Back in September 11 we posted about a mining-related project in Malaysia being proposed by the Australian rare-earths miner, Lynas Corporation Ltd. The point we tried to make in that post were that there is very little economic analysis of the impacts of the Lynas project and that the reasons for granting Lynas generous tax concessions didn’t seem to make a lot of economic sense. We’ve been following events since then and there continues to be a very well organised community (and political) effort to oppose the Lynas Advanced Materials Plant (LAMP).
So it was with great interest that we read a report today by Daiwa Capital Markets titled: “Will Lynas’ LAMP ever shine?”. The short report is the joint effort of Amy Chew and and David Brennan at Daiwa. Amy visited Malaysia to investigate the community concerns and political risk surrounding the project. David did some analysis of what the risks might mean to Lynas’ share price here in Australia. Their conclusions:
- Local opposition to Lynas’ rare earth processing plant is vociferous and mounting
- Regardless of a 30 January decision by the AELB on whether to commission the plant, protests look set to continue
- If the plant doesn’t go ahead, Daiwa value Lynas at A$0.68 per share, if it does go ahead, they value it at $1.63 per share.
We applaud Daiwa for sending somebody to Malaysia to investigate the issue and the very fact that they have attests to the seriousness of the risks due to opposition to this project. This issue is now highly politicised in Malaysia and whatever the outcome, this will surely make for an excellent case study in corporate social responsibility and emerging market risk. In addition, we would hope that it will also prompt the Malaysian government to reassess its process for project approval and tax exemption status to include more transparent economic cost-benefit analysis and social impact assessments.