The financial returns from a new minerals agreement between Ukraine and the U.S. are expected to take a decade or more, as investors encounter numerous challenges in bringing new mines into operation in the war-torn nation. Mining consultants indicated that developing mines for strategically significant minerals in countries with established mining industries, like Canada and Australia, can require 10 to 20 years.
However, most mineral deposits in Ukraine lack sufficient data to verify their economic viability. Additionally, investors may hesitate to invest in a country where infrastructure, including power and transportation, has been severely damaged by Russia’s ongoing invasion, and where future security remains uncertain.
Adam Webb, head of minerals at Benchmark Minerals Intelligence, remarked, ‘If anyone thinks that all these minerals will suddenly be exported from Ukraine, they are mistaken.’ He added, ‘The reality is that it will be challenging for investors to justify putting money into Ukraine when there are opportunities to invest in critical minerals in stable countries.’
Although the financial prospects of the deal are unclear, Ukrainian officials have celebrated it as a significant political achievement, believing it will bolster U.S. support for Kyiv, which has waned under President Donald Trump.
Ukraine requires U.S. assistance, particularly in the form of military aid and financial support, to resist Russia’s military aggression. On the U.S. front, Trump strongly advocated for the agreement, highlighting the access it grants to Ukraine’s rare earth element reserves, which are essential for various technologies, including smartphones and automobiles. This could accelerate government investment policies. The U.S. lacks substantial rare earth production and has intensified its trade conflict with China, the leading global supplier.
The agreement signed in Washington indicated that the reconstruction fund’s revenue would derive from royalties, licensing fees, and production-sharing agreements. However, it did not specify financial details, noting that both parties still need to finalize a limited partnership agreement between the U.S. International Development Finance Corporation and Ukraine’s State Organization Agency for Public-Private Partnership Support. The agreement outlines 55 minerals, along with oil, natural gas, and other hydrocarbons. Ukrainian statistics reveal that the country possesses deposits of 22 out of the 34 minerals classified as critical by the European Union, including rare earths, lithium, and nickel.
Willis Thomas from consultancy CRU remarked, ‘The transition from a discovered resource to an economically viable reserve demands considerable time and investment, both of which have been limited, not only since the war began but even before it.’
According to data from the Ukrainian finance ministry, in 2024, the state generated 47.7 billion hryvnias, approximately $1 billion, from royalties and other fees associated with natural resource extraction. However, the joint fund established under the agreement will only receive revenue from new licenses, permits, and production-sharing agreements that are finalized after the agreement takes effect.
The issuance of mining licenses in Ukraine has been notably sluggish. Prior to Russia’s full-scale invasion in 2022, the country granted only a limited number of natural resource licenses from 2012 to 2020, including approximately 20 for oil and gas, one for graphite, one for gold, two for manganese, and one for copper, as reported by the Ukrainian geological service.
Currently, there are a total of 3,482 active licenses. Analysts suggest that the recent agreement may lead to direct government investment in a mining company, establishing a limited partnership between the two nations. Webb pointed out that Chile, recognized as the largest copper producer and home to the state-owned mining company Codelco, could serve as a model for this collaboration.
However, challenges remain, particularly as some promising projects are located on territories occupied by Russia, and the agreement lacks security guarantees. The U.S. has indicated that its involvement could act as a deterrent against aggressors. Benchmark has identified seven out of 24 potential mining projects situated in Russian-occupied areas of Ukraine, which encompass resources such as lithium, graphite, rare earth elements, nickel, and manganese.
A representative from a small Ukrainian firm holding the license for the Polokhivske lithium deposit, one of Europe’s largest, expressed to Reuters in February that development would be challenging without Western security assurances. Webb noted that this agreement further entwines U.S. interests with Ukraine, as it increases their stake in the resolution of the conflict to facilitate the development of these resources.
