Why the Only Gold Mine in Ukraine Was Given to Americans

Translated by Ollie Richardson & Angelina Siard



The only gold mine in Ukraine was handed over to an American company. Avellana Gold promises to invest $100 million into the field in Transcarpathia in the village of Muzhiyevo, 15 kilometers from the Hungarian border. Such a message was announced the other day by Gosgeokadastr.

In the ore, besides gold, there are heavy metals – lead and zinc, which also have their value.

But local residents and ecologists are afraid that the starting of the mines will poison them, and investors promise villagers work and promise to protect nature.

“I held gold in my hands”

Experts estimate that the gold deposits are approximately 50 tons, and there is one million tons of zinc and lead. In the money equivalent – it is almost $3.8 billion. From local ore the highest grade gold is mined – 999.9.

The place is called sacred. Since the 18th century in Muzhiyevo German colonists from Saxony tried to extract gold, which is visible in the ancient underground “holes”.

But mining production started already at the time of “independence”, with the help of western investors.

Former President Leonid Kravchuk was somehow praised abroad for the fact that Ukraine will become the leader in gold mining in Europe, producing 4-5 tons per year. This is a lot, as in all Europe no more than 15 tons per year are extracted. Experts, however, were skeptical about Kravchuk’s words.

And it’s not for nothing – over the last 20 years in Muzhiyevo only 800 kg of gold was extracted. Although the locals claim that the real volumes of production were hidden.

“Officially it is said that from tons of ore only a couple of grams of gold were received. And it actually happened that for half a year a kilogram of gold was chosen from a ton. I held this gold in my hand every day,” said a local who worked at the mine at the time.

I.e., roughly speaking, there was a lot of unaccounted gold, which later was quietly sold.

Fight for a vein between Americans

The mine started to work in the late 90’s. At the time the Americans invested in it, but it was another company – Cengart Financial Inc. They created the JSC Zakarpatpolimetally enterprise together with the State and for some years invested $4 million in Muzhiyevo.

But production went not as planned. A fight began for control over a pot of gold.

In 2006 the field went out of business, having left half-ruined surfaces of mines, poisoned waters and earth, mountains of dead rock, and kilometers of dug adits in the picturesque mountain.

“The enterprise went out of business because of old equipment. In the 90’s they simply wanted to show the world that in Ukraine there is gold, and quickly brought all the old junk that there was,” said Nikolay Gozhik – geologist and the former chief engineer of “Zakarpatpolimetalla”.

In 2012 permission to mine gold in Muzhiyevo was obtained by the private “Carpathian ore company”, which was owned by a Donetsk businessman, and which was connected to Vitaly Zakharchenko – the Interior Minister at the time of Yanukovych.

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After Maidan, in 2014, the gold mine was returned to the State. But the “Carpathian ore company” in the same 2014 in commercial court won the gold mine from “Zakarpatpolimetalla”. While there were lawsuits, the mine was plundered.

Past American investors complained that all the equipment had been taken out and the processing plant dismantled.

Another American company – Avellana Gold, which last year bought a gold mine from the “Carpathian ore company”, promises to revive the mine. They want to begin production from next year, so for now preparatory work is conducted.

Avellana Gold is registered in Cyprus and belongs to the American Brian Savage. The businessman owns also Pioneer Management – a private consulting firm on investments in the spheres of natural resources. He has interests in the African Congo and in Far East Russia, where Savage controls extracting companies. Connections with the Russian Federation, and also that fact that his wife is Russian, his competitors consider, allegedly, as some proof of relations between the American and the real owners of the “Carpathian ore company” from Yanukovych’s environment.

The Ukrainian representative office of the firm is headed by Nikolay Gozhik, who was the chief engineer for the previous owners of the mine. On the official site of the investor it is said that the company is engaged in exploration and development of fields in Ukraine and other countries of Eastern Europe.

“The company was founded following the Euromaidan revolution by a group of international investors that perceived the developments in Ukraine as a harbinger of changes at the institutional level that would lead to greater security for investors which would attract the capital needed to recapitalize the mining sector in Ukraine,” it says on the website of the company.

But competitors assure that Avellana Gold is allegedly controlled by the same former minister Zakharchenko.

“Avellana Gold will not invest money in gold mining and polymetallic ores, but only represents the interests of those who tried to earlier gain control of the gold-bearing mineral resources,” stated Dmitry Zaytsev, the representative of the former investor of Cengart Financial, at a press conference in April of this year.

Avellana Gold rejects connections with Yanukovych’s people and complained to the State Office of Public Prosecutor about “information attacks”.

“We all all used to see the hand of Moscow in everything and connections with the former President. But then it turns out that the state voluntarily handed over minerals to Yanukovych’s structures veiled under the Americans,” said to “Strana” a source in the investor company. “After all, the transaction took place under the auspices of Gosgeonedr. And the transfer of mining was facilitated by the young reformer, the deputy minister of economy Maksim Nefedov, the head of the electronic procurement ‘ProZorro'”.

The Americans promise to sell all extracted gold to the National Bank of Ukraine, as is demanded by the law “on the NBU”.

Villagers are afraid of poison, while work was promised to them

Meanwhile in 2,000-people Muzhiyevo there is an ambiguous attitude to the revival of the gold mine.

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Some of the villagers wait so that they will have the opportunity to earn money, and so that it won’t be necessary to go abroad for this purpose. Others are afraid of the impact on health because heavy metals will be lifted from the depths of the mine, which the wind will carry to the district, the poison will enter into the wells and it will poison the land.

“The people are already sick here, and now in general it is the end for us,” complains the local resident Vasily, who asked us not to name him by his surname. “Besides gold, thousands of tons of lead will be extracted. And who will want to live on a lead mine? And furthermore, to come here for vacation. And our region first of all is touristic. Here it is necessary to develop tourism and to grow grapes, and not to dig gold with lead. The Americans will arrive, they will spoil it, and we will be left to live with it”.

At the same time Muzhiyevo residents want it so that the mine is cleaned – from the previous owners there are poisoned production wastes here with zinc, lead, manganese, and cadmium, which together with the rain will flow down to the village.

“When the mine worked, in the middle of the 2000’s, we remained without drinking water. The wells were dirty, the water was rusty, with dark deposits. As it turned out, there was a lot of filth that is hazardous to health. If the mine again operates and something goes wrong, the village will be poisoned,” said worryingly the local resident Erika.

Ecologists confirmed that the poison in the wells can cause incurable diseases in people. “Heavy metals in the water of wells then were many times more than is acceptable according to regulations,” said Yury Bandurovich, the director of the Transcarpathian branch of the Institute of protection of soils of Ukraine. “Cadmium affects the lungs and a liver, and manganese – the nervous system”.

As the Transcarpathian ecologist Genrikh Rozman told “Strana”, analysis showed that in the water from the wells lead was 23 times more than the norm, and cadmium – eightfold. “And at that time there was no large-scale industrial gold mining yet,” said the expert.

According to him, a lot depends on what methods will be used to extract gold. There are ones that are a threat to the environment, but are more profitable (at the output — there is more than gold), and more friendly methods aren’t so profitable.

In neighbouring Romania, near the border with Ukraine, gold was extracted with dangerous technologies.

“In 2000, poison from a Romanian gold mining enterprise entered the River Tisza. It was an environmental disaster that developed into an international scandal. At the time in the rivers hundreds of tons of fish were lost, the water that was drank by 2.5 million people was poisoned,” said Rozman.

The American investors swear that in Transcarpathian there won’t be an environmental disaster. They promise to clean the mine from harmful substances, to work with safe technologies, and to give to villagers the chance to earn more money than in tourism.

“We will use only innovative technologies, which are safe for the environment,” assures the CEO of Avellana Gold Brian Savage. According to him, the field will be able to employ 500 people, and the mine will work for decades.

According to Nikolay Gozhik, the head of the Ukrainian representation of Avellana Gold, the company already supplied filters that will purify the water from harmful metals.

$50 million will be spent to clean the mine and for new equipment – a half of all investments. They plan to receive a return investment after three years of production.

The rural authorities support the project. “There will be money for the development of not only our village, but also the entire area of the region,” considers Vasily Fitsay, the rural leader of Muzhiyevo.

However, experts say that investors shouldn’t believe this at face value, and it is necessary to ensure that there will not be any harm to the environment from gold mining.

“The ecological legislation of Ukraine is imperfect, and there is a moratorium on inspecting enterprises. Therefore the owners of the company must bear responsibility for the environment,” said Vladlena Martsinkevich, the expert of the National ecological center of Ukraine.

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