Donald Trump wants Ukraine to give the United States the rights to exploit its mineral resources, especially rare earths and metals, as compensation for the support provided by the United States during the war. Volodymyr Zelenskyy was ready to sign a draft of the agreement when he went to the White House to meet with Donald Trump, but the visit turned out to be a real disaster and the signing ceremony was canceled. After some time, negotiations resumed, and the agreement could be finalized by the end of the month, according to Kyiv.
Very little is known at this time about the document in question. Will Kyiv also have to renounce control of its energy or port infrastructure, or its natural gas reserves, as has been discussed? Will Ukraine receive the security guarantees it wants from the United States of America? Can at least Kyiv be certain that, even if it does not provide security guarantees, Washington will continue to deliver the weapons and information that Kyiv needs to continue to resist the Russian assault, for as long as it’s necessary?
Ukraine holds 117 of the 120 most widely used minerals, the largest estimated reserves of uranium in Europe, the second-largest reserves of iron ore, titanium and manganese, and the third-largest reserves of shale gas. The potential is huge. Most of these resources are located in areas occupied by Russia. Additionally, it is unclear just how profitable their exploitation really is. Last but not least, Ukraine lacks the technology to process these raw materials, which would bring it more revenues than by simply selling them.
Ukraine has rare earths, but their amount remains unclear, and Russia controls a large part of the deposits
Rare earths are lanthanides used in medicine, the military industry and high-end technology in general. For instance, cerium is used to manufacture cars and refine oil. Holmium is used to produce nuclear reactor rods, neodymium for hard drives, and erbium for laser surgery equipment. Donald Trump did not refer to these alone, but also to others that are more familiar to the general public, such as lithium, titanium, nickel and cobalt, which are also used in high-tech production, such as in mechanical engineering, the manufacture of paints and plastics, batteries, glass and so on.
According to Volodimir Landa, a senior economist with the Center for Economic Strategy, China owns 68% of rare earth production is, while the USA a mere 12%. Therefore, right now, Ukraine is not a significant player on the rare earths market. Moreover, there is no guarantee it will become one in the future: these metals are difficult to extract, and the deposits have low concentrations. To get a few kilograms, you need to process tons of minerals.
There are three main areas of rare earth mineralization in Ukraine: Azov, Dnipro and Volyn.
- The Azov area covers the territories of Donetsk, Luhansk and Zaporizhzhia regions, which are currently under occupation. It also includes the Mazurivske deposit of mariupolite and nepheline pegmatites, the Novopoltavske deposit (900 hectares) of carbonatites, and the Azovske and Petrovo-Hnutivske deposits of alkaline syenites.
- The Dnipro area covers the Dnipro, Kirovohrad and Vinnytsia regions. The Malyshevske and Vovchanske deposits of titanium and zirconium are important in this region. The Pervomaiske deposit in the northern part of the Kryvyi Rih structure is known for scandium. The Vinnytsia region is home to the Sabarivske and Rizhkivske deposits, which have commercial concentrations of neodymium.
- Finally, Volyn region has deposits of complex beryllium and yttrium-fluorite, as well as deposits of titanium and zirconium, where traces of scandium have also been found.
It is unclear how large these mineral deposits are. For instance, according to Forbes (2023), the total value of all mineral resources in Ukraine stands at some $15 trillion. More than 70% represents minerals located in three regions – Donetsk, Luhansk and Dnipro, the first two of which are largely occupied by Russia. SecDev, a Canadian geopolitical risk assessment firm, estimates Ukraine’s total mineral deposits at $26 trillion (of which $12.5 trillion representing minerals in areas occupied by Russian forces). It is unknown how much of this amount is represented by rare metals, since even general data is merely indicative. This also goes for beryllium, zirconium, scandium and other rare earth metals. As for rare earths, according to the Center for Economic Strategy, Ukraine holds about 1% of the world's reserves of nickel and cobalt and about 1% of the world's deposits of titanium (8 million tons). This is the only rare earth that Ukraine mined before the large-scale invasion, when it provided 6-7% of global production. Ukraine is also home to about 2% of the world's reserves (500,000 tons) of lithium, but the deposits are in Russian-held Donetsk.
Rare earths are also located mostly in southern and eastern Ukraine. According to an analysis carried out by DiXi Group, there are also significant deposits in the Dnipro, Kirovohrad and Zhytomyr regions. Overall, about 40% of all Ukrainian rare earth metals are located in occupied territories.
Kyiv doesn’t know how much it costs to mine rare earth metals, nor does it have the necessary processing capacity
There are very many challenges to the exploitation of rare earth metals. Ukraine does not mine and has not mined rare earth ore, although it has explored deposits. In particular, this is due to the complexity of extraction. In addition, rocks containing rare metals may have an increased level of radioactivity. This is the main challenge and affects the cost of production. Broken down in terms of type, the cost of rare metals can vary from tens to thousands of dollars per kilogram. But the development of deposits and the extraction of rare metals require expensive equipment, reagents and other devices, as well as teams of experts. Tens of billions of dollars must be invested to tap into the full potential of Ukraine's rare earth deposits.
Stella Shekhunova, the director of the Institute of Geological Sciences of the National Academy of Sciences of Ukraine, says it will take some time before Ukraine will really be able to supply rare earths to the United States in exchange for military assistance. So far, we are talking about promising geological sites with ore that may contain a certain percentage of the minerals that the Americans are talking about. These metals are not so evenly distributed in geological formations, as one might imagine. That is, “providing metals” is certainly not tantamount to having gold bars in a bank reserve – you just take them and give them to someone.
Therefore, Ukraine has rather a hypothetical potential to become a major player on the market of rare earths and metals. And the existence of deposits and the profitability of their extraction are merely part of the problem. To be truly profitable, these rare metals would have to be processed, and that requires technologies that Ukraine has developed to little or no extent. For example, Ukraine has rich deposits of titanium, but it does not manufacture end products from it.
The processing problems are greater, however, and are not limited to rare earths and metals. The same is true, for instance, of iron ore deposits. Prior to the war, Ukraine was able to produce high-quality steel and steel products, but the loss of Mariupol and other southern cities had a negative impact on the steel industry. Therefore, for the post-war economic recovery, Ukraine must focus not only on mining raw materials, but also on creating technological chains and manufacturing products with higher added value.
