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Lynas Corporation has been under increasing pressure in relation to its Malaysia-based materials plant. While the media focuses on the negatives of the project, experts claim it could spur positive economic development for the region.
By Adam Currie — Exclusive to Rare Earth Investing News
While the market has been primarily focused on the impending WTO investigation into Chinese export quota policies, one Australian rare earth mining company has been facing an equally uphill battle in its quest to move a rare earth production facility forward.
Lynas Corporation Ltd. (ASX:LYC), a company focused on creating a fully-integrated source of rare earth from mine through to market, has come under political pressure in relation to its project in Gebeng, Malaysia.
The choice to construct the Lynas Advanced Materials Plant (LAMP) in Malaysia rather than in Western Australia stemmed from “a business decision,” a company spokesman told a Malaysian news agency earlier this month.
Makes business sense
According to Andrew Arnold, general counsel of Lynas, the company chose to relocate its rare earth processing facility outside of Australia because the area lacks the potential industrial zone already evident at the Gebeng Industrial Estate in Malaysia.
Arnold explained that Gebeng already has an established industrial estate with key infrastructure, support industries, and the skilled workforce required for the operation of the facility. Once the plant is completed, it is expected to be one of the largest sources of rare earth elements (REEs) outside of China.
The project gained global media attention in February when more than 2,000 local residents held a demonstration in an attempt to halt construction. Protesters in the eastern city of Kuantan claimed that there is a risk of dangerous radiation from the plant, something that few people believe the Malaysian government would be able to cope with if there was any form of leakage.
The LAMP has been under intense criticism since the Atomic Energy Licensing Board (AELB) approved the granting of a temporary operating licence, which allows Lynas to operate the plant for an initial two-year period. The licence could be made permanent if the company complies with certain conditions.
However, earlier this month an appeal against the granting of the temporary licence was lodged with the Minister of Science, Technology and Innovation, with the appeal likely to be heard in April.
Parliamentary Select Committee
Increased exposure and public backlash have prompted the Malaysian government to set up a Parliamentary Select Committee (PSC) to oversee the project. The committee will not be actively involved in decisions relating to matters such as the approval and ongoing operation of the LAMP, but is expected to assist in raising awareness of the scheme. It is should provide an update on progress by the end of June.
Despite widespread public criticism, Lynas has insisted that “misinformation” and fears from past radiation disasters are the main reasons behind opposition to the project.
In a recent media conference, the company’s CEO, Nick Curtis, suggested that it was unfair to punish the company for incidents that “have nothing to do with us.” Drawing on this point, Curtis emphasized that the LAMP is not a nuclear power station – referring to the Fukushima Dai-ichi Nuclear Power Plant in Japan, which suffered a nuclear meltdown following last year’s tsunami, and released harmful radioactive materials that are still affecting the area today.
He also stressed that the LAMP’s practices and materials are vastly different from those of Mitsubishi Chemical’s (TSE:4188) Asian Rare Earth (ARE) plant in Bukit Merah, Ipoh, which was ordered to shut down in 1992 and has been linked to eight cases of leukemia due to radioactive exposure, seven of which were fatal.
Curtis tried to calm fears by underlining that despite the LAMP not being a nuclear plant, the facility has in fact been designed and constructed to withstand disaster scenarios.
“The engineering of the site is done very specifically with 100-year flood events and various other engineering standards to ensure that if there were catastrophic events, it would be safe,” he said.
“Secondly, our material is not the same as Japan’s (Fukushima plant). Nothing like it, we have nothing to do with it,” he continued. “People have ignored the facts. The word radioactivity has been misused in this context [because] of Fukushima. The emotions were high. But Fukushima has nothing to do with us.”
Safe if regulations adhered to
Dr. Proom Promwichit, a former lecturer on nuclear reactor and radiation safety at Universiti Kebangsaan Malaysia, has added to the debate by underlining that the LAMP is safe as long as Lynas complies with its safety regulations.
“Just like driving a car, what is important is safe handling. The company must ensure that that when the plant starts operations, it does not have a negative impact on local residents. If there is an alpha particle radiation, it will be dangerous,” commented Promwichit.
In March the AELB tried to calm public fears by announcing that it will immediately shut down the facility if Lynas violates any conditions related to the disposal of radioactive material.
Political pressure
Meanwhile, the Democratic Action Party (DAP), one of the three major opposition parties in Malaysia, has added fuel to the political fire by stating that it will abstain from participating in the PSC on the Lynas issue, describing the panel as a “sham.”
The “DAP will not participate in a sham PSC which serves to deliver a ‘fait accompli’ by endorsing the Lynas plant and forcing public acceptance without any due regard for safety, environmental and health concerns,” said DAP Secretary-General Lim Guan Eng.
Given that the PSC is unlikely to decide the fate of the Lynas plant, Guan Eng said it would be a “complete waste of time” for the DAP to participate in it. He has also urged other parties to join the DAP in abstaining from joining the committee.
Lynas has maintained that waste from the Gebeng plant will not be hazardous, and can be recycled for commercial applications.
Malay Businessmen and Industrialist Association of Malaysia (PERDASAMA) President Datuk Moehamad Izat Emir also described the project as positive, claiming that it will benefit the local population and spur economic development.
Securities Disclosure: I, Adam Currie, hold no direct investment interest in any company mentioned in this article.
