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Interview 10:30 05 Jun 2021

Our major asset is our reputation. BGV Group Management on future investments and Ukraine's place in a new raw materials supercycle

How retail and subsoil development fit under the same roof, and why now is the best time to engage in mineral resources: the investment company's Board of Directors and Hennadii Butkevych answers.

Hennadii Butkevych

Recently, a new holding BGV Group Management was officially structured in Ukraine as an investment management company. It's been known in the market since 2015 for its portfolio of mining assets and several significant "niche" projects in retail, recreation, and development. And with the onset of a pandemic, for more than $2 million in aid to medical institutions in the country.

The company belongs to Hennadii Butkevych, who's included in the top 20 richest Ukrainians according to Forbes as a co-owner of ATB corporation, the largest supermarket chain in Ukraine. With BGV Group, the entrepreneur is not only expanding his retail history but also develops other market areas, in particular, mining.

Like the main shareholder, BGV Group's top managers have decades of experience in building business processes and generating value. Members of the Board of Directors answer questions: Oleksandr Naumik (Chief Officer), Viktoria Lavreha (Financial Strategy), Serhii Voitsekhovskyi (Strategic Initiatives), and Viktor Tanai (Mining Projects).

— BGV Group Management has already concentrated a significant portfolio of assets in its hands, some of which are of strategic importance for the country. What area of work is your priority?

Сергій Войцеховський

Serhii Voitsekhovskyi

Serhii Voitsekhovskyi: We've been in the Ukrainian market long ago and now formalized our activities. The portfolio includes several areas: exploration and production of ore minerals, oil and gas production, HoReCa & recreation, retail, development, education. Each direction has a prospect for us.

But if we imagine the country's economy as a pie, then there are such businesses that distribute it, for instance, retail. And by building a mining business, we're increasing it because it'll be completely export-oriented.

Олександр Наумик

Oleksandr Naumik

Oleksandr Naumik: Our major asset, which is of key importance for each of the projects, is the reputation of Hennadii Butkevych. This person has built a successful business without administrative resources and continues to do so. He serves as inspiration and motivation for all of us.

— Why did one of the most prominent retailers on the Ukrainian market decide to enter a completely unfamiliar area, mining?

Serhii Voitsekhovskyi: The BGV's essence is an approach to doing business that can be described as Beyond the Great Vision. It's not just about mining and selling resources. We all share Mr. Butkevych's vision that Ukraine is more than a resource economy, and BGV Group Management is a leader in the production of value-added goods using strategic resources. We are dedicated to creating sustainable value. Moreover, the BGV Group Management's primary mission is to gradually develop the country's potential and facilitate Ukraine's transition from a resource economy to an economy of developing end products (for example, electric vehicles, lithium batteries, and so on).

— Extraction of minerals is a very long-term investment, which sometimes begins to pay off after decades. Are you going to attract foreign investments or other Ukrainian partners in the future?

Вікторія Лаврега

Viktoria Lavreha

Viktoria Lavreha: It's a right question. We hold licenses for the exploration and/or production of minerals and metals important for modern technologies, included in the list of strategic materials of the United States and the EU's similar plan. These are, for instance, rare earth metals. Our main stakeholders are not in Ukraine. And to work with them, we have to meet the bar, not of Ukraine, but the world's top companies.

We create the most transparent terms of cooperation and emphasize that we're a long-term partner who values ​​and protects our reputation. But, naturally, we understand that we still need to convince the investor to accept the risk of Ukraine. Although there's an age-old expression: high risk, high return.

Our company is now structuring and hasn't entered the capital market in full force yet. We plan to actively join in and initiate the process by the end of this year/the beginning of the next.

— Tell us a little about the time frame of your work. How long does it take before they work as expected?

Віктор Танай

Viktor Tanai

Viktor Tanai: It takes 2-3 years to develop design solutions, plus construction, and before the return on investment after construction starts, we need 5-7 years. It's different for each project, but they all require time-consuming stages. It's the international practice. It took 2 years to have the result (oil and gas production) from the moment of investing in oil and gas in 2018. In 2020, we rejoiced at a certain final in one of our fields. But with graphite, it takes much more time.

— Mining is surrounded by myths and prejudices, but there are also actual threats, for example, to the environment. What will you rely on in this sense in your projects?

Viktor Tanai: Extraction of minerals can indeed have a significant impact on the environment and is subject to a mandatory assessment of this impact. But precisely in light of this, this area is regulated by the state as much as possible to forestall any potential, even minimal, harm. To start a project, it's necessary to prepare design solutions, collect the opinions of various authorities, and obtain millions of approvals. And this procedure is carried out at every stage of the project's lifespan.

But if we disregard our country's rules and return to our mission and vision, as well as the general strategy for the BGV Group Management's growth and development, then you'll once again see that we're interested in minimally invasive mining. We're switching to technology solutions that help minimize environmental damage while increasing production efficiency.

Oleksandr Naumik: Business, first, is rational. Take our graphite asset as an example. For us, our end customers in 5-10-year limit are such companies as Tesla, Apple, and others. Their product's performance depends on the lithium battery quality. And the battery will be as good as its constituent parts: lithium, nickel, cobalt, graphite. China now occupies a large share of the raw material market for the extraction of the same graphite. But American companies are ready to look for a supplier with an even higher price, but who's ready to play according to international rules and regulations, including environmental legislation. Besides the fact that we're a responsible company, we're also a rational company, and we won't throw up roadblocks with non-environmentally friendly methods.

— Why should the local communities that your companies visit trust them? What guarantees do you give them?

Oleksandr Naumik: Fortunately, we have a track record and a reputation. We've been on the market for some time. And we managed to establish ourselves as a socially responsible company that came here to stay.

We've formed 2 key values ​​for ourselves in this direction: the first one is not to harm employees and society as a whole, the second is to respect and protect the environment at all our locations, both during the operation of facilities and at the end of the process. Upon completion of work on each of our sites, we guarantee land reclamation.

Local and national economy's development is also one of our priorities: by paying competitive salaries, treating our suppliers fairly, investing in local communities, and contributing our share of taxes, we make a significant contribution to what we believe in — a successful Ukraine and successful communities.

We always meet local and central authorities' requests for help for development and support (including reforms), while our credo is to stay out of politics. We got involved in the fight against the pandemic: we allocated about $2 million to aid medical institutions and communities. Most of these funds helped the Zhytomyr region; the central government determined the region in response to our initiative, knowing that the bulk of our assets are in this region. But we also provided assistance in all regions that contacted us.

— There's a myth that mining is about transforming a country into a "raw material appendage." Where to find the balance and how do you plan to work with minerals in a way to avoid such extreme situations?

Serhii Voitsekhovskyi: We play in the Beyond the Great Vision league.

Ukraine is lucky, we're rich in several primal and important natural resources. But the state also needs to support such investors as BGV Group Management, which not only hasn't stopped at the extraction and sale of minerals but is building factories for their processing and enrichment. Moreover, we'll have to compete in this area not only with international companies but even with countries. Kazakhstan, the EU countries, the USA are very active in supporting their producers, as they understand the importance of these resources.

Forming such a sector will help to employ many people. Ukraine is a large country with a population of 40 million. Of course, honor and praise to IT and the rest of the service business, but it is industrial enterprises that can globally influence the situation on the labor market.

Besides, we're now on the verge of a new commodity super-cycle; at the very least, it means that commodity prices will rise again. It's a great time for Ukraine to start unleashing its potential. And "to be continued," as they say.

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