February 2, 2012
by Justin Pugsley
No doubt the champagne corks were popping at Lynas Corp on news that it had finally won its hard fought for temporary licence to operate its controversial advanced material plant in Malaysia to refine rare earths. But the battle appears far from being over.
Even so there was probably a sigh of relief from rare earth consumers who from about the second half of this year will have the choice of two non-Chinese companies from which to buy their material. The other is Molycorp of the US, which is already selling rare earths and ramping up output. This effectively means the beginning of the end of China’s tight grip on global rare earth supplies and may also signal an end to the rare earths price boom.
But Lynas’ operation has been marred in controversy almost since the beginning with the residents living near the plant in Gebeng leading a well organised protest to get the facility shut down. They are concerned over the plant’s location and design, which they say could lead to radioactive contamination of the land and jeopardise the local fishing and tourism industry.
Malaysian Member of Parliament for Kuantan, Fuziah Salleh, indicated to Metal Pages prior to the announcement that the campaign to close the plant would go on if the licence was awarded. “Should the government and the regulatory body award LAMP (the Lynas plant) with the TOL (temporary operating licence), there is always avenue for a judicial review, which means bringing the case to court,” she wrote in an emailed reply. Local media reports suggest the suit could be filed within a week. Indeed, this could be a future source of uncertainty for the plant.
The two year licence comes with a number of strings attached for Lynas, including a $50m financial guarantee to the government payable in instalments, plans to be presented within 10 months over how to deal with waste and Malaysia’s authorities reserve the right to send a third party to ensure the operation is up to scratch.
But this did not satisfy the Anti-Lynas campaign, which condemned it strongly. Fuziah Salleh questioned how the waste would be treated including the possibility of it being sent back to its original source, Australia. However, Australia has said it would refuse to take it and basically sees it as Malaysia’s problem. She said the plans were too vague and have too many holes in them for her to feel convinced that it is safe.
No room for compromise?
Asked by Metal Pages if there was any condition under which the plant would be accepted in Gebeng she wrote back stating that it should not have been located there in the first place as it is built on swampy land with poor quality peat soil and with the water table barely one meter below the surface. She also said there was no consultation with locals before locating it there. On that basis the position seems intractable.
Metal Pages has also contacted Lynas to give them an opportunity to address these points and we expect a reply shortly and will share it on this blog.
However, it is a two-year licence and given the hostility surrounding the plant any incident could be used as an excuse to close it or to impose particularly harsh financial penalties. Malaysia also faces an election soon and the country’s political landscape could change following that to become less supportive of Lynas. It also remains to be seen what the Anti-Lynas campaign can achieve in the courts.
A further problem is that of image. According to an article in the New York Times Dutch chemical giant AkzoNobel pulled out from doing work on Lynas’ plant apparently because its engineers were concerned over the safety of the design. A point picked up by the Anti-Lynas campaign.
If the protest gathers momentum, and it is already being followed by some in the foreign media, it could make big name companies wary of being seen to be doing business with Lynas for fear of tarnishing their own image. That could be become a problem in the years ahead as more non-Chinese suppliers come into what could be a more competitive market for selling rare earths.
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