Malaysia: Mining rare earth

The government of Malaysia recently agreed to allow an Australian company to build a new rare earths processing plant in the country – the first such plant to be constructed outside of China in decades.

Construction of the Australian-owned Lynas Advanced Materials Plant (LAMP) is scheduled to be finished in late 2011, with rare earths processing set to begin immediately after. The $230m plant will be located in Gebeng in the Kuantan region and is expected to be among the largest facilities of its kind. LAMP will refine raw rare earths from Mount Weld in Western Australia. When operations are in full swing, Lynas Corporation plans to double output from the Kuantan plant to 22,000 tonnes a year by the end of 2012.

Rare earths are a group of 17 chemical elements – the 15 lanthanoids, as well as scandium and yttrium, which often occur in the same ore deposits. The collection includes such elements as promethium, cerium, dysprosium and europium, which are indispensable in making many high-tech products, such as hard drives, solar panels, laser missile systems, wind turbines, compact fluorescent light bulbs and computer screens.

LAMP will provide world markets with the first new source of rare earths to come from outside of China in decades. Approximately 1.4m tonnes of rare earths elements will be trucked to Freemantle in Australia and then transported by container ship to the Kuantan industrial port in eastern Peninsular Malaysia.

At present China dominates global production of rare earths, accounting for more than 95% of the world’s supply, a situation that has prompted concern about its monopoly on these vital elements.

Australia’s budding rare earths industry received a big boost in December of last year after Japanese businesses complained that China had temporarily cut off exports due to a territorial dispute. China has also restricted exports to the US and EU, major consumers of rare earths, leading the US last December to call on China not to use rare earths as a trade weapon.

For its part, China denied the restrictions were due to any political motivations, insisting instead that the move was due to environmental concerns and the need for a more sustainable approach to rare earths production. Since then, China has set tough emissions limits on producers, with the effect of further tightening supply and raising prices.

Given this state of affairs, LAMP appears to be a huge boon for Malaysia’s economic growth programme. Indeed, Lynas received the approval of the Malaysian Industrial Development Authority (MIDA) to set up the plant in 2008 and the company will enjoy a 12-year tax holiday, once it begins operation.

However, there have been problems with the rare earths industry in Malaysia in the past, with this giving some locals pause for thought about the recent move. A similar plant in Bukit Merah in the Perak region was forced to stop operations in 1992 due to protests over environmental and health concerns. That plant, operated by Mitsubishi Chemicals, has since undergone a $100m clean-up.

The concerns arose from the fact that refining rare earths results in low-level radioactive waste, mostly in the form of thorium. Exposure to thorium can lead to an increased risk of cancer and liver diseases. Environmental groups in Malaysia have urged the government to ensure that there are stringent controls on waste products and contamination before going ahead with LAMP.

In response, the head of Malaysia’s Atomic Energy Licensing Board (AELB), Raja Abdul Aziz Raja Adnan, has said that Lynas must have a solid waste management plan in place before it will receive an operating licence. In addition, “The licence will only be issued after an inter-agency assessment is done,” Raja Aziz told Malaysia’s StarBizWeek on March 11.

For its part, Lynas has promised to uphold stringent environmental standards, saying that the company was “dedicated to zero harm”. “The care and well-being of our people and the communities in which we operate are at our core. We have agreed to place funds with the Malaysian government to ensure safe management of any remaining residue as required by the AELB,” Matthew James, vice-president of corporate and business development at Lynas, said to StarBizWeek. In addition, James claimed that the raw materials from Mount Weld have naturally low levels of thorium – 50 times lower than the raw materials used at Bukit Merah.

Countries like the US, Canada and Japan are coming to the realisation that having a reliable supply of rare earths is vital to their national economic and security interests. With a lead time of up to eight years necessary to develop new rare earths processing plants – and with China currently in possession of some 95% of the supply of this critical group of elements – many eyes are turning toward a small town in eastern Malaysia for an alternative.