TOP 5 Ways for Foreign Businesses to Invest in Ukraine’s Mineral Resources

Out of the 118 elements in the periodic table, 92 are found in Ukrainian deposits. Ukraine possesses reserves of 21 out of the 30 elements identified by the European Commission as critical raw materials, including rare earth elements, lithium, titanium, graphite, cobalt, and nickel. This underlines the country’s importance in the global mining sector and signals opportunities for foreign investors.

So what investment mechanisms does Ukrainian legislation offer in this sector?

Participating in auctions for special permits for subsoil use

The extraction of minerals in Ukraine is regulated by the Law of Ukraine “On Subsoil” and is carried out based on special permits that grant the right to conduct geological exploration, prospecting, and extraction of minerals in a designated area. Special subsoil use permits are granted through competitive electronic auctions on the Prozorro.Sale platform. The procedure ensures open access for investors, but they must meet criteria for integrity, financial capacity, and technical competence.

Competitions for obtaining special permits are held regularly, approximately quarterly, in accordance with the plan of the State Service of Geology and Subsoil of Ukraine. The auction schedule is published on the official website of the State Service of Geology and Subsoil of Ukraine  and the Prozorro.Sale platform. 

In some cases, particularly when it comes to strategically important minerals (such as vanadium, lithium, titanium, uranium, nickel, cobalt, and rare earth elements, which are crucial for the development of high-tech industries and energy security), permits may be granted without an auction. This requires a decision of the Cabinet of Ministers of Ukraine and entails additional obligations for the investor, such as the introduction of advanced technologies or investments in infrastructure projects. This procedure facilitates the acceleration of extraction projects, which is especially relevant given the international focus on Ukraine’s critical minerals market.

Investment through a production sharing agreement 

A production sharing agreement (PSA) is a contractual mechanism that allows investors to extract minerals in exchange for sharing the extracted resources with the government. Under the Law of Ukraine “On Production Sharing Agreements”, such contracts are typically concluded for long-term periods, usually 30 to 50 years, ensuring long-term stability for investors.

The procedure for concluding a PSA in Ukraine begins with the initiation of a relevant competition by the government or the submission of an application by a potential investor. The Cabinet of Ministers of Ukraine then determines the subsoil areas eligible for PSA development and approves the competition conditions. Potential investors submit their proposals, which are evaluated based on technical, financial, and environmental criteria. The winner signs an agreement with the government, which is then approved at the level of Cabinet of Ministers of Ukraine and gains the status of an international treaty. Once the agreement is concluded, the company gains the right to explore and extract minerals without the need for a separate special subsoil use permit but must comply with the agreed production-sharing terms and environmental regulations.

Investors operating under a PSA may receive tax incentives, including reduced royalty rates, making this mechanism attractive for major international companies interested in strategic resources. The law allows both Ukrainian and foreign legal entities to be parties to a PSA. However, non-residents must comply with Ukrainian legislation, including demonstrating financial and technical capacity and registering a representative office or a subsidiary company in Ukraine to fulfill the agreement’s conditions.

Acquiring a company with a subsoil use permit

Acquiring a company that already holds a special permit for subsoil use is an efficient way to enter Ukraine’s mineral extraction market quickly. However, this process requires the availability of acquisition opportunities, which is not always common, and thorough legal due diligence, as a change of ownership can affect the validity of the permit and may require additional approvals.

Before finalizing a transaction, investors must verify the company’s compliance with all licensing conditions, including the permit’s validity period, environmental obligations, and the absence of legal disputes over its issuance or use. Violations or unfulfilled investment commitments may serve as grounds for the permit’s revocation.

Additionally, a change in the company’s ownership may require further approval from the State Service of Geology and Subsoil of Ukraine. In some cases, confirmation of the new owner’s compliance with integrity, financial capacity, and technical competence criteria is required. If the acquired company holds strategically important assets, the transaction may also require approval from security agencies or relevant ministries.

Another crucial factor is compliance with antitrust legislation. If the transaction triggers a special thresholds and results in market concentration (especially if the buyer already owns similar assets in Ukraine) it may require approval from the Antimonopoly Committee of Ukraine (AMCU).

Beyond legal risks, investors should review the company’s financial statements, credit history, and potential debts to the government or private entities. Conducting a comprehensive legal audit helps identify risks before finalizing the deal, allowing investors to avoid financial losses and ensure long-term business stability in Ukraine.

Privatization of state-owned mining assets

Ukraine is currently undergoing privatization of state-owned enterprises, including mining companies. These assets are sold through transparent public auctions to ensure fair competition among investors.

One of the key enterprises planned for privatization is the Demurinsky Mining and Processing Plant, which specializes in the extraction and processing of ilmenite ores. Additionally, the privatization of the United Mining and Chemical Company (UMCC) “Titan” was successfully completed in 2024, demonstrating strong investor interest in Ukraine’s mining sector. This example highlights the potential for further capital inflow into the industry, particularly in the context of the global transition to clean energy and the rising demand for strategic minerals.

According to the Law of Ukraine “On Privatization of State and Communal Property”, investors are required to fulfill the terms of the privatization agreement, which may include modernization of the enterprise, job retention, or investment in social infrastructure. Investors participating in privatization must also consider antitrust requirements and potential restrictions related to national security interests in strategic sectors.

Partnership or establishment of a joint venture

Foreign investors may also partner with Ukrainian companies that already hold the necessary permits by establishing a joint venture (JV). This approach reduces risks associated with entering a new market, as local partners are typically well-versed in legal regulations and business practices in Ukraine.

JVs are regulated under the Law of Ukraine “On the Regime of Foreign Investment”, which provides several legal protections for foreign investors, including protection from expropriation and access to international arbitration mechanisms. Structuring the agreement correctly is crucial, ensuring clear profit-sharing terms, rights to extracted resources, and dispute resolution mechanisms.

To sum up, investing in Ukraine’s mining sector offers significant opportunities but requires careful consideration of legal risks and a strategic approach. The choice of the optimal investment mechanism depends on the scale of operations, available capital, and the investor’s risk appetite.

Amid increasing global interest in strategic minerals and the growing demand for critical resources, Ukraine presents a vast array of opportunities for foreign companies. Properly utilizing existing mechanisms ensures not only profitability but also long-term stability for investment projects in the sector.

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