KUALA LUMPUR -- The Malaysian government has granted a six-month extension to Australian-based Lynas's $800 million rare earths processing plant, putting to rest uncertainties that have been swirling around the controversial project since the government's historic election victory in May last year.
The approval could have global repercussions, as Lynas is the world's only major rare-earth producer outside China. With the trade war heating up, there have been concerns of Beijing weaponizing its dominance of the supply of rare earths, which are used in everything from smartphones to electric cars to cruise missiles.
In a statement on Thursday, Malaysia's Atomic Energy Licensing Board said it is giving a six-month license to Lynas based on several conditions, among others for it to build its own "cracking and leaching" facility outside Malaysia within four years of the renewal, after which it would not be allowed to produce radioactive residue exceeding 1 becquerel per gram at its Malaysian plant.
It also said the company must identify a permanent disposal facility, or PDF, with written approval from the relevant state government.
"AELB will closely monitor and ensure that the construction and management of the PDF follow international standards," the statement read. The rare earth miner's current operating license expires on Sept. 2.
The Lynas Advanced Materials Plant, located in Pahang on the east coast, was set up in 2014 under the approval of the previous Najib government. At the time, the project drew protests from then-opposition lawmakers and environmentalists concerned about radioactive waste and health issues.
Shortly after winning last year's general election, the current ruling coalition insisted that Lynas would have to remove its water leach purification (WLP) residue from Malaysia as a precondition for its license being renewed.
In an about face, Prime Minister Mahathir Mohamad confirmed last week that the government was dropping that requirement.
Instead, the Australian company has been directed to explore a permanent disposal facility to treat its rare earths processing residue.
Lynas has repeatedly defended the safety of its processing plant, pointing to multiple reviews carried out by local and international agencies including the United Nations' International Atomic Energy Agency.
Rare earths are a group of 17 minerals used in high-tech products such as smartphones, powerful magnets used in wind turbines and hybrid cars, telescope lenses, satellites and the weapon guidance system, as well as used in the construction of cutting-edge fighter jets, drones and cruise missiles.
Rare earths processed at Lynas Malaysia are highly sought after by customers in Japan, China, Europe and North America. The company's Japanese customer base continues to grow strongly and currently represents about 60% of sales.
Being the largest rare earth producer outside China, Lynas is anticipated to benefit should China decide to use its rare earth exports to the U.S. as a weapon in the ongoing trade war.
Chinese rare earth producers have threatened to pass on any tariff imposed by Washington to American buyers -- and Beijing could potentially halt exports altogether.
If rare earths from China become more expensive or harder to obtain, U.S. users will be forced to seek sources in other countries.
Options may be limited, however. China accounts for more than 80% of the global output of rare earths and accounts for about 80% of exports to the U.S., whose massive defense industry is one of the biggest consumers of the materials.