Malaysian lawmakers green light Lynas rare earths plant

Anuradha Raghu and Niluksi Koswanage PlanetArk 20 Jun 12;

Australia's Lynas Corp is set to clear the final hurdle for its delayed $800 million rare earths plant after Malaysian lawmakers asked the government to issue the miner a temporary operating license despite community safety concerns.

The recommendations of the six-member lawmaker committee are expected to be rubber stamped by parliament later on Tuesday, clearing the way for Lynas to start operating the plant that is key to breaking China's grip on rare earths used in products ranging from Apple Inc's smartphones to Honda Motors' hybrid cars.

"It's another in a long line of affirmations for the safety of the Lynas plant," said a Lynas spokesman in Australia.

Lynas shares added nearly 9 percent, while analysts said the plant, set to be the biggest in the world outside China, could start operating within four months of the issuance of a temporary operating license.

The Lynas plant on Malaysia's east coast has been standing ready to fire up since early May, but the company has been embroiled since construction began two years ago in lengthy environmental and safety disputes with local residents.

Widespread protests over concerns at possible radioactive residue have drawn thousands of people at a time, and the project has become a hot topic ahead of an election likely to be held this year.

The decision by the committee, which was dominated by MPs from the ruling Barisan National coalition, came after Malaysia dismissed an appeal by residents to scrap the plant on radiation concerns.

RARE EARTH SUPPLY

Prized for their magnetism, luminescence and strength, world consumption of rare earths is estimated to rise to around 185,000 metric tonnes (204,000 tons) a year by 2015, from 136,000 tonnes in 2010.

China imposed export quotas in 2009 to fight pollution caused by illegal mining and processing, turning up the pressure to find alternative sources.

The Lynas plant would supply about 11,000 metric tonnes in its first year, eventually rising to 22,000 metric tonnes. The company says demand is so strong that it has locked in customers for all the rare-earths it can process in the first 10 years of operations.

Malaysia's opposition lawmakers boycotted the committee set up three months earlier, accusing the government of planning a whitewash over the plant in Prime Minister Najib Razak's home state of Pahang. Opposition lawmakers on Tuesday called the latest report "propaganda from Lynas".

Najib is seeking a strong mandate based on a track record of drawing in investments and boosting growth at a time when the euro zone debt crisis hobbles the global economy.

"The parliamentary committee's findings will blow up the Lynas issue for many voters who were against the plant," said James Chin, political science professor at Malaysia's Monash campus. "There will be some form of a backlash."

Lynas, which last year said refined rare earth exports from Malaysia could hit 8 billion ringgit ($2.5 billion) from 2013 -- equivalent to 1 percent of the country's gross domestic product, is expected to figure prominently in Najib's plans.

MOST ADVANCED

The committee on Tuesday said awarding the license would help the factory start processing rare earths in stages and recommended a committee of NGOs and experts keep track of the plant.

"Among all the rare earths factories in operation, they (Lynas) are the most advanced, we were told by international experts," select committee chairmanet Mohamed Khaled Nordin told reporters outside the parliament hall.

Deutsche Bank said it expected Lynas to submit its plan to meet earlier government conditions on neutralizing radioactive elements in plant waste and an emergency response plan on dust control this week, looking for a sign-off by end-July.

Once the license was issued, it would take another four months for Lynas to generate cash from the plant - one month for shipping the concentrate from its Australian mine to Malaysia and three months to commission the plant.

The 100-page report said while Lynas had met safety, health and environmental standards, an additional 31 recommendations would be tabled in what appeared to be concessions to public concerns over the plant's safety aspects.

Key among them was a recommendation Lynas has to ship out factory waste from Malaysia if it is unable to find an approved storage and recycling site -- a condition the panel says Lynas is already committed to although opposition lawmakers said the report was scant on the terms of such a deal.

(Additional reporting by Sonali Paul in MELBOURNE; Writing by Niluksi Koswanage; Editing by Richard Pullin)