In accordance with the provisions of Article 16 of the Subsoil Code of Ukraine, a special permit for subsoil use is granted based on the results of an auction (electronic bidding), and, if there are grounds specified in part one of Article 16-2 of this Code, without an auction (electronic bidding).
A special permit for subsoil use under a production sharing agreement (PSA) is issued on the basis of a production sharing agreement.
In other words, in most cases, a special permit for subsoil use can be obtained only after winning an auction (electronic bidding).
Currently, all auctions (electronic bidding) for the sale of special permits for subsoil use are conducted through electronic bidding.
The subsoil user’s investment atlas is a kind of catalog of mineral deposits prepared by the State Service of Geology and Mineral Resources of Ukraine (Derzhgeonadra) for electronic auction and information about which is posted on its official website.
At the same time, it is possible to nominate a site for an auction that has been prepared using in-house resources or to initiate an auction in accordance with the subsoil user’s investment atlas.
If you are the auction nominee, it is obvious that such a study has already been conducted. If you are not the nominee, or if you are initiating an auction for a mineral plot from the investment atlas, then the study is mandatory.
The reason is actually very simple, as the acquisition of a subsoil use object at an auction without prior research may well have unpredictable consequences. Given that the auction announcement usually does not allow for a clear definition of all the essential qualities of the object of purchase. Thus, the announcement describes the positive qualities of the object, while the negative ones are often silenced. In some cases, it is precisely because of the negative parameters of the object that it is impossible to fully exercise the right to use subsoil for which the full market price was paid. A striking example is when the land is privately owned. In this case, it is almost impossible to reach an agreement with its owners. In fact, there are many such nuances, but each case is individual and requires a separate study.
Given that for almost all minerals (except oil, natural gas, condensate), the auction is held 20 calendar days after the date of the auction announcement, without sufficient information about the object and special knowledge and experience, it is impossible to conduct a qualitative study, and without research, participation and winning the auction is risky.
Auction procedure for the sale of special permits
Once an auction for a particular subsoil plot is announced, a person intending to participate in it must register as an auction participant.
First, you need to choose one of the authorized electronic platforms. Despite the fact that there are about 40 of them in the list, about 10 have sufficient experience in participating in auctions for the sale of special permits for the sale of special permits for subsoil use.
After that, you need to register on such a platform. Please note that such registration has its own specifics at each site.
After registering at the site, you need to contact the site manager and inform him or her of your intention to participate in the auction for the sale of a special permit for subsoil use. Given that the legislation does not establish the form of documents to be submitted for registration of participation in the auction for the sale of special permits for subsoil use, the manager should help determine the scope and content of the required documents, as well as the procedure for their submission. Although the law does not specify the list and form of documents to be submitted by a potential bidder, their content, i.e. the list of information to be provided by the bidder, is exhaustive. Often, taking advantage of the ignorance of inexperienced potential bidders, platforms often request documents that are not required by the Procedure. Therefore, without experience working with platforms, registration as an auction participant can become a serious problem.
Before or after submitting the required documents, a guarantee fee must be paid, however, no later than the deadline for accepting bids for participation in the auction. In any case, the status of an auction participant can be acquired only after the platform receives confirmation of the guarantee fee crediting.
After the platform accepts the required documents and receives confirmation of the deposit credit, the platform shall allow the applicant to participate in the auction.
How to win a permit auction?
Obviously, registering for an auction does not mean winning it. To win an auction, you need to develop the right participation strategy.
Important to consider:
-
The strategy should be developed even before registration, because the initial price offer is an element of it and affects the victory.
-
A strategy is a kind of action plan in different possible scenarios that allows you to achieve your goal.
-
The strategy should take into account the market for a particular mineral, potential competition, access to land, and many other things.
-
The more thorough the market research is, the better the strategy will be, and a high-quality strategy increases the chances of achieving the desired result many times over.
-
If you have a good strategy, you can win the auction even with limited resources.
What happens after winning the permit auction?
After winning the auction, a number of documents are signed and the difference between the amount offered by the winner and the amount of the guarantee fee, as well as other payments, are made. This whole process takes about a month and is clearly regulated by the Procedure.
It is important to note that failure to meet the deadlines may be grounds for depriving the winner of the right to obtain a special permit for subsoil use. The licensing authority has repeatedly used this power.
What to do after receiving a permit based on the results of the auction?
The first step in becoming a subsoil user is the state registration of works and studies related to geological exploration of subsoil (hereinafter referred to as the “RSGS”), which is an official certificate of the expediency of certain types and volumes of work aimed at increasing the completeness of geological, hydrogeological, engineering geological, geophysical, environmental geological and geochemical study of subsoil.
After that, the holder of a special permit for subsoil use must develop a plan for the effective exercise of the right to use subsoil, as full-scale mining requires obtaining a number of other related permits and approvals of project documents, which will take time and additional resources.
How we will help?
- We have extensive experience in participating in and winning electronic auctions for the sale of special permits for subsoil use.
- We will help you initiate an auction or nominate a subsoil plot for an auction.
- Our team will check the subsoil plot to be auctioned for geological, environmental restrictions and risks.
We know the formula for winning an auction. We understand how to properly prepare for the auction in order to win and acquire the right to obtain a special permit for subsoil use.
