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Commodities

Australian rare earth producer raises questions over Mahathir-led review

Lynas' Malaysian plant comes under scrutiny as operating license up for renewal

The Kuantan plant, the biggest in the world, has an annual capacity for refining 20,000 tons of rare earth minerals.   © AP

KUALA LUMPUR -- Lynas Corp., the world's second largest rare earth producer, has raised questions over the independence of a Malaysian government committee set to review its mineral refining operations in the country, appealing for an "independent and public" inquiry.

The Sydney-based company, while recognizing Malaysia's right to conduct a review, is objecting to the inquiry headed  by a former anti-Lynas campaigner, ahead of its operating license renewal in September 2019.

Prime Minister Mahathir Mohamad has ordered a review of big-ticket projects launched by his scandal tainted predecessor Najib Razak. So far, at least three infrastructure projects backed by Beijing have been scrapped due to high costs and low priority.

The government has now turned to the Lynas Advance Material Plant in Kuantan, an eastern coastal town. It wants to look into decisions made by the previous government, their timing, as well as safety issues.

At a press conference on Tuesday, Amanda Lacaze, Lynas chief executive, told reporters: "If there is a change in policy, we simply ask that it is fair [and that we are] treated consistently with other companies in Malaysia and we are given time to adjust to any change."

Fuziah Salleh, who had campaigned against the construction of the plant six years ago as an opposition lawmaker, will lead the government-appointed Lynas Executive Review Committee.

"Central to the review will be the Radioactive Waste Management Plan since radioactive waste is a very pertinent issue to be deliberated by the committee from the perspective of sustainability and sustainable development," Fuziah told the Nikkei Asian Review. 

As a non-nuclear energy producing country, Malaysia has little tolerance for the radioactive pollution that rare earth minerals are associated with. The project was approved by the previous government despite strong opposition from locals.

Fuziah explained the review was in line with the new government's election promise to rule the country based on principles of sustainability. "In short, it will be an environmentally-friendly government," she said.

The Kuantan plant, the biggest in the world, has an annual capacity for refining 20,000 tons of rare earth minerals, essentially raw material used in industries such as automotive and electronics. These minerals are imported from mines in Mount Weld, Western Australia. From Malaysia, refined materials are exported to Japan, North America, Europe and the world's biggest market, China.

According to a statement in 2011, Japanese trading company Sojitz Corp. and Japan Oil, Gas and Metals National Corp. had collectively invested $250 million into Lynas in exchange for a minimum supply of 8,500 tons of rare earth minerals annually, or about one third of Japan's demand, over a ten-year period. The investment came at a time of tense relations between Japan and China, forcing Tokyo to look for alternative sources.

The Malaysian government vowed when it took power in May to look into Lynas' operations, in particular the management of rare earth waste. Lynas' Lacaze claimed the "zero-harm" waste is stored in permanent deposit facilities at its Kuantan plant, and any plan to ship it back to Australia will require regulatory approvals from the country.

"We are heavily committed to Malaysia," said Lacaze, adding that Lynas spends 500 million ringgit ($121 million) annually in the Kuantan plant, staffed by about 600 employees. 

Reacting to news of a possible government review, shares of Sydney-listed Lynas have declined 21.9% since Sept. 21 to end at 1.64 Australian dollars on Monday. 

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