KIROVOHRAD REGION, Ukraine — Ilmenite, a crucial mineral used in titanium production, is extracted through deep sand mounds and refined using a gravity-based method, resulting in a sparkling substance reminiscent of a night sky. Ukraine is home to extensive reserves of ilmenite located in heavy mineral sands that stretch across the eastern part of the country, which is currently facing significant challenges due to ongoing conflict and restrictive state policies that have hindered the development of its critical minerals sector.
Prospects may change if discussions between Ukraine and the U.S. government progress regarding a potential agreement to trade critical minerals in exchange for continued military assistance from America. In Kirovohrad, the ilmenite open-pit mine represents a treasure trove of resources that its owner aims to develop with U.S. partnerships. However, various uncertainties loom over the initiative, including financial considerations, license arrangements, and whether such an agreement will include necessary security assurances.
Ukrainian President Volodymyr Zelenskyy mentioned during the Munich Security Conference that he halted his ministers’ efforts to finalize a mineral resource agreement with the U.S., stating that the current framework does not adequately protect Ukraine’s interests. Business leaders in the minerals sector also privately voiced doubts about the feasibility of the deal, noting that the capital-intensive nature of the industry means substantial results could take years or even decades to materialize. Concerns about the extent of geological data availability, alongside existing government policies that have already deterred local entrepreneurs, also paint an uncertain picture for foreign investors.
Andriy Brodsky, the CEO of Velta—a prominent titanium mining operation in Ukraine—emphasized that the main objective of engaging in such an economic arrangement would be to secure reliable security guarantees, drawing interest from stronger nations for defense support. A proposed deal to exchange resources could enhance the ties between Kyiv and the U.S. government. As a notable consumer of critical minerals like lithium and gallium, the United States has been advised about Ukraine’s reserves, even though certain elements are not yet thoroughly explored. Currently, the demand for titanium, which finds use in industries such as aerospace and defense, reinforces the potential for U.S. imports of ilmenite from Ukraine, aiding in reducing reliance on sources from Russia and China.
In return for providing critical resources, Ukraine would continue to secure a consistent supply of American arms—essential for countering threats from Russia and maximizing leverage during potential ceasefire negotiations. Analysts have highlighted the importance of security guarantees, which remain a concern for both businesses and investors. According to an anonymous senior Ukrainian official, while American companies are keen to invest, they necessitate assurances for their financial commitments amid possible conflict resurgence. Brodsky contended that once U.S. investments are made in Ukraine, the ongoing American business interests could inherently serve as a security measure.
Brodsky has recently noted a shift in perspective among U.S. businesses regarding investment opportunities in Ukraine. “Conversations in influential sectors are now acknowledging that our efforts align perfectly with current needs,” he remarked. His company has maintained a collaboration with American partners over the years and he has entered negotiations with potential investors, should a favorable deal materialize.
However, attracting foreign investment has traditionally been difficult for Ukraine, primarily due to restrictive government practices that fail to incentivize overseas businesses. Brodsky advocates for collaboration between international firms and local partners to foster mutually beneficial growth in this sector. Ksenia Orynchak, director of the National Association of Extractive Industries of Ukraine, also highlighted that American firms aiming to penetrate the market must navigate complex bureaucratic challenges. Partnering with current Ukrainian license holders might offer a more straightforward entry path into the industry.
Orynchak pointed out that further exploration is essential in the field and suggested that existing geological data might have been influenced by motivations from the Soviet era, wherein geologists may have exaggerated their findings for recognition. She urged foreign investors to lower barriers to entry into exploration, as vast areas still have unproven mineral reserves.
Amidst these developments, the extraction site reveals a bustling scene, where workers are often obscured by ilmenite dust, yet driven by the desire to extract this valuable resource from the earth. The gravity separation method effectively retrieves the mineral from the surrounding debris, while employees have grown accustomed to the challenging conditions.
Brodsky’s journey with Velta began with a dormant license and an estimated investment of $7 million, and it has taken years and additional funding before he could envision a productive operation. However, the potential partnership is intersected with complex societal concerns, as the Constitution asserts Ukrainian ownership of subsoil resources, stirring apprehensions among local residents about foreign exploitation of their land.
Orynchak expressed her worries about public sentiment regarding foreign involvement in the mining sector, reflecting broader societal hesitations. Additionally, sentiments shared among Velta’s workers revealed uneasiness about foreign ownership. A worker illustrated this by comparing ownership of a vegetable garden at home and the reluctance to allow outsiders to reap its benefits.
Due to the inherent risks of this industry, skepticism around the proposed arms-for-minerals deal remains prevalent among Ukrainian entrepreneurs. One notable businessman expressed his doubts upon hearing about the agreement, commenting on the substantial financial commitment and resource requirements involved in operating in this capital-intensive sector.
