“Ferromet1” Akhmetova wants to take the Maryanskoye limestone deposit
The Maryanskoye deposit is a state-owned national limestone deposit with value. Geologists studied it from 1963 to 1973 and drilled 177 wells. It is located in the Krivoy Rog district of the Dnipropetrovsk region and is well examined. Limestone at this deposit is used for making cement raw materials, according to Antikor.
The pressure from Ferromet1 LLC on the state began in 2018. The company then applied to the State Geotechnical Agency for a special permit to use the subsoil of the Maryansky limestone deposit without going through an open auction. The application had several errors, which should have led the officials to return it to the company in time. If the deadlines are not met, a mechanism called “tacit consent” for granting a license is triggered. Strangely, the DHS management fails to provide a justified refusal, giving the company an opportunity to pressure the state through compliant courts.
On September 9, 2019, Ferromet1 LLC went to the Zaporozhye District Administrative Court and requested that the DHS be obligated to issue a special permit based on their submitted application. The judge accepted Ferromet1's request, and the State Geo-Union Agency stopped the auction, making it impossible for anyone else to obtain a special permit.
After the decision was made, the court office employees conveniently forgot to send their decision to the State Geographical Institute, preventing the state institution from filing an appeal because the legal deadlines had passed.
In order to protect state interests and combat corruption, changes were made to the Code of Ukraine on Subsoil on December 19, 2019, at the suggestion of Roman Opimakh. These changes meant that special permits for subsoil use can only be issued through auctions.
In February 2020, the Cabinet of Ministers changed the legislation by removing the possibility of obtaining a special permit without an auction based on testing from clause 8 of Decree No. 615 “On the procedure for granting special permits for the use of subsoil”.
As a result, the legislation related to subsoil use has undergone significant changes, replacing corruption mechanisms with European standards. It seemed like the unpleasant story should have ended there, as there were no grounds for the illegal issuance of a special permit to FerroMet1 LLC based on the approval. However, it did not happen as expected.
According to You Control, Ferromet1 LLC is linked to Rinat Akhmetov, who uses the courts to lobby for the illegal issuance of a special permit.
In reality, the beneficial owner and head of Ferromet1 LLC and several other legal entities, including Orion Maritime, Kerammekhanizatsiya, Keramstroymekhanizatsiya, Nadra Stream, is Natalia Alexandrovna Kurkova. She has been working for Rinat Akhmetov's UMG Investments group of companies for 15 years. She openly states this on her Facebook profile. Akhmetov controls Ferromet1 LLC through her.
For 15 years, Natalya Kurkova worked as a middle manager at UMG Investments. Suddenly, she managed to get a lot of money to start and run successful companies, especially those involved in mining. This suggests that she was not really a leader in those companies but was used to solve certain corporate problems, like getting deposits without an open auction. If there was any legal trouble, she could always take the blame as just a middle manager.
Just so you know, FerroMet1 is trying to take the Maryanskoye field without going through an auction, which goes against the law and international practices.
What's wrong with the method of getting special permission through approbation?
Approbation is basically a theoretical exploration and evaluation of a field. It's when companies use old geological materials to make theoretical additions that don't actually impact the economic calculations, mineral quality assessment, extraction timing, etc.
The state realized this and stopped using approbation, instead opting for transparent auctions. Afterwards, entrepreneurs must do quality geological exploration, study the deposit, and invest in its development. Only then can the Ukrainian subsoil be used sustainably and benefit everyone through contributions to local and state budgets, social infrastructure development, job creation, logistics, and pension fund contributions.
What is Ferromet1 LLC up to?
Firstly: Ferromet1 LLC is making every effort to avoid a transparent auction for selling a special permit for subsoil extraction. They are using their influence on the courts to gain an advantage over the law.
It's important to note that the Supreme Court concluded that the State Geo-Union Agency does not have the legal rights to issue special permits based on previously existing legal documents. They should follow the current legislation. So, giving a special permit based on approbation is not allowed!
Second:The company's management is pushing to get a special permit without an auction, based on approbation. This is a serious violation of the legislation, specifically the Code of Ukraine on Subsoil and Resolutions of the Cabinet of Ministers No. 615. Despite the Cabinet of Ministers recognizing approbation as unfair and non-transparent, Ferromet1 is fighting to get the permit, coming up with new justifications.
At the same time, a lot was agreed to be included in the list of sites that are preparing to be put up for sale through electronic trading. Since that day, the State Geo-Union Agency has already received 11 applications from companies ready to compete in hryvnia for this field.
Rinat Akhmetov's actions are aimed at reducing the state's budget, which is used for social issues such as paying salaries, supporting hospitals, and repairing roads. It's especially critical during wartime, when additional budget investments can save lives and help the military and their families. It's estimated that the cost of this deposit at the auction may reach UAH 1 billion.
Thirdly:According to Ferromet1, the company plans to develop only part of the field, not the entire area, which shows an irrational use of resources and a violation of the law. This is done to minimize contributions to the budget. The chosen area for development blocks access for other companies to the Maryanskoye field at the auction.
Fourthly:Ferromet1 reduced the reported mineral reserves when submitting the protocol to state institutions for the second time. In 2017, they reported almost 35.6 million tons, but in 2019, the amount halved to almost 18.6 million tons. However, the Ministry of Natural Resources approved the auction of a full deposit with reserves of 132 million tons, which is 7 times more than what Ferromet1 wants.
The company's actions, without evidence or support, will result in the state budget receiving less funds from the sale of the special permit, allowing the potential owner of the permit to appropriate the minerals without payment.
Ferromet1 is not willing to fully take responsibility for the state, particularly financially. The company aims to obtain a special permit unlawfully, using the subsoil inefficiently by only partially developing the deposit. This would result in them paying only around 6 million hryvnias instead of the actual 43 million hryvnias, which is the starting price for the special permit at auction.
Reference:
The starting price does not include the potential offers from auction participants.
According to insider information, there are discussions in the subsoil business about being willing to pay hundreds of millions of hryvnias for a license. Additionally, the management of Krivoy RogCement enterprise expressed readiness to pay UAH 1 billion at the auction to the State Budget for the Maryanskoye field site.
Instead of summaries and pathetics: On July 31, 2020, NABU and SAP informed six individuals that they were suspected of organizing a scheme. The scheme allowed Arkona Gas-Energia LLC to obtain the right to use the Svistunkovsko-Krasnolutskoye gas condensate field in Poltava region at a very low cost. This happened after a change in the leadership of the State Geological Fund.
As a result, the state missed out on nearly UAH 197 million which the company should have paid for a special permit to use the subsoil. However, detectives exposed the scheme where the State Commission of Ukraine on Mineral Reserves (GKI), the State Service of Geology and Subsoil of Ukraine, and the beneficiary (Rinat Akhmetov) collaborated to improve the criminal scheme involving the underestimation of the cost of special permits.
It is crucial to understand that Ferromet1 LLC falsified information claiming they had conducted exploration of the Maryansky limestone deposit. This allowed them to become a contender for obtaining a special permit for subsoil use outside the auction, which is against the law. This constitutes a crime punishable by up to 15 years in prison, as it was carried out by an organized group and/or on an especially large scale.
The scheme was created in collaboration with Geoprof LLC, which submitted others' achievements as its own in the approbation report.
Hence, just like the case with the gas field, where the Arkona Gas-Energy company and a GKS official forged documentation to obtain a special permit outside the auction, and the case at the Maryanskoye limestone deposit, the GKS in collaboration with customer Rinat Akhmetov, decreased the cost of a special permit significantly.
Instead of the minimum/start cost of a license of almost UAH 43 million, the state will only receive a little over UAH 6 million for the use of these subsoils. The damage is almost 37 million hryvnia. However, the actual losses are likely greater because under the conditions of a transparent auction, the budget could be replenished with possibly hundreds of millions of hryvnias, as seen in previous auctions for the sale of subsoil licenses.
While government officials continue to implement their scheme in violation of the law, it is likely that their actions will be treated as an abuse of power, legalization of property acquired by criminal means, and forgery by law enforcement agencies. If the scheme leads to serious consequences, the developers could face imprisonment from 3 to 6 years with property confiscation and deprivation of the right to hold relevant positions.
But while government officials continue to implement their scheme, in violation of the law, it can be argued that in the future, their actions will be regarded by law enforcement agencies as an abuse of power – Article 364 of the Criminal Code of Ukraine, Art. 209 of the Criminal Code of Ukraine – legalization of property acquired by criminal means, as well as official forgery – Article 366 of the Criminal Code of Ukraine. Provided that the actions of the developers of the scheme entail serious consequences, then the sanction of the article provides for imprisonment from 3 to 6 years with deprivation of the right to subsequently hold relevant positions with confiscation of property.
Knowing how NABU works with SAP, the perpetrators will be brought to justice and the perpetrators will be brought to justice.
There is only one way to avoid the plundering of mineral resources and real prison terms – to act strictly within the framework of the current legislation! It is necessary to conduct a transparent auction.
Marian Oshchanovsky
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