Lynas Corporation’s Mount Weld mine in Western Australia is the richest known deposit of rare earths in the world.
In a market where China dominates 97 per cent of global supply the asset puts the junior in an enviable position.
But after an all-time high in April this year, its shares have crashed nearly 50 per cent, and doubts have surfaced over the company’s ability to carry out its Mt Weld plans.
How Lynas got to this point is a story of how even the most promising miners are vulnerable to falling foul of their local communities.
The immediate problem for the company is the construction of the Lynas Advanced Materials Plant (LAMP) in Kuantan, Malaysia.
The plant is the keystone to Lynas’ Mt Weld plans, but is facing fierce opposition from locals in Kuantan.
Leading the battle is the outspoken Save Malaysia Stop Lynas (SMSL). Its spokesperson Lee Tan told Australian Mining locals couldn’t envisage any situation where Lynas and the community could coexist.
“It is highly unlikely that the majority of the community will allow the plant to operate,” Tan said.
“Thousands have already started to sign a pledge to do whatever it takes to shut the LAMP down.”
In itself community opposition is not an unusual or insurmountable obstacle for miners.
But what sets Lynas’ Malaysian problem apart, and has rightly spooked investors, is the scale of resistance in Kuantan.
SMSL claims its protests in early October attracted 5000 to 8000 demonstrators, with other monthly protests drawing between 1000 and 3000 people.
The protests have sometimes turned ugly, with reports of riot police dispersing crowds and fire bombs being thrown at the home of a Lynas senior project manager.
But more concerning for the company is the spread of the malaise and discontent to the upper reaches of Malaysia’s Government.
The ruling coalition National Front, in power for decades, is heading towards a national election that could be held any time within the next 12 months.
Kuantan MP Fusia Salleh has made significant inroads in capitalising on the Lynas disquiet to criticise the Government, and with an election looming, the electoral pressure has been too large for it to ignore.
Last month Malaysia’s international trade and industry minister Datuk Seri Mustapa Mohamed came out in public opposition to Lynas.
He said the company had been issued with a reprimand after releasing completion dates for the LAMP that seemed to pre-empt the Government’s approval process.
He also accused Lynas of failing to work with and engage the Malaysian community, a charge backed up by SMSL.
“Lynas has invested heavily in its public relation exercise but little in corporate social and environmental responsibility,” Tan says.
“The absence of any meaningful consultation prior to the construction of the rare earth plant is unacceptable.”
Lynas chairman Nick Curtis was overseas when this article was written and nobody else from Lynas was prepared to comment.
Kuantan residents have a host of concerns over the potential impact of the LAMP, but SMSL says their most serious pertain to the plant’s waste products.
“The majority of the people are concerned with the massive amount of waste containing low-level radioactive material, amongst other hazardous substances, that will be left behind by the LAMP,” Tan stated.
“Processing of rare earths requires highly concentrated acids in extremely high temperatures, leaving behind massive amounts of toxic waste.”
But protestors are also concerned about the effects of the LAMP on the community, and say some families are already planning on moving away from the area.
In media statements Lynas has repeatedly attempted to allay health and environmental fears over the plant.
It contends protestors make up only a small proportion of the population, and fear about its projects is being exploited for “political purposes”.
Company officials say the LAMP is safe and complies with industry standards, and the International Atomic Energy Agency has issued a report approving the plant’s overall design.
Whilst issuing broad support of the plant, the IAEA gave Lynas recommendations for improvements on ten issues.
In part it recommended Lynas draw up a plan for managing the LAMP’s waste over a long term period, with regard to future land use and public health and safety.
It also said the company should develop a fund to cover the cost of long term waste management, and “enhance the understanding, transparency, and visibility” of its operations in the eyes of the public.
Lynas says it is committed to adopting all of the IAEA recommendations.
But locals remain cautious, with the memory of the country’s last rare earth refinery, which the New York Times recently credited as “one of Asia’s largest radioactive waste cleanup sites,” still fresh in their minds.
The loosely regulated Chinese rare earth industry, which has delivered its fair share of environmental damage, also lies close to their borders.
“We have seen the devastation caused by the rare earth industry in China and we do not wish to see a repeat of that in our backyard,” Tan explained.
Nevertheless Lynas remains optimistic the LAMP will meet environmental guidelines and be operational in the near future.
And the incentive for quickly delivering the plant is high.
While China has a stranglehold on the market, other companies are also scrambling to get rare earth projects online and capitalise on relatively high prices.
For Lynas the path ahead is potentially a short one if it can sidestep community and political opposition.
The LAMP is already more than two thirds complete, and a pre-operational and operational licence from the Government are the only remaining hurdles.
As a project expected to produce $1.7 billion a year in rare earths, or nearly one per cent of Malaysia’s entire economic output, it has plenty of financial momentum.
But spectators are mixed in their expectations for Lynas and the company’s ability to deliver the LAMP.
Rare earth forecaster Jon Hykawy recently recommended investors sell their stocks in Lynas, but Deutsche Bank analysts are sticking with it.
At this stage the battle looks too close to call, and while Lynas stands confident and steadfast, its opponents are equally resilient.
SMSL told Australian Mining there would be more surprises to come, and it was even looking at launching legal action against Lynas in Malaysia and Australia.
“We will continue to provide an avenue for local people to fight the battle to shut down the LAMP as long as there are people who are prepared to continue the fight,” Tan said.