By 2030-2032, the demand for lithium products in the EU will grow 10 times, experts predict
Ukraine is one of the world leaders in lithium reserves, a strategic raw material for the production of batteries for electric vehicles. The volume of its exact reserves is a state secret, but gradually, despite the war, investors are beginning to enter this area. One of them is “UkrLitiyVydobuvannya” by Sergei Tabalov from the Kirovohrad region. The director for strategic development of this company, Denis Alyoshin , told Business Telegraph at what stage the project is.
About Ukrainian deposits
– Please tell us about your project.
— Let me start by saying that there are two types of lithium in the world. The first is in salt lakes, in South Africa, Chile, Argentina, Bolivia. There are also hard ore deposits, which in 90% of cases contain the mineral spodumene.
— What are the deposits in Ukraine?
— We have solid ore deposits. But it is in our Polokhovsky deposit in the Kirovohrad region (near the village of Smolino) that pegmatite ore is located, in which another mineral is petalite.
– There are other deposits with lithium in the Kirovograd region. Will you develop them too?
— Near us, 70 kilometers away, there is indeed a Dobraya section. It contains a combination of spodumene and petalite. But the special permit that our company has does not apply to this deposit.
— Ukraine is also rich in lithium in the Donetsk and Zaporozhye regions. What’s there?
– Indeed, there is a Shevchenkovskoe deposit in the Donetsk region, it seems that there are spodumene ores there. And there is also a deposit called “Krutaya Balka” in the Zaporozhye region. But we did not study its composition. It is under occupation. That is, out of four fields, unfortunately, one is under occupation, the other is in the frontline zone. And only two deposits in the Kirovograd region are available for production.
— UkrLitiiVydobuvannya has long had a license to develop the Polokhovskoye deposit .
— Yes, the Polokhovskoye field is so far the only one in Ukraine for which the owners of our company acquired a special permit in 2017 for UAH 119 million. Then it was about 4.5-5 million dollars. A record amount by that time for rare earth metals. In March 2021, we confirmed ore reserves in accordance with the international JORC standard. They make up about 75 million tons of pegmatite ore. This is a very large deposit by European standards.
– How will you mine?
– We considered two options: light ( quarry . – Ed. ) open-pit mining and the mine method. We settled on the mine, because the environmental component is important to us. We want to be esg-friendly ( environmental, social and corporate governance. — Ed.). Although Ukraine is not yet in the European Union, we believe that it will be there in the next few years. We will do everything according to the highest European standards. The mining method brings much less harm to the environment than open-pit mining. The mine will cost much more to the investors of the project, but we choose this method. We will go deeper by about 600 meters into the depth of the deposit. The second stage will be the construction of an enrichment plant, where we will process the ore into petalite concentrate.
— What volumes of ore and concentrate are we talking about?
— We plan to mine one and a half million tons of ore per year. It will be annually transformed into 300 thousand tons of petalite concentrate.
— Deep processing is expected?
— Of course, we are striving to add a third stage – processing of petalite concentrate into lithium carbonate. This is better for both the investor and the government, because lithium carbonate has a higher added value. There are two options – lithium hydroxide and lithium carbonate. They are used in the production of lithium-ion batteries, but involve different technologies. Lithium carbonate is used for the so-called LFP batteries, lithium hydroxide is used in the production of NMC batteries. We analyzed the market and came to the conclusion that we want to produce lithium carbonate. We made this decision a year and a half ago, and I see that it is the right one.
– Why?
– Because the world’s largest players, and this is China, produce highly processed products using more advanced technology from lithium carbonate. You probably know that this country produces 99% of all cathodes in the world. Tesla, Li One and more EV manufacturers are switching to LFP batteries. Accordingly, we strive to ensure that the production of lithium carbonate is located in Ukraine. Whether this will work will depend on a number of factors. One of them is how attractive the investment climate in our country is.
On investment and return
– What investments are we talking about?
I am dividing our project into two phases. The first is the construction of a mine and a processing plant. This is about 300 million dollars. Stage number two – the construction of a factory for the production of lithium carbonate. That’s another $400 million. Total – 700 million dollars. Only international strategic investors can afford such a volume of investments. In terms of the size of the attraction, the project is only comparable with the privatization of Kryvorizhstal.
– What guarantees are needed?
– For an international investor to come to us with that kind of money, certain conditions are needed. International partners expect from us a complete reboot of the judicial system. The fact that we are fighting corruption and even detained the chairman of the Supreme Court of Ukraine was accepted by foreign partners with approval. It was a good sign on the one hand. But corruption has not left our lives, although Ukraine has embarked on the path of this struggle. I also witnessed how the speech of the new head of NABU was very approved in London.
– And if it does not attract funds for deep processing?
– There is always a plan “B” – to build a mine, a processing plant and sell abroad the products of the first processing stage – petalite concentrate. We are definitely not going to sell the ore. This is irrational. After several years of exporting lithium concentrate, we will get the first cash flow. These funds can be used to attract investments in the production of lithium carbonate.
– What is the return on investment?
– I orient the owner to payback within 5 years. This is a very attractive project in terms of return of funds.
— How many people need the project and when will you start mining?
– I hope that by 2027 mining and enrichment will work. We will produce petalite concentrate. It is planned to attract about 500 employees to the mine and factory.
About the owners
— There is information that the son of ex-premier Mykola Azarov was involved in UkrLitiyVydobuvannya. How objective is she?
— I have 15 years of investment banking experience, I worked at Deloitte. That’s why I’m used to assessing risks. Besides, my professional reputation is at stake. Therefore, we conducted a detailed due diligence ( collection and analysis of information. – Ed. ) on the history of the project owners. We aim to attract international investment. Such risks would be unacceptable.
— Who is the ultimate beneficiary of UkrLitiyVydobuvannya?
– 99.99% of the company belongs to a businessman from the Kirovograd region Sergey Tabalov. If you look at youcontrol , the authorized capital of the company was replenished by UAH 297 million a few years ago. These are the tools I now use to start the project. My budget for this year is about $3.5 million. Let’s spend them on studying, tests, examination, the so-called feasibility study. This is approximately 2-2.5 million dollars. The rest will be directed to the study of the consequences for the social and environment (the so-called environmental and social impact assessment study). We do this according to the standards of global financial corporations such as IFC, EBRD and Development Finance Corporation.
— Can these companies act as investors?
— We are negotiating with 25-30 potential investors and 5-7 financial institutions and banks, and as a result we see a pool of investors. If we are talking about the amount of 700 million dollars, in principle it cannot be raised from one investor, because this is a significant risk for him. We have no illusions that no one will invest in us before our victory and before Ukraine joins NATO and the EU, which will become an effective investment insurance. I have a year and a half to prepare the project for raising funds. Direct attraction is planned for 2025 so that we can start construction. I hope that by then we will win, join NATO and the EU.
— So what is the task of the owner?
— My task is to ensure that the Ukrainian owner, as a result of raising funds, has the maximum share in the project. We will attract a strategist as an investor, that is, a large international company in the lithium segment. Without such a company, the start of the project is impossible. In general, the standard mechanism for attracting funding in four areas will work. $400 million is a combination of export credit and debt financing from international financial institutions (IFC, EBRD, DFC). From 100 million dollars – policy funding, that is, grants from the US and the EU for projects in the field of lithium. We expect that there will be an advance payment for future products, the so-called offtake – up to $50 million. 150-200 million dollars – attraction of a strategic investor in the capital. In total – 700 million dollars.
About sales markets
Where do you see consumers ?
Petalite concentrate will be bought for processing into lithium carbonate or lithium hydroxide for lithium-ion batteries. If we fail to produce lithium carbonate ourselves, we will sell the petalite concentrate to manufacturers of batteries or ceramics and glass ceramics in Europe. Its use in this area is called technical grade, if it goes to batteries – battery grade. Our petalite concentrate will combine battery grade and technical grade. That is, we can sell it to both markets.
The end buyers of our product are huge European manufacturers of electric vehicles. If we launch the production of lithium carbonate, our customers will be manufacturers of cathodes for LFP batteries. And these are Chinese companies that are also represented in Europe. Here we have no choice, because we know that China owns the technology, raw materials and production of batteries around the world. And when people ask me how to get out of this addiction, I say that it will take at least 3-5 years until the Europeans and Americans take over this business.
— That is, your project will start working when the volumes are in demand in Europe?
— We certainly focus on the demand in the EU. There are forecasts that by 2030-2032 the demand for lithium products, namely, petalite concentrate, lithium carbonate, lithium hydroxide, cathode, will increase 10 times. Even assuming that by 2030 all European lithium deposits will produce products from it, this will be only 4% of the world market. In addition, by 2030, Europe will need to have 25% of the world’s production of lithium carbonate. I note that our field is large by the standards of Europe, so it will be attractive not only for European, but also for any investor.
About competition
— Do you feel competition for lithium mining in Ukraine?
— I don’t see any competition in lithium mining in the next 5-10 years, not only in Ukraine, but also in the world. There is not enough lithium in the world to meet the demand of electric car manufacturers.
— I mean raiders who like to come to successful projects.
– The state is interested. We will have a large specialized investor from Europe or the USA. So far, I do not see such risks. Perhaps I am an optimist after the conference in London . I see how our partners and authorities are set up, so I don’t believe in the situation with raiding in 3-4 years.
About the interest of the Russian Federation in lithium
– Do you think that Russia’s invasion of Ukraine was also due to interest in lithium deposits, or is it a myth?
I am skeptical of such arguments. It would be more logical then to seize Bolivia. It’s a joke. In my personal opinion, the system of checks and balances does not work in Russia. And an elderly person, far from the Internet, single-handedly makes decisions in this country. This is dangerous and has led to very sad consequences.
– So there is an interest of the Russian Federation in lithium?
– If there is, then he is definitely not in the TOP 10 reasons for the start of the war in Ukraine.