Political Involvement Complicates Lynas REE Plant Progress

By Adam Currie — Exclusive to Rare Earth Investing News

Political Involvement Complicates Lynas REE Plant Progress

While the market has been primarily focused on the impending WTO investigation int o Chinese export quota policies, one Australian rare earth mining company has been facing an equally uphill battle in its quest to move a rare earth production facility forward.

Lynas Corporation Ltd. (ASX: LYC), a company focused on creating a fully-integrated source of rare earth from mine through to market, has come under political pressure in relation to its project in Gebeng, Malaysia.

The choice to construct the Lynas Advanced Materials Plant (LAMP) in Malaysia rather than in Western Australia stemmed from "a business decision," a company spokesman told a Malaysian news agency  earlier this month.

Makes business sense

According to Andrew Arnold, general counsel of Lynas, the company chose to relocate its rare earth processing facility outside of Australia because the area lacks the potential industrial zone already evident at the Gebeng Industrial Estate in Malaysia.

Arnold explained that Gebeng already has an established industrial estate with key infrastructure, support industries, and the skilled workforce required for the operation of the facility. Once the plant is completed, it is expected to be one of the largest sources of rare earth elements (REEs) outside of China.

The project gained global media attention in February when more than 2,000 local residents held a demonstration in an attempt to halt construction. Protesters in the eastern city of Kuantan claimed that there is a risk of dangerous radiation from the plant, something that few people believe the Malaysian government would be able to cope with if there was any form of leakage.

The LAMP has been under intense criticism since the Atomic Energy Licensing Board (AELB) approved the granting of a temporary operating licence, which allows Lynas to operate the plant for an initial two-year period. The licence could be made permanent if the company complies with certain conditions.

However, earlier this month an appeal against the granting of the temporary licence was lodged with the Minister of Science, Technology and Innovation, with the appeal likely to be heard in April.

Parliamentary Select Committee

Increased exposure and public backlash have  prompted the Malaysian government to set up a Parliamentary Select Committee (PSC) to oversee the project. The committee will not be actively involved in decisions relating to matters such as the approval and ongoing operation of the LAMP, but is expected to assist in raising awareness of the scheme. It is should provide an update on progress by the end of June.

Despite widespread public criticism, Lynas has insisted that “misinformation” and fears from past radiation disasters are the main reasons behind opposition to the project.

In a recent media conference, the company's CEO, Nick Curtis, suggested that it was unfair to punish the company for incidents that “have nothing to do with us.” Drawing on this point, Curtis emphasized that the LAMP is not a nuclear power station - referring to the Fukushima Dai-ichi Nuclear Power Plant in Japan, which suffered a nuclear meltdown following last year's tsunami, and released harmful radioactive materials that are  still affecting the area today.

He also stressed that the LAMP's practices and materials are vastly different from those of  Mitsubishi Chemical's (TSE: 4188) Asian Rare Earth (ARE) plant in Bukit Merah, Ipoh, which was ordered to shut down in 1992 and has been linked to eight cases of leukemia due to radioactive exposure, seven of which were fatal.

Curtis tried to calm fears by underlining that despite the LAMP not being a nuclear plant, the facility has in fact been designed and constructed to withstand disaster scenarios.