There is (still) no minerals deal

Yes, one has been signed, but it's basically meaningless

Back at the start of March I wrote There is no minerals deal, about the fact that the commercial prospects for mining in Ukraine aren’t bad, but aren’t compelling. The point being that, whether or not Ukraine has a good deal on paper with the Americans (it appears to now) as opposed to the previous very poor proposed deal, the effect on the ground is little different. I am prepared to wager that no new commercially-viable mining production will happen under the auspices of this deal within President Trump’s lifetime.¹

Geological map of Ukraine. Source: https://archive.org/details/Ukraine_C-1

It’s not that Ukraine doesn’t have reserves of critical minerals. It has lots of them. But, as a mining executive active in the post-Soviet space explained to me back in March, even in places where there are none of the obstacles found in Ukraine, such as an ongoing war, minefields, parts of the country under foreign military occupation, mining prospecting is a highly risky business. Just because there are geological deposits of a certain mineral doesn’t mean that these are in commercial quantities or in places that are accessible. People are being asked to risk tens, maybe hundreds of millions of dollars for an uncertain outcome. As I wrote in March, “since Trump doesn’t do details, I doubt he understands any of this, preferring to think there is money underground in Ukraine waiting to be dug up.”

For any mining to start happening under this deal, hard-headed mining professionals would have to conclude that the opportunity in Ukraine is in some way better than other opportunities in parts of Africa, or Kazakhstan, or anywhere else on planet earth where there are deposits of minerals. What makes Ukraine a better bet? One of the things that makes Ukraine a poor bet is that it is a democracy. In general, people don’t like living near huge mines, even if there are economic benefits to accrue. In Serbia, the huge Jadar lithium mine project has been repeatedly delayed by environmental protests. Serbia is hardly the most democratic country in Europe, but its has still proved unable to get this project off the ground in the face of public opposition. We don’t yet know how Ukrainians might respond to “American” mines ripping up their countryside and removing their national wealth. Trump thinks the Americans will be “paid back” the $350 billion that he likes to believe the USA is owed (he’s lying: American aid has not been anything like that number, and in any case much of it took the form of gifting mothballed equipment whose value could be close to zero; where it was new kit it was mostly spent on defence firms in the US.)

But this still fails to grapple with the underlying issue here: mining is an uncertain, and very slow business. For a start, there is currently a slump in the value of several critical minerals, thanks to oversupply and a faltering EV market (something Trump has had a hand in with his hostility to clean energy.) Lithium is currently trading at prices not seen since 2021. In these circumstances, generating investment for new mines is extremely difficult. As an article in Foreign Policy put it: “Even if a new geological survey were to confirm significant rare-earth and critical mineral resources in Ukraine, the commercial viability of extracting these resources may be low. First, developing new mines, whether they’re open pit or deep tunnel mines, is a slow process. Even if ground were broken tomorrow on new sites in Ukraine, they might not yield mineral resources for a decade or possibly two [my emphasis].” There is a reason the Chinese have stolen a march on the Americans in securing critical mineral supply chains - they are prepared to play a very long game and have built up their position patiently over the years, not in a few simple flashy deals.

Here’s the original piece:

1. I am cunningly using the framing “commercially-viable” and “production” because you can’t rule out the two sides putting together a sort of government-sponsored show project to keep Trump happy. But that’s not a proper mine. Also, how long is that guy going to live?