Ukrainian mining enterprises are among the world leaders in mineral inventories, extraction, and processing of iron ore, manganese ore, and flux materials. Owing to intensive phasing in of iron-ore productive capacities in the 1950s-1960s, Ukraine was abl
UKRRUDPROM CONCERN
Ukrainian mining enterprises are among the world leaders in mineral inventories, extraction, and processing of iron ore, manganese ore, and flux materials. Owing to intensive phasing in of iron-ore productive capacities in the 1950s-1960s, Ukraine was able to boost the rate of production growth and drive the output figures up to 126.39 million tonnes in 1978, including 109.27 million tonnes of commercial iron ore in Krivoy Rog iron-ore basin, the record-high for the history of Ukrainian metallurgy. Enterprises engaged in extraction and processing of manganese-ore and flux raw materials reported similar rates of development. The state support and long-term planning regulation contributed to stable and efficient operation of mining enterprises during a long time.
From the very first years of transition to the market economy, mining enterprises have been experiencing difficulties owing to their specific business. High power consumption, labor intensity, capital intensity, and long payback periods on outlay require significant capital investments for support of the operating capacities, which currently need radical reconstruction and technical upgrade. However, unlike in the world practice, these measures are funded only with in-house current assets of Ukrainian companies. Under the permanently increasing taxes levied by the state budget and non-budgetary funds, the amount of investments in capital renewals plummeted fivefold in 1997 compared to the 1990′ figure. The portion of centralized financing dropped from 23% down to 5.4%. Besides, the mentioned investments were not made to support the functioning capacities, but to construct new capacities, namely, Krivoy Rog Oxidized Ore Mining and Concentrating Works (KROOMCW) and the mine engaged in extraction and processing of the Gasforta-mountain limestones from M. Gorky Mining Administration of Balaklava.
The market for commercial iron ore over the past 5 to 6 years and the forecast for iron output in Ukraine until 2010 reveal excessive productive capacities in the industry (up to 20%) as of January 1998. Taking into account the scheduled putting into operation of KROOMCW’s capacities for 10,020 tonnes of pellets per year, the problem with sales will come up.
As of today, it is impossible to take a unilateral decision on phasing out of idle and excessive capacities without preliminary renewal of the necessary productive assets.
In order to keep up the current level of output, the USD-734-million capital investment ought to be made in the mining industry in 2000, USD 965 million should be invested in 2001-2005, and USD 941 million in 2006-2010.
It must be noted that enterprises’ profits have remained the only source of financial backup in this situation.
Owing to poor efficiency, long payback periods on capital investments and lack of favorable investment regime, Ukrainian mining enterprises pose no attraction for domestic and foreign investors.
Lack of in-house current assets has produced the situation when the quality of mining operations and financial and economic figures are worsening year on year. Construction of sludge storage facilities encounters extreme difficulties. The currently unoccupied storage vessels are enough for only 2 to 3 years of normal operation of such mining and concentrating works as SevGOK, InGOK, YuGOK, and NKGOK.
Similar situation is observed in the underground mining operations. Only 50 to 60% of the scheduled site-preparation and capital-mining works are actually done. The currently mined iron ore deposits will provide for only 4 to 6 years of enterprises’ manufacturing operations.
The quality of commercial iron ore has remained unchanged ever since 1993. This is 4 to 5% lower than the quality of similar materials produced abroad that have lower contents of harmful inclusions. This is the reason why Ukrainian mining companies are gradually losing their spots on domestic and foreign markets.
Along with export curtailment, import of iron ore to Ukraine is steadily going up. Most alarming is the fact that raw materials are imported even to Krivoy Rog iron-ore basin, which produces 80% of the total Ukrainian iron-ore products.
Manganese ore concentrate has run into a similar situation.
Measures to overcome the economic crisis that were worked out by Ukrrudprom concern have never been brought to life, thus currently causing social tension in the regions.
Long and exhaustive mining operations in mineral deposits, especially in those of Krivoy Rog basin, have caused a critical environmental situation. Krivbass emits more than 180,000 tonnes of detrimental substances to the atmosphere per year. Some 30 million cubic meters of highly-mineralized mine waters are annually pumped out from underground mines, thus worsening the ecological situation even more, whereas circulation of these waters in water supply systems corrodes metal structures and equipment. Research on technological methods of disposal and desalination of this water has been completely suspended due to problems with financing.
As a result of mining operations in the region, dumps have accumulated 3.7 billion tonnes of stripped rocks and sludge storages contain some more 2.7 billion tonnes of concentration wastes. Most of these wastes can be applied in production of construction materials.
The question whether it is expedient to continue exploitation of small quarries that extract construction rocks in the regions with well-developed mining industry remains open.
Mining enterprises will be able to resolve these problems only with assistance of strategic investors.