US-Ukraine deal is heavy on symbolism, light on minerals

Reuters

02-05-2025

LONDON, May 2 (Reuters) - U.S President Donald Trump's minerals deal with Ukraine is a big symbolic win for both sides.
Ukraine gets a long-term commitment for U.S. investment in "a free, sovereign, and secure Ukraine". The United States gets a stake in Ukraine's future resource potential. And Trump gets to prove that he is, to quote White House spokeswoman Karoline Leavitt, "the great deal maker".
Just don't expect a Ukrainian critical minerals rush soon.
Yulia Svyrydenko, Ukraine's deputy prime minister, posted on X, opens new tab that she does not expect the jointly-owned Reconstruction Investment Fund to pay out any dividends in the first 10 years.
DON'T MENTION THE RARE EARTHS
At least everyone has stopped calling it the rare earths deal. The agreement covers all sub-soil resources, including oil, gas and a wide spectrum of metals.
Ukraine has a couple of rare earth deposits, which is not surprising given the size of the country and that rare earths are not as rare as their name suggests.
Deposits that are viable economically and technically are relatively unusual and how promising Ukraine's are is unclear.
Even the best-mapped Novopoltavske field, opens new tab was last surveyed in 1982-1991. It is also inconveniently located just north of Chernihiv in Zaporizhzhia province, which is the wrong side of the front line from a Ukrainian point of view.
So are two of the touted lithium projects. Indeed, about 40% of Ukraine's metal resources are under Russian occupation, according to estimates by Ukrainian think tanks We Build Ukraine and the National Institute of Strategic Studies.
Unlocking the full value of the minerals deal will be impossible without a definitive peace and reconciliation of Ukraine's and Russia's competing territorial claims.
LONG ROAD FROM MINE TO MARKET
Ukraine has other lithium deposits and also hosts reserves of critical minerals such as uranium, titanium and graphite.
But since existing production facilities are not included in the deal and many have been closed since the start of the war anyway, Ukraine will be building a minerals production chain from scratch.
That is a long journey.
The challenge with many of the metals on everyone's critical raw materials list is not getting them out of the ground, although that can be capital-intensive enough, but in refining them into high-purity products ready for the manufacturing process.
Rare earths' separation and processing is notoriously tricky and dominated by Chinese operators, which is another reason why no-one's calling it the rare earths deal any more.
Mined uranium also needs to be enriched before it can be fed into a nuclear power plant and titanium ore needs to be processed into aviation-grade alloy before it can be used to build aircraft.
It's an inconvenient truth that Russia is one of the world's largest titanium processors and accounted for 27% of the enriched uranium supplied to U.S. commercial reactors in 2023.
Russia, however, is explicitly excluded from benefiting from the reconstruction of Ukraine.
PRICE PROTECTION
Market price is another problem.
Ukraine's graphite deposits are both on the right side of the front line and relatively well mapped. The Balakhivske project is at the feasibility study stage, according to the Ukrainian Geological Survey.
There is a ready European market for the material needed for the anode in electric vehicle batteries.
But will mining it in Ukraine be economically viable?
Canadian miner Northern Graphite (NGC.V), opens new tab, the only producer in North America, has announced it is putting its Quebec plant on care and maintenance due to a 50% collapse in the graphite price.
China controls 70% of the global supply chain and can exert huge influence over pricing, in this case flooding the market to undermine potential competitors.
The West's lithium ambitions are being similarly stymied by Chinese over-supply and rock-bottom market prices.
Ukraine will find that private investment will need government help to shield start-ups from price turbulence.
The United States has already understood the need for direct federal action. The Department of Defense is a strategic investor, opens new tab in a domestic rare earths processing project being led by Australia's Lynas Rare Earths (LYC.AX), opens new tab.
STAKING THE METALLIC FUTURE
This minerals deal is clearly going to come with a long repayment schedule.
But it is a sign of the times. As the world transitions from a fossil fuel economy to a metallic future, minerals have become the new geopolitical currency.
In this new world order China is the dominant incumbent and the West the challenger.
The United States has just made a strategic move in the great global minerals game. It will not be the last.
Next up is the Democratic Republic of Congo, where another minerals-for-security deal is on the table.