Ukraine needs to create an ecosystem based on the mining industry

Ukraine must create a powerful economic ecosystem based on the mining industry to ensure the financing of the army and long-term defense capabilities. Our country also needs to move from simply extracting raw materials to producing products with the highest added value and creating favorable conditions for long-term investment.

This was stated by Serhii Skorbun, Head of External Projects at Metinvest Group’s CEO Office, during his speech at the United by Mining forum held by the National Association of Mining Industries of Ukraine. GMK Center presents the main points of his speech.

The economy as the foundation of defense capability

In the current circumstances, we need to spend billions and trillions of hryvnias on our defense. And this is not only today, but most likely for decades to come. This requires a strong economy as a starting point.

Ukraine is luckier than many European countries in terms of mineral resources – we have quite a lot of them. However, minerals lying in the ground have no value until they are extracted, brought to marketable condition, and sold to those who are willing to pay the most for them.

Today, 60% of our business is in the extractive industry and subsequent processing. This is what enables us to support our state, because everyone understands that those who pay taxes provide for the Armed Forces of Ukraine, since our partners provide assistance exclusively for humanitarian purposes and financial support. The more revenue the state has, the stronger our army is.

The state’s task

The state’s task is to create all the conditions for us to mine minerals from the ground and produce high-quality products from them, for which foreign markets are willing to pay big money.

Our business is not purely extractive. The ore we extract is of no use to anyone in its raw form—it contains only 25% iron, which is impossible to use. It must be brought to marketable condition.

This requires significant investment in enrichment and processing—the purchase of flotation machines and the construction of enrichment plants. After that, it is necessary to move on to the next stage – the production of sinter, which requires huge sintering machines, each of which costs hundreds of millions of dollars in investment.

To make such investments, it is necessary to be able, first, to raise the necessary capital and, second, to attract it on a long-term basis. If we can attract loans at 5-6% rather than 20%, then it will truly be possible to build factories in Ukraine. Our main industry should not be the mining of raw materials, but the creation of products with the highest added value from the resources available in our country.

The necessary ecosystem

Ukraine needs an ecosystem that views the mining industry not as a source of easy money from deposits, but as a basis for attracting capital, building factories, and manufacturing products with the highest added value.

This system should include:

1. A predictable and adequate tariff policy — without this, it is impossible to plan long-term investments.
2. A predictable and adequate tax policy — to create a stable investment climate.
3. State support – not in the form of subsidies, but at least in defending the interests of our producers in foreign markets and conducting trade diplomacy to gain access to markets.
4. Affordable energy resources – if resources are the most expensive in the world, we will not have any domestic production.
5. A sufficient number of qualified personnel – today we are experiencing a significant shortage of personnel. The army needs to be mobilized, but the economy that supports this army must also function. This balance must be constantly felt by the state.

For the entire system to function, it is necessary to:

• make long-term loans available;
• improve the country’s credit ratings to reduce the cost of financing;
• liberalize currency regulation.

Multiplier effect

Our industry is export-oriented, and everyone knows that one job at our mining and processing plant creates four more jobs in Ukraine as a whole. This includes Ukrainian Railways, port workers, energy workers, and many other industries. It also includes lecturers, teachers, and doctors who treat us and our employees’ children. It is a huge infrastructure.

When this industry is working, it gives a boost to the entire economy, and the entire economy works for our defense.