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14.04.2025
Mineral Extraction in Ukraine: What’s Required for Legal Operation
Author: Volodymyr Prystai, Advisor at TOTUM Law Firm
Subsoil, minerals, and rare earth metals have become buzzwords in Ukraine’s media landscape since the beginning of 2025. The potential “Mineral Agreement” between the United States and Ukraine has sparked intense public debate, as the most recent draft appears to significantly undermine Ukrainian sovereignty.
According to the draft version of the agreement disclosed in the media, the U.S. seeks to obtain substantial control over investments in Ukraine’s infrastructure and natural resources, including a priority right to carry out such investments.
Note: In 2023, Forbes estimated the value of Ukraine’s mineral resources at $14.8 trillion, with over 70% concentrated in just three regions — Donetsk, Dnipropetrovsk, and Luhansk. The total volume of resources is estimated at 111 billion tonnes.
However, there is no need to panic just yet — the agreement has not been signed, and its provisions are likely to undergo significant revisions. For now, let’s explore the key aspects investors should consider before, during, and after obtaining subsoil use rights in Ukraine.
1. Eligible Entities — Who Can Be a Subsoil User?
Current legislation provides a broad list of entities eligible for subsoil use (including under production sharing agreements), such as enterprises, institutions, organizations, Ukrainian citizens, as well as foreign nationals, stateless persons, foreign legal entities, and legal entity associations established in or outside Ukraine.
In general, unless you are affiliated with an aggressor state or subject to sanctions, you are eligible to obtain subsoil use rights.
Important: If you are seeking subsoil rights for plots of strategic and/or critical importance (including under production sharing agreements), note that the law imposes additional eligibility requirements (Article 13 of the Subsoil Code).
Note: According to a recent study by YouControl’s R&D Center, 2,268 companies and 78 individuals currently hold subsoil use rights in Ukraine. Ownership structures span 51 countries. Over 10 entities with special subsoil permits are affiliated with major corporate groups like SCM, Smart Holding, Zakhidnadraservice, EastOne, ATB.
2. Permits and Licensing
Subsoil use is a state-regulated, licensed activity. Therefore, potential investors must go through a rigorous process to obtain a special subsoil use permit (hereafter — the Permit or SUP).
The State Service of Geology and Subsoil of Ukraine issues permits to winners of electronic auctions or, in exceptional cases outlined in the Subsoil Code, directly (non-auction procedure).
Prozorro Auction: What You Should Know
Auctions for SUPs are conducted as electronic bids through the “Prozorro.Sale” system and are initiated by the State Geology Service based on investor applications.
One of the key participation requirements is the payment of a guarantee deposit, which currently stands at 20% of the starting bid. Minimum deposit thresholds depend on the type and significance of the mineral resources — UAH 1/2/10/20 million.
Applications must include a sealed price offer, which determines the order in which bids are presented in the first round.
Once your application and deposit are verified and accepted by the auction organizer, you are officially a participant.
The auction comprises three real-time interactive rounds, and the winner is the highest bidder who has made at least one auction bid. After the auction, the system generates a protocol signed within six working days by the winner and the auction operator.
Then, within 20 working days, the State Geology Service and the winner must sign a sales agreement for the permit.
Note: The winner has 30 working days after signing the agreement to pay the remaining balance (auction price minus guarantee deposit). Only after payment confirmation via the participant’s online account does the State Geology Service complete the auction.
Non-Auction Permits
As noted, it is possible to obtain a special subsoil permit without an auction, but only in specific cases. These include:
- Subsoil users who conducted and financed geological exploration, reserve evaluation, and forecast resource appraisal, confirmed by the State Commission of Mineral Reserves.
- Landowners of plots up to 25 hectares seeking to extract locally significant minerals (e.g., sand, chalk, gypsum, loam).
- Healthcare and wellness institutions, for extraction of therapeutic natural resources.
- Entities extracting groundwater (excluding mineral water) for general use (excluding bottling or public water supply), up to 300 m³/day.
- Entities extracting groundwater for public water supply, regardless of volume.
Note: In 2024, the State Geology Service of Ukraine issued 478 special subsoil permits. Of these, 378 were granted non-competitively (including under the “small subsoil use” procedure), and 100 through electronic auctions.
3. Mining Allotment Authorization
Subsoil users holding special permits for underground mining must obtain a mining allotment act, issued free of charge by the State Labour Service of Ukraine.
Note: The mining allotment procedure is governed by Cabinet of Ministers Resolution No. 59 dated January 27, 1995.
4. Environmental Impact Assessment (EIA)
According to the Law “On Environmental Impact Assessment”, EIA is mandatory for:
- Quarries and open-pit mineral extraction, on plots over 25 ha, or peat extraction over 150 ha.
- Extraction of minerals (excluding local resources) by landowners/users outside intended land-use boundaries.
- Processing/enrichment of extracted minerals.
EIA conclusions are issued by the Ministry of Ecology or, in most cases, by regional Departments of Ecology and Natural Resources, or the Kyiv City Council’s Department of Ecology.
Warning: Failure to obtain an EIA may result in severe consequences:
- Temporary suspension of operations by court order (based on claims from the State Environmental Inspectorate) until all environmental requirements in the EIA are met.
- Complete cessation of operations at the enterprise or its production units.
These risks are supported by legal precedent where courts upheld government claims to halt company operations pending EIA compliance.
Conclusion
Mineral extraction in Ukraine is a highly regulated and state-controlled industry. Obtaining subsoil use rights requires a complex, often lengthy process — sometimes involving litigation.
Compliance with all legal requirements, including proper permitting, is crucial to ensure lawful and stable operations in the subsoil use sector. Therefore, it is strongly recommended that investors seek assistance from qualified legal and consulting professionals when planning to acquire and exercise subsoil use rights in Ukraine
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