SHARES in rare-earths miner Lynas Corporation suffered their biggest one-day fall in two years yesterday despite the company’s efforts to allay investor concerns over delays in production, after the Malaysian government imposed environmental and safety conditions on the company’s key refinery in the country.
Lynas shares slumped 23¢, or more than 11 per cent, to $1.75 after they emerged from a trading halt.
The Malaysian government made 11 recommendations, the toughest of which relates to the appropriate disposal of radioactive waste generated by the plant. The rare-earths plant, to be the world’s largest when completed, will not be allowed to operate if the conditions are not met.
The $230 million plant, in Kuantan, the capital of the state of Pahang, has stirred fierce political and community backlash over fears the plant could leak radioactive material into the state’s water supply.
Lynas was also forced to respond to a report in The New York Times that local engineers had blown the whistle on what they considered to be serious design and construction flaws, including structural cracks and air pockets in many of the concrete shells for 70 tanks that would hold radioactive material.
The report cites leaked memos between Lynas, head contractor UGL, and Malaysian subcontractor Cradotex, which purportedly detailed instructions from the Australian companies to circumvent basic construction safety standards to save costs.
Lynas chief executive Nick Curtis had previously said that the project adhered to all safety standards and he did not ”fully understand” the report’s origins.
Lynas yesterday said it was ”normal course of business in any construction project for questions to be raised between vendors, contractors and construction management teams” and it would ”never compromise the health and safety of the environment, community or our employees through cost-cutting efforts or accelerated delivery”.
Lynas’s woes represent a setback in its race to break China’s global stranglehold on the lucrative rare-earths market.
”It’s obviously significant because there had been an expectation in the market that the project was running to its timetable,” said Gavin Wendt, a senior analyst at Mine Life. ”The rare-earths market is already on a tightrope, and prices have doubled over the past couple of months. This has to put further upward pressure on prices.”
Shares in Perth-based rival Arafura Resources, which has also been beset by extensive delays, rose as much as 7.5 per cent yesterday after it announced an agreement to buy land from OneSteel for a $1 billion processing plant in Whyalla.
China controls an estimated 97 per cent of production of rare earths worldwide and has cut back export quotas in recent months. Prices of heavy rare earths, coveted for their use in smartphones and flatscreen televisions, have soared by up to five times since the start of the year.
Chinese state-owned enterprise ECE Nolans holds 17 per cent of Arafura. The Foreign Investment Review Board blocked a 2009 takeover of Lynas by China Non-Ferrous Metals Group.