Ukraine Mining Report 2008

Credit Rating, a Kiev-based ratings agency, in February said it was predicting 'steady development' of the country's ore mining and metallurgical sector and that companies in the industry would benefit from their relatively low expenditures and conservative financial policies. Factors limiting companies' creditworthiness were their outdated production facilities (requiring investment in modernisation), a traditional product range (mainly finished and semi-finished products with low value-added) and insufficiently trained management. The industry would see ongoing consolidation to achieve economies of scale and vertical integration, as well as improving access to a wider range of geographical markets(Query - I'm presuming this is still Credit Ratings analysis, as there is no indication of a move to a general analysis. Is this correct?). A danger highlighted was that rising raw material and energy prices would reduce the profitability of the country's metallurgical enterprises. This would be particularly acute for industrial groups that did not produce their own raw materials.

Ukraine shares boundaries with Belarus, Russia, Romania, Hungary, Slovakia and Poland. One of the largest nations in modern-day Europe in terms of landmass, Ukraine is richly endowed with various key minerals and ores, including coal, iron ore, manganese, nickel, lead and uranium. It is the world's secondlargest producer of manganese ore and the fifth-largest producer of iron ore. However, domestic mining output has declined sharply since the break-up of the Soviet Union. This decline has been primarily attributed to redundant mining equipment and inefficient methods of production.

Donbass is Ukraine's main coal production base, while iron ore is found in Krivoy Rig, Kremenchuck, Bilozersky and Kerch basins. The Nikopol basin contains some of the largest deposits of manganese ore in the world. The Bol'shoy Tokmak deposit is the largest manganese deposit in Ukraine, while gold mining in Ukraine is centred on Muzhiyev and Saulyak in the Trans Carpathians. The nation's key uranium facilities are located in the Zhovti Vody, Kirovohrad and Dnipropetrovsk regions.

The Mineral Resources Code is the key legislation regulating the supervision of mineral resources in Ukraine. The Committee of Geology and Mineral Resources is responsible for managing Ukraine's mineral resources, including the issuing of mineral licences. The Ministry of Coal is responsible for regulating all coal mining activity. In 2006, the government approved a national programme on development of Ukraine's mineral resources for 2006-2010.

As a part of its plan to achieve self-sufficiency in uranium production by 2012, the government is seeking investment in exploration and development of uranium deposits. At present, Ukraine fulfils about 30% of its uranium requirements from domestic production.

Most of the nation's coal mines are state owned. However, the government has resolved to privatise 18 coal mines in its bid to encourage private participation in this segment.

Industry Forecast BMI forecasts an average annual growth rate of 5.7% for the Ukrainian mining industry over 2008-2012.

We expect the mining industry to reach a value of over US$9.15bn by 2012.