Source: EnergoBusiness Magazine, No. 51 (1244) from 21.12.2021
Author of the article: Dmytro Sydorov
State Enterprise “Eastern Mining and Processing Plant” (SkhidGZK), a member of the Ukrainian Nuclear Forum Association, is the only company in Ukraine that mines natural uranium and produces uranium oxide concentrate. SkhidGZK is among the top ten of the 28 uranium mining centers globally and is the largest in Europe. Established in 1951, the plant is a member of the World Nuclear Association.
Today, the plant faces several challenges, including the development of the Novokostiantynivska mine. The enterprise is also taking steps to improve its overall operational and financial performance. Below is an interview with Serhiy Shovhelia, Head of SkhidGZK, as he discusses the company’s current operations.
— What was the state of the company when you took over in mid-October of this year? What were its production and financial indicators?
— Frankly speaking, I took over the enterprise in a challenging production and financial situation. Production targets were not met, there were delays in salary payments, and the company had massive outstanding debts, including to our strategic partner, “NAEK Energoatom.” In numbers, SkhidGZK’s performance in the first nine months of 2021 was as follows: uranium concentrate production was almost halved compared to the same period last year, losses reached 934 million UAH, outstanding debts tottaled 2.278 billion UAH, and salary payments were delayed by nearly a month. It took considerable effort and time to begin addressing these issues.
— What steps do you plan to take to improve the financial and production performance of the company?
— First and foremost, we need to stabilise the company’s operations. This involves ensuring the stable operation of the main production units (the mines and the uranium processing plant), increasing uranium concentrate production, and fulfilling our supply obligations to Energoatom. Beyond addressing these immediate tasks, we must also focus on strategic directions, such as developing the promising Novokostiantynivska mine to exploit Ukraine’s and Europe’s largest uranium deposit; constructing a new sulfuric acid plant to meet uranium processing needs; and implementing a plan to decommission the Smolinska mine, which has nearly exhausted the Vatutin deposit.
— Do you plan to improve the company’s procurement process?
— Yes. A new budget formation regulation for the company has recently been introduced. Measures are being taken to improve contract management, and a working group has been created to develop procedures for preparing and executing contracts in specific areas. Certain managers and specialists are now held more accountable for ensuring timely and efficient procurement processes and contract execution for necessary materials and equipment. For example, in the fourth quarter, we successfully completed a tender to acquire essential mining equipment, fully utilizing our budget and equipping the Novokostiantynivska mine. Throughout the year, this issue remained unresolved for unclear reasons, with a real risk of losing budget funds.
— Has the company renewed its contract with Energoatom for uranium oxide concentrate supply under your leadership?
— Currently, we are preparing a new supplementary agreement with Energoatom for 2022. It includes a nearly 14% price increase for the concentrate, in line with global uranium price trends. Increasing uranium concentrate production remains SkhidGZK’s key task. We have also reached an agreement with Energoatom’s management to restructure our debt for uranium concentrate deliveries over several years, allowing the plant to gradually pay off its debt to the company.
— What is the current volume and value of undelivered uranium concentrate for Energoatom?
— As of October 1, 2021, SkhidGZK’s debt to the generating company was substantial, totaling 409 tons of concentrate worth 1.429 billion UAH. It is clear that the plant cannot repay such a significant debt without some understanding and support from Energoatom.
— What investments does the company currently require, particularly for the Inhulska and Smolinska mines, the hydrometallurgical plant, and the Novokostiantynivska mine development project?
— The main investment project that needs to be realised is the development of the Novokostiantynivska mine. The total cost of the mining project, designed to achieve a capacity of 1,500 thousand tons of uranium ore per year, is 6.5 billion UAH. Additionally, the construction of a new sulfuric acid plant at the hydrometallurgical facility is necessary, as uranium concentrate production requires substantial sulfuric acid. The estimated cost of a modern sulfuric acid facility is up to 1.5 billion UAH.
— By how much do we need to increase uranium ore extraction and the shaft capacity at Novokostiantynivska mine to reach target indicators?
— Indeed, the extraction capacity at Novokostiantynivska is significantly constrained by shaft lifting capabilities. The previously developed project for Novokostiantynivska envisions an increase in uranium production nearly fourfold from current levels to meet Ukraine’s nuclear energy requirements fully.
— What equipment needs to be acquired for the Novokostiantynivska mine’s development, and when can we expect the first ore extraction after installation?
— The Novokostiantynivska mine has been extracting uranium ore in pilot-industrial mode since 2011, with annual uranium extraction currently limited to 400 tons. To fully meet Energoatom’s natural uranium needs, we must increase uranium extraction at the mine.
— How many additional reserves could potentially be mined through the Novokostiantynivska project, and what is their estimated production cost?
— According to the previously developed project, production is expected to reach 1,500 tons of uranium. Given the significant reserves and high-quality uranium ore at the deposit, nearly 80% of reserves fall into the price category below $80/kg, while the remaining reserves are priced up to $130/kg. However, to access these reserves, the full development project must be implemented, requiring substantial mining and capital investments.
— What is the remaining reserve at the Inhulska and Smolinska mines, and when are these mines expected to close?
— The deposits currently mined by these sites are largely depleted, especially the Vatutin deposit at the Smolinska mine, leading to a high production cost for uranium from these ores. The government program proposes decommissioning the Smolinska mine in 2023 and the Inhulska mine by 2027. By then, we must increase uranium extraction at Novokostiantynivska.
— Does the company plan to obtain new special permits from Ukraine’s State Geological Service for uranium exploration and mining?
— SkhidGZK currently holds the necessary permits for mining at active deposits. However, the State Program for the development of the nuclear-industrial complex until 2026 includes the development of the Aprilivka deposit alongside Novokostiantynivska.
