UMCC privatization - is a cleaning of corruption

Acting Head of the Management Board of JSC "United Mining and Chemical Company" Peter Davis in an interview with "RBC-Ukraine" outlined his vision of development and prospects of the company.

“The privatization process is carried out and managed by the State Property Fund, as the authorized body of the state - the single shareholder of UMCC. Yes, the company is profitable, but we have to look to the future. There are several reasons for privatization. First of all, it is the necessity to develop new areas at both MPP (mining and processing plant), including exploration, geological and geodetic works. Stocks, which were developed since the early 60's of last century, are gradually running out. Large-scale exploration work on new sites requires large financial resources. They are quite difficult to implement within a state-owned company. Therefore, from an economic point of view, attracting a large profile investor is a matter of survival for the company. In addition, privatization is also a cleaning of corruption schemes. But the main reason is the inflexibility of the system of state management of companies: to approve a financial plan or investment program, it is necessary to get an approvement from several ministries and the Cabinet of Ministers. At the same time, as I said, there are geological risks in the UMCC, and in order to solve them, it is necessary and flexible approach, which is possible only in private business. It turns out that the State Property Fund of Ukraine is the largest holding in Europe. I am convinced that companies such as UMCC can develop more effectively as part of non-state business.

In addition, the titanium business is attractive for investment when it is included in the production chain. As far as I understand, the State Property Fund plans to sell UMCC not just to anyone, but to build it into the chain of the holding, which is already operates in the titanium and zirconium market. In this case, potential investors will be interested in obtaining a resource base for their existing business and build a vertically integrated holding company. At present, UMCC is, in fact, only mines with mining and processing plants at them,” Davis said.

Davis reported that the new UMCC team began to root out company’s corruption schemes, which were organized by the former management. Davis provided an example of stopping the corruption scheme of exporting 20,000 tons of ilmenite concentrate through the Odessa Sea Trade Port, which made it impossible for the state to incur losses in the amount of UAH 80 million. The event took place on May 22-23: in cooperation with the State Property Fund, SSU and NABU, the export of products under contracts concluded by the previous management was stopped. The peculiarity of these contracts was that the counterparty was a little-known intermediator firm, which has receivables from UMCC, and the selling price as product was artificially underestimated.

“On May 16, I signed an order that did not allow UMCC to ship our products to reseller companies. However, 20,000 tons of ilmenite concentrate from the Odessa Sea Trade Port was going to be exported by an offshore intermediary company, which has outstanding receivables from the UMCC of about UAH 400 million. Thanks to the coordinated and clear actions of the company's management, the State Property Fund, NABU and the SSU, this shipment was disrupted, and the state did not incur losses of about UAH 80 million.

According to my information, when the former management of the UMCC realized that the State Property Fund took firm steps and there would be a change of management, MPP was given an unofficial instruction that all products have to be stored on trading platforms and exported abroad. It was done with one goal - to export outside Ukraine as many products as possible at reduced prices, and then to sell it through offshore structures, and put all the profits in their own pocket.

Moreover, most often the products to such dubious companies were shipped at a price of $ 150. per ton. When I first heard about it at the Irshansk MPP, I was just amazed. Although, the market price even during the quarantine period was 220-240 dollars. per ton. Not only that they take our concentrate at a reduced price, but they also use a 130-160-day stay of payment, creating difficulties with the salaries and other payments. That is why, it was a completely artificial situation,” Davis noted.

In Davis’s opinion, the resumption of shipments will take place after the elimination of the influence of the former management of the UMCC on the company: “Now we are completing the process of final elimination of the influence of the former management of the UMCC on the operating company activities. Upon its completion, the shipment of products will be resumed immediately, and its suspension will not affect the work of Irshansk and Vilnohirsk Plants, as well as on the salaries payment - they are paid stably and in full.”

Recall that advisers on UMCC privatization are BDO, KPMG and Baker McKenzie. Both foreign and domestic investors are interested in UMCC.

* All information on the UMCC activities will be temporarily published on the official website of the State Property Fund of Ukraine, as access to the company's website and the official Facebook page of the UMCC has been blocked by the former management.