and called for Europe to seriously invest in Ukraine’s mining sector, which he sees as a cornerstone of both European and Ukrainian sovereignty, or risk getting left behind in the global minerals race.

The EU has ramped up its attention on critical minerals this year amid geopolitical tensions, even stockpiling them, and on June 4, announced 13 non-EU strategic projects alongside the 47 EU-based projects. The BGV graphite project at the Balakhivka deposit is one of those projects, and the only one from Ukraine.

"The recent discussion about strategic independence sharpened the focus on some of these deposits in Europe. Before, everyone was fine with importing them from China, but now it's more like, why don't we look at what we have in our proximity?" Arvid Tuerkner, EBRD’s Ukraine head, told the Kyiv Independent on July 9, noting that the project had been on the horizon long before the U.S. started talking about Ukraine’s minerals.

While Tuerkner is not familiar with the legal dimensions of the Reconstruction Investment Fund, he currently doesn’t foresee any potential clashes between European and American interests, which was something critics pointed to during the negotiations. Instead, he believes there is an opportunity for the EBRD to co-invest in projects covered by the fund.

He does, however, see issues with the large number of unused deposits. Often, these are owned by oligarchs who don’t invest in the resources despite having a license, creating tension in the mining sector.

'To generate more investments under the fund, I think there's a bit of cleanup needed with some dormant licenses. Maybe they have been given out ages ago and have never been followed up or maybe they should have a shelf life," he said.

"Either the investment follows, or you should give the opportunity to someone else."