Quartz Non-Metallic Mines Quarry

Lot: Unified mining complex of the State Enterprise Quartz Druzhbivsky Non-Metallic Mines Quarry.

It is put up for auction for the first time, with a starting price of 4,842,667.00 UAH (VAT excluded). The final sale price will be VAT inclusive.

(!): The actual price is 2.82 million UAH more due to outstanding liabilities with payrolls.

The seller of this auction is the Regional Division of the State Property Fund in Rivne and Zhytomyr Oblasts.

Short summary

This is one of the most exciting privatisations this year. Located in the picturesque Zhytomyr Oblast, it is an abandoned mine complex for 40-80%, but with outstanding debts and additional conditions. With a right licence and lease agreement on a 128 ha plot, the new owner can restore production and mine gravel or sand here. In terms of international programmes to revive Ukraine's economy, this object looks rather attractive.

Also unique location by a lake offers potential to open up tourism infrastructure with recreational centres, water attractions and diving facilities in prospect.

Business entity: YeDRPOU (Unified State Register of Enterprises and Organisations of Ukraine) code 07624867, not under liquidation process.

Address: 1 Myru Street, Druzhba village, Korosten Rayon, Zhytomyr Oblast.

Current trade debtors: 10.8 million UAH

Overdue accounts payable: 2.8 million UAH

Tax liabilities, as of 01.01.2022: 1,787,230.54 UAH

Main activities of the plant: 08.12 Production of sand, gravel, clay and kaolin

Financial statements

Indicators (UAHthsd)	2020	2021	2022
Assets (Form No.1, row 1300)	16205	7652	7618
Total income	82	-	-
Total expenses, including:	-	-95	-290
Net profit (loss) +,-	-65	-95	-290

What is for sale:

• The large facility of the State Enterprise Quartz Druzhbivsky Non-Metallic Minerals Quarry in Zhytomyr Oblast, 24 units of real estate, with a total area of 9,210.9 sq. metres. Full description of buildings.
• Quarry’s 4th horizon (rock permanent working)

Technical state: The complex is mainly industrial and warehouse buildings, is in poor condition and requires capital repairs (physical wear is 41–80%).

The state of load-bearing structural elements is disastrous. They are not used for their intended purpose.

On the balance sheet of the enterprise there are objects that are not subject to privatisation, namely: the haul road to the village of Rudnia-Radovelska 6.1 km (3.4 km asphalt, 2.7 km gravel)

Additional conditions: The buyer is obliged to obtain permission from the Antimonopoly Committee of Ukraine to directly or indirectly purchase ownership of assets in the form of a unified asset complex.

Land: 128.7467 hectares of area. No cadastral number of land plots and restrictions on their use. Information on the specified land plot was not inserted into the State Land Cadastre. The form of ownership of the land is state-owned. State act on the right to permanent use of the land plot series YaYa No. 076367 from 18.11.2005.

The target purpose of the land plot: For production of non-ferrous building materials.

Status of the land: Buildings are located on lands granted in permanent use (State Act for granting a right for permanent use of land plot Series YaYa No. 076367 from 18.11.2005).

Typically, the rights to permanent use of land belong to state or municipal organisations and enterprises. Upon resale, the right to permanent use of land is not transferred and the land must be leased separately.

Obligations. According to the Law of Ukraine "On Privatisation of State and Municipal Property", the buyer becomes the successor of all property rights and obligations of an enterprise, except for the right to permanent use of a land plot.

Under privatisation conditions, it is prohibited to dismiss employees within 6 months, also the auction winner will be obliged to pay off debts of the enterprise – 2.82 million UAH.

The lot history. The Druzhbivsky Quarry Quartz was founded in 1948 to provide the military industry with building materials, so the military supervised the quarry for a long time. Previously, even its official name was the State Enterprise of the Ministry of Defense of Ukraine – Druzhbivsky Quarry Quartz, but in 2020 it passed into the State Property Fund’s ownership, so they removed the Ministry prefix.

Near the quarry is located a virtually destroyed factory that is part of the enterprise. There they processed granite into gravel. According to various registers, the enterprise has not done any activities since 2015.

In Soviet times, a settlement called Druzhba was specially built for employees and managers of the company, becoming a town-type settlement in 1961.

Currently, the quarry is flooded and serves as a place for rest and relaxation, that is mentioned by many travel websites about trips around Ukraine.

The Druzhbivsky Quarry along with the plant occupies an huge area of approximately 128 hectares. There are clean water of turquoise colour, high rocks overgrown with forest and artificial white hills from which there is descent to beaches. Reviews from visitors can be found here.

Visitors to the quarry have already managed to give it another name – Pamukkale of Zhytomyr.

Also 15 km away from the quarry is located the geological reserve Kaminne Selo (Rudnia-Zamyslovitska), which is considered a real wonder of nature.

Analysis by Mind

Advantages

• The Quartz quarry covers an area of over 9 thousand sq. metres and 128 hectares.
• With the appropriate licence and lease rights for a large land plot, the new owner can resume production and extract gravel and sand.
• In the future, after victory or even before it, Ukraine is expecting a new large construction to be financed by countries of Europe and the world. It is planned to allocate $350 billion for restoration of damaged objects and construction of new facilities in 2023–25 years. Taking this into account, the market for building materials necessary for restoration looks very attractive.
• Due to the unique features of the locality and Quartz quarry’s stunning views on the lake, it is possible to create tourist infrastructure. Potential visitors can be tourists, lovers of water sports and divers.
• The place is already known, and even without infrastructure has a significant demand among tourists from all over Ukraine marked with high ratings from visitors on many tourist sites. Canyon as a place for recreation has not lost its popularity even during war times. According to local media reports, “people continue travelling to Pamukkale of Zhytomyr despite restrictions on visiting forests. Brave tourists are not deterred by bans. People go there to see with their own eyes autumn landscapes, quartzite mountains, fiery forests and the lake”.
• Quite convenient location from the point of logistics – close to Highway M-07 Kyiv – Kovel – Yagodyn. The last section towards Druzhba settlement are asphalt and gravel roads.
• Quartz is one of the largest quarries in Ukraine.

Problems

• For doing business on the facility, a licence and land lease registration are required. The building complex is predominantly industrial and warehouse functions and is in poor condition, requiring capital repairs (wear and tear 41–80%).
• The state of supporting framework elements is disastrous. They are not used according to their functional purpose.
• The plant has been closed since 2015, which creates obvious problems in organising production. On its balance sheet there are objects that cannot be privatised. According to its technical passport, some immovable property areas do not correspond to the areas recorded in the Register of Ownership Rights to Real Estate, due to damage and deterioration over time since registration (2011).
• Privatisation conditions prohibit staff layoffs for 6 months.
• The auction winner will be required to pay off the company's debts – 2.82 million UAH.
• The buyer must obtain permission from the Antimonopoly Committee of Ukraine for direct or indirect acquisition of assets in the form of an integrated asset complex.
• Privatisation and construction of the complex can cause social unrest due to the possibility of lost or complicated access to water for citizens, which should be taken into account when developing investment plans.