According to the production sharing agreement for the Dobra site, Ukraine will receive financial revenues amounting to about 13% of total production at the initial stage.
Deputy Minister of Economy, Environment and Agriculture of Ukraine Yehor Perelyhin announced this on Facebook.
“The competition conditions stipulate a high minimum guaranteed investment in the Dobra project—namely 179 million US dollars. Under the competition terms, the potential investor must conduct a geological study of the deposit within 2.5 years, followed by the construction of a mine for extracting lithium-bearing minerals and processing them into lithium concentrates, which should take an additional 4–5 years,” the statement reads.
According to Perelyhin, this project requires not only significant investment but also the involvement of qualified investors with the necessary experience and technical and financial capacities. For this reason, the Cabinet of Ministers of Ukraine decided to hold the competition under a production sharing agreement (PSA) framework.
The deputy minister notes that after production begins, the investor will, for at least 3–4 years, recover its invested funds through the compensation product received from the state at the maximum rate specified in the agreement, but not exceeding 70%.
At the same time, at the initial stage the state, in addition to its share of profit production (at least 4%), will also receive royalty payments (5% of the price), corporate income tax from the investor (18%), as well as personal income tax, social security contributions, and the military levy.
“Calculations show that at this initial stage, state revenues will amount to roughly 13% of the total volume of produced output (and not 1.2%, as some claim), while the investor’s financial result will be 22% (excluding the value of the compensation product, which essentially serves to reimburse previously incurred capital expenditures and is not investor profit),” Perelyhin emphasized.
During the main phase of the agreement (up to 50 years), beginning from the fourth or fifth year of lithium concentrate production, the compensation product is expected to be at the level of about 30% of the value of produced output, from which the investor’s current operational expenses will be reimbursed.
“Thus, even with the state’s share of profit production set at no less than 6%, the combined financial result for the state (including all the above-mentioned taxes) is expected to reach 22% of total production volume,” the deputy minister added.
He underscored that while preparing the competition terms—including the minimum production-sharing indicators in favor of the state—the government was guided, among other factors, by the need to ensure financial and other conditions for the state that are no worse than those under projects implemented after purchasing special permits for exploration and extraction of metallic minerals at auctions.
