LEGAL AMBER; FOR THE FIRST TIME, A PRIVATE COMPANY WILL LEGALLY EXTRACT “SUN STONE”

Віктор Коц

Ukraine is one of the leaders in amber deposits in the world. However, 95% of amber extraction stays in the shadow economy. Cautiously estimated, “black artisan miners” wash amber out from the interior of the earth to the tune of more than 30 million dollars annually. The state does not receive a kopeck from this. Numerous attempts to bring the amber business into the legal framework have almost always run aground. The robust bureaucratic wall of prosecutors, judges and other top officials and criminals stood in the way of private owners, who wanted to get a license for extraction. However, a precedent has recently occurred in the Zhytomyr Region. A company with foreign investments “Wright Solution” is still beginning lawful extraction from two local amber deposits. Of course, this was preceded by three-year judicial battles, culminating in the Supreme Court, and almost detective stories with the special operations carried out by the anti-corruption agency NABU and exposing corrupt people’s deputies. Viktor Kots, the Director of “Wright Solution”, LLC, has told us what it takes to be a pioneer in the legal amber business in Ukraine.

– Company “Right Solution” is actually one of the flagships among private companies of civilized amber mining in Ukraine. Tell us about the creation of your company and how you have come to this market.

– Our Company was founded in 2015 in the Town of Ovruch of the Zhytomyr Region. Now our office is in Olevsk. Today, Right Solution has three special permits for geological study and research-and-commercial development of amber deposits in the northern regions of the Zhytomyr Region in an area of ​​over 5.5 thousand hectares. However, in fact, we shall work within a much smaller area of 25-30 hectares. In the Zhytomyr Region, there has been no civilized extraction of amber at all. It all has had an illegal spontaneous nature. It was necessary to put an end to this! We decided to work legally, because it means both jobs and the revenue to the state budget and, ultimately, new environmental standards.

Today, Olevsk is a united territorial community (UTC). If all local businesses continue to stay in the shadow economy, then what will our community live of: our schools, kindergartens, hospitals? So we embarked upon this path. We submitted the necessary documents for obtaining a license, and in 2016 the State Service of Geology and Surface Resources issued to us these special permits. Now, we have all the necessary documents to get started. We got the project executed and geological prospecting carried out; we have bought the appropriate equipment.

– The reference information states that Right Solution is a company with foreign investments.

– Yes, among the founders, one company is foreign and one is from Ukraine.

– Why, having had all the approvals for three years, you cannot start works?

There are people, for whom we have become a thorn in their flesh. These are the persons who wanted to control the shadow segment of the market and blocked roads for us. Boryslav Rosenblatt, a scandalous people’s deputy from the Zhytomyr Region, was in charge of this process. In the Zhytomyr Regional Council, he lobbied an action against us in court. According to him, we had illegally obtained a license, without an auction. This is not true, because we obtained special permits in accordance with the current resolution of the Cabinet of Ministers of Ukraine. Subsequently, NABU carried out a special operation. Agent of the national bureau “Kateryna” gave him over money as if for judicial pressure on competitors, that is on us. According to the record, made by the agent, he confessed that he paid had prosecutors and judges to push us into a corner in courts. All this is recorded. Well, all this had lasted years, until the session of the Supreme Court that passed a decision in our favour.

– What was the purpose pursued by Rosenblatt and whose interests he defended?

– Certainly, he wanted to control the illegal extraction of amber in Olevsk. Maybe, he had partners. I cannot say that.

Why do you think that amber mining in Ukraine is still not brought out of the shadow economy?

–In fact, today, this business is almost entirely in the shadow economy – about 95% of it. First of all, such a state of affairs is beneficial to various officials and law enforcement officers, who are “fed” from the hands of these illegal miners. Why should a company come, which will work legally, pay taxes, and they will not profit from such a situation? Also, the artisanal amber miners themselves do not like such a situation. None of them wants to work legally.

– Why?

– It is due to financial costs and risks, as nobody wants to assume them. It is easier for them to go illegally to work with a “pump” and wash out the stones. And here is the risk of losing money. Also, they would have to buy a licence, invest in equipment, carry out exploration, and in the end, nothing in this area can be found and they would lose money. It’s a lottery.

What does the scheme of patronising in the amber business look like at Olevsk. Who is providing a cover for illegal extraction?

– If we talk about Olevsk, then we have, probably, no scheme as such. Everything looks rather trivial. People from almost every household in the surrounding villages are involved in illegal extraction. They have a “pump”. Here they are organized in crews and they take this pump to the area, and wash out amber with this pump; on their way they, maybe, encounter a police patrol that will simply “sell them tickets”. Then later, they will sell the amber, which they have found, to their customers, and that’s it. It seems to me that the media have somewhat demonized amber business. At least, at Olevsk, this process looks like this. Illegal miners do not earn some cosmic amounts of money: just 10-20 thousand UAH per month, sometimes less. Unfortunately, there is practically no other work for people in our district, so people are engaged in this amber business.

– You mentioned “pumps” used by artisan amber miners. Tell us about these units. And what does the illegal extraction process look like?

– Among the local artisan amber miners, the most popular is the Chinese “pump; also, popular is the pump based on the old Mercedes-Benz diesel engine, as it is more powerful. A crew comes with this pump to a plot and looks for water: it can be a ditch, or a crater with water; the pump gets connected then to water and washes out amber from the ground. If there is amber, water pushes it up, because it is easier than water. Then the mineral is collected by lift nets. Another type of miners are diggers. They work without a pump. They dig pits and are looking for stones without water. There are also those, who simply come with lift nets to already dug holes and try to catch stones, which other amber miners failed to notice. Tiny stones are called “minus”. However, one can come across a kilo stone and even heavier. For such a stone one can get thousands of dollars in the “black market”. It is true that such a treasure happens very rarely, but it does happen. However, this is a primitive technology, which, in addition, causes a lot of damage to the environment and is life-threatening. Also, there are fatal cases, when edges of a crater fall down, a man is dragged into the pit and filled with soil. The stories I have heard relate about many incidents with injuries at Olevsk in the result of illegal artisan mining. I have heard about a few dead fellows, too.

– And how will you work? Tell us about your extraction technology that you plan to implement?

– Right away I would like to emphasize that we shall not develop new maps, cut down the forest, and so on. We shall work in areas that have already been destroyed by illegal artisan amber miners – on their craters and ditches. Here, it’s all about mining technology. By using the “pump”, it is possible to wash out an average of 30 percent of stones, because an artisan miner works spontaneously and has only the amber that gets into the jet of his apparatus. We approached the process from a scientific point of view. We conducted geological exploration in the areas alloted to us: we drilled control wells and took a soil sample. So, we saw where and at what depth the stones were deposited. Besides, the extraction process itself will be different. It will not be of a spontaneous point type, but of a quarry one. We shall dig a small quarry; we shall develop a layer of amber. This will allow extract almost all stones from the site. However, the most important thing is that our work process will involve the complete reclamation of the territory. That is, unlike craters and ditches, left by artisan miners, we shall leave a flat area planted with grass. In fact, we shall landscape the area after what they (editor’s note - illegal miners) have done here. The works will be accepted by a special commission. Afterwards, the forest service will plant a forest there.

– Is, perhaps, special machinery necessary for such a process, which you have described?

– Yes, it is. We bought three Caterpillar excavators and a bulldozer. It is the best machinery in the world for such works. Also, two washing mini-plants were made to our special order. Many factors should be taken into account for proper operation of this machinery: type of soil, volume, and other geological conditions. Therefore, we ordered it for our conditions. The power of this unit is from 300 to 500 cubic meters per shift. Now, we shall additionally order a third such mini-plant. We have installed power line poles to one of the sites and mounted a transformer. At another site, we shall probably work with a powerful diesel generator, because it is rather difficult to connect to the electrical grid there. In general, we plan to process 25-30 hectares in two plots. Also, the protection of the objects will incur a large amount of expenditures. Over the three years that we have been at suit, we have had to spend huge amounts of money for it. They are constantly operating mobile groups of guards who, day and night, have been making rounds and have not allowed illegal miners to enter our territory.

– How many people are you planning to hire?

  • Up to 70 persons will work at the quarry in Zamyslovychi and still so many          in the area at Pravoberezhna. In general, we plan to employ up to 150 persons from the local population. Everyone will work legally. This is about 5 million UAH of annual deductions in the form of taxes for the budget of the Olevsk UTC.
  • – All are interested in amber selling markets. Where to is amber now sold from the shadow market? Where will you legally sell amber?

– I am not an expert in shadow markets of amber. I only have information that is usually available. As for us, currently we are not extracting amber, so I cannot say beforehand. What I know about the “black market” is that virtually all the amber that is now extracted illegally is bought by the Chinese. Also, amber was earlier brought to Poland, but it went from Poland to the Celestial Empire, too. The Chinese have here their buying agents, everything is set up. In China, a certain cult is made of this mineral. Amber is called a “sun stone” over there. Souvenirs, decorations, religious statuettes, even facing decorative tiles are made of it. I have even heard that they put amber under the pillow. Also, large stones are held in high esteem by the rich; after having been faceted by a jeweller, these large stones are given as a gift to the Chinese nobility as a special luxury item. The price depends on both the size and the colour. In particular, I know that our Polissya Olevsk stone, which has a yellowish tinge, is appreciated. As already noted, such stones can be estimated at tens of thousands of dollars. However, over the past few years, the market has fallen substantially. The “sun stone” has fallen in price by almost three times

– With what do you associate this falling price trend?

Apparently with the circumstance that is the market contraband. In China, violations of the law have been of late severely punished, and there is a death penalty, too. Therefore, people engaged in smuggling are under a huge risk. Apparently, that is why the price of the “sun stone” has fallen. There may be some other reasons.

The “black market” is for us, citizens of Olevsk, very disadvantageous, because amber stones are bought from local people for nothing. That’s when amber mining is channeled into a legal framework and amber can be sold legally, I am convinced that the Chinese will buy it more readily, even at a higher price, and our market value will be significantly higher. Everyone will benefit from this: both local communities and our foreign partners.

pROJECTS

RIGHT SOLUTION’S PROJECTS

As a socially responsible enterprise, Right Solution is working on implementation of a number of projects for the development of the Zhytomyr Region.
First of all, it’s infrastructure, construction of the power plant n and creation of jobs. Our company is engaged in geological study with research-and-commercial development of amber subsurface resources, and this will provide up to 180 jobs in the Olevsk District and up to 100 jobs in the Ovruch District.
In the long term, Right Solution means creation of a large industrial enterprise, and hence the continuous growth of employment of the local population by several times, as well as the construction and improvement of roads, the opening of kindergartens and the creation of comfortable living conditions for the inhabitants.

The second important project for the company is land reclamation. The work of illegal amber miners has lead to catastrophic consequences for the flora, fauna and microclimate in the region, which affects the groundwater acidity. There is a list containing 2046 sites requiring reclamation, and among them there are 195 sites within the territory of the Zhytomyr Region. Therefore, Right Solution will work on reclamation of damaged lands. Also, the implementation of this project will stop illegal re-extraction of amber in the re-cultivated areas of the forest.
We, as investors, shall bear responsibility for our work.

INTERNATIONAL ACTIVITY

REPRESENTATIVES OF RIGHT SOLUTION PARTICIPATE IN THE INTERNATIONAL EXHIBITION “AMBER TRIP” AS A PART OF THE UKRAINIAN DELEGATION

Representatives of Right Solution, as part of the Ukrainian delegation, visited exhibition “Amber Trip”, where they held a series of talks with representatives of the European market of amber concerning our “sun stone” supplies this year.

“I would like to appeal to industrial forces in Ukraine not to export our raw materials abroad in a primitive way, but to invite companies that would process it and export it to other countries already in

the form of finished goods”, said Volodymyr Balanda, one of the investors of Right Solution.

“CREATION OF CONDITIONS FOR ATTRACTING INVESTORS INTO THE BRANCH IS THE FIRST LINE CONDITION FOR THE DEVELOPMENT OF OUR COUNTRY”, - INVESTOR RIGHT SOLUTION

Right Solution Company is a project with foreign investments, which received special permits for geological study of amber in the Zhytomyr Region. So you can safely say that Ukraine started to talk about real steps to legalize the amber market for the first time. Volodymyr Balanda, one of the investors of the company, speaks about this, as well as about the work and prospects of the company in the difficult operating environment of the branch.
 

According to the investor, now in Ukraine there is no reliable geological data – the available information is from the times of the Soviet Union. And this is the main problem, because in order to extract something here, investors, first of all, should invest enormous money in the investigation (study) of the interior. And this is an investment that does not make a profit, so companies want to have guarantees that after the investigation they will be able to obtain a permit for extraction as well. However, nobody can guarantee this.

Instead, Right Solution company would like to become one of the first to take such a geological investigation in the Zhytomyr Region. Only later, the company will apply for a license for mining. “At present, we shall conduct a geological study, research-and-commercial development and an expert examination. And this means  labour force and equipment, and most importantly for the state – a reclamation project. As the situation that is now at the amber sites, the Moon landscape that black-diggers have left has devastating consequences for everything: flora, fauna, microclimate, affecting the groundwater acidity. As investors, we shall be responsible for our work. Only after all that, the company will submit documents for obtaining a license for extraction”, - adds Volodymyr Balanda.

The goal of Right Solution is to place Ukraine at a qualitatively different level in the world, the investor emphasizes. Our country should get rid of the reputation of a mere resource extractor or source of raw materials. Amber should become the brand of Ukraine on the world market. And creating conditions for attracting investors to the industry branch is a prerequisite for the development of our country and the formation of its positive image. The company plans a full cycle of production: from geological prospecting to ready-made products. It intends to enter the market with a number of social investments: they are both the infrastructure and the creation of jobs as well as the construction of the road and the installation of a power plant. It means employing about 200 local residents.

In the investor’s opinion, the solution of the amber problem in Ukraine is possible only through legalization and entry into the market of official companies, as it means the creation of a positive image of the country, taxes, infrastructure, social goods, exhibitions, shops, work and attracting funds. “This means the construction of an entire sphere”, underlines Volodymyr Balanda.