Some 74% of companies continue to invest in Ukrainian subsoil during the war, 18% have not yet made such a decision, and only 8% have not yet invested, according to the results of a survey conducted by the European Business Association (EBA) among EBA member companies, carrying out activities in the field of subsoil use.

The EBA announced the results of the study Subsoil use in the context of industry reform and development prospects in a press release on Friday.

According to it, 82% of the respondents consider the mineral resource sector to be investment-attractive, and they rate Ukraine's resource potential at 7.85 out of 10 on the scale. According to businesses, the greatest potential in Ukraine and the world lies in valuable minerals such as titanium, lithium, hydrocarbons (oil, gas, condensate), and iron ore.

The majority of companies, specifically 61%, have invested up to 5 million USD/EUR in Ukrainian mineral resources since the start of the full-scale invasion, while 21% have invested more than 5 million USD/EUR.

High risks for international investment, coupled with issues related to power supply and logistical challenges (lack of access to ports and complications in rail transportation), are among the top three challenges during wartime, according to businesses. However, 51% of the respondents agree that insurance by international companies (DFC/MIGA, etc.) against capital loss risks during wartime and post-war periods will incentivize investments in mineral resources.

In the field of subsoil use, the regulatory environment is considered satisfactory by most enterprises, specifically 63%, and 11% rate it as fine. However, 26% find it unsatisfactory. Entrepreneurs have rated the reform of the mineral resource utilization sector at 6.26 on a 10-point scale. At the same time, a high-quality regulatory environment, property rights protection, and foreign investments could already stimulate the development of the sector.

The full-scale invasion of Russia into Ukraine has impacted the economic activities of most companies. Specifically, the operations of 54% of companies were temporarily stopped but have since been fully or partially restored, while the activities of 18% of companies remain completely stopped. Only 28% of the respondents have not felt the impact of the combat actions.

Since February 24, 2022, the revenues of only 16% of companies have remained unchanged; all others have experienced a decline in income. In particular, 42% reported a decrease of up to 50% in their revenues, 13% reported a decrease of 50-75%, and 29% reported a decrease of over 75%.

Some 13% of businesses have reported damage to their subsoil objects since the start of the full-scale invasion, and 18% have assets located in occupied or de-occupied territories. Additionally, 23% of companies plan to seek compensation for the damage inflicted on their assets.

According to the EBA experts, the following incentives are believed to help businesses recover in the post-war reconstruction period: a special taxation regime for subsoil users who resume their activities in the de-occupied territories; the preferential tax rate for producers of construction raw materials; the preferential tax rate for subsoil users who extract oil/gas.

"The resource potential of Ukraine and the industry′s prospects are extremely significant. We can see that companies are willing to invest and contribute to its further development even during times of war. It is crucial to maintain consistent efforts to improve the regulatory environment and working conditions for companies already present in the market, support them in overcoming the consequences of military actions, and demonstrate the potential of Ukrainian mineral resources to new investors. Equally important is a constructive dialogue with the authorities to enhance the investment climate," Svitlana Mykhailovska, EBA Deputy Director, said.

According to Dmytro Kaschuk, Head of the EBA Subsoil Use Committee, Director of Business Development at the Geological Investment Group, the launch and implementation of the subsoil use reform have fundamentally changed the perspective on conducting extractive business, making the market more transparent and attractive for international investments.

The survey Subsoil use in the context of industry reform and development prospects was conducted by the European Business Association for the first time in 2023. The survey took place from July 25 to August 29. Some 39 member companies engaged in subsoil use participated in the survey.