Record result but still no breathing space for Lynas

» … at this time, we have nothing further to the add to the comments we made last week,» Lacaze said on a conference call accompanying its results, adding that the company continues «to engage productively with the regulators».

In other words, the company was still «seeking clarification» on comments earlier this month by Malaysian Prime Minister Mahathir Mohamad, which appeared to solve the problem of the licence pre-condition that Lynas says it cannot meet — removal of the radioactive waste by September 2.

The radioactive waste from Lynas Corp's Malaysian operations is currently being stored on-site.

The radioactive waste from Lynas Corp’s Malaysian operations is currently being stored on-site.

Mahathir said Lynas — or any potential acquirer (without explicitly naming Lynas’ estranged suitor, Wesfarmers, whose $1.5 billion indicative offer for the group was rebuffed in March) — would be able to continue to operate in Malaysia if it agreed to extract the radioactive residue from its ore before it reached the country.

Despite two cabinet meetings since that announcement, Mahathir has failed to clarify his comments, or confirm whether it means Lynas might not need to move the existing mountain of radioactive waste that has been accumulating at its $1 billion, 100-hectare processing facility in Kuantan province.

It was the only update that mattered, and the continuing silence has not helped its cause.


The PM’s comments — which have mired Wesfarmers in controversy over what exactly its chief executive, Rob Scott, said to Mahathir in a meeting ahead of this statement — hinted at a path Lynas could have taken instead of processing its ore in Malaysia.

Crown jewel

Lynas’ crown jewel is its world-class rare earths deposit in Mt Weld, Western Australia.

Lynas initially planned to process the ore near its WA mine but was attracted by the infrastructure in Kuantan, including water, electricity, chemical and gas supplies, a skilled labour force and proximity to its customers in the region.

The eventual decision to set up its processing plant in Malaysia meant Lynas also exported the controversy over what happens to the toxic waste produced by the extraction process.

And as the water-leached purification (WLP) residue — which contains low-level radioactive waste — has accumulated since production started in 2013, so has the push-back.

It reached its nadir in December last year when the Malaysian government made the export of the radioactive waste a pre-condition of its licence being renewed beyond September.

The Malaysian PM would be well aware that the implications of closing the rare earth processing plant extend well beyond Malaysia and Australia.

Global implications

There are significant global concerns about the fact that China dominates the supply of rare earths — a group of 17 elements crucial to the manufacture of hi-tech products like digital cars, smart phones and wind turbines.


Lynas is the only significant miner and processor of rare earths outside China.

Not that this means anything in Malaysia, where there has been no end to the negative news that has dogged the Lynas operations since it set foot in the country.

Fresh allegations

Lynas was just this week forced to deny fresh allegations it had breached Malaysian environmental regulations by storing more than 1.5 million tonnes of waste on-site for years.

The worry for Lynas is that the latest complaint, by Malaysian MP Lee Chean Ching, related to the 1.13 million tonnes of non-toxic waste produced by its operations, not the 450,000 tonnes of radioactive waste.

Malaysian MP and Lynas critic Fuziah Salleh.

Malaysian MP and Lynas critic Fuziah Salleh.

The Sydney Morning Herald and The Age also revealed this week that Lynas was warned in a confidential 2011 report, by crisis management group Futureye, that there was an «urgent need» for it to win the local community’s support.

The report presciently warned that its operations in the country could be jeopardised if it did not change the way it dealt with environmental concerns and the government.

«If Lynas is convinced that its political support in Malaysia is so unwavering that it will withstand deep and broad community opposition, then outrage management should be at most a peripheral strategy, aimed at diminishing the reputational cost of a company-government partnership that has largely ignored stakeholder concerns and intends to continue to ignore them,» the report reads.

Lynas responded that it had instigated a range of stakeholder engagement activities since that time.

Concerns pre-date Lynas

Malaysian concerns around rare earth processing pre-date Lynas.

In the 1990s, a subsidiary of Japanese conglomerate Mitsubishi closed a rare earths processing plant and spent more than $US100 million cleaning up the waste after residents complained of birth defects and a spike in leukemia cases in the community, according to a New York Times report.

There is no suggestion of any health issues at the Lynas plant, which has passed all of its health and safety checks.

And Lynas critics, such as Malaysian MP Fuziah Salleh, lay the blame for the company’s woes solely at its own feet.

«As far as I remember, Lynas engaged with whom they think they can convince, and they only want their narratives,» Ms Fuziah this week told a Malaysian newspaper. «Basically, all Lynas did was mislead the public with a narrative which is just half-truth.»

Colin Kruger is a business reporter. He joined the Sydney Morning Herald in 1999 as its technology editor. Other roles have included the Herald’s deputy business editor and online business editor.

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