Lynas Malaysian Rare Earth Refining Plant Construction Halted

by on

Lynas Corporation made an announcement last week about its Rare Earth (RE) refinery project in Malaysia that resulting in a suspension of trading in its shares.  According to the NY Times, the $230m refinery project has had a line of problems (alleged) around  environmentally hazardous construction and design  since the project began three years ago, despite a flurry of initial optimism. MetalMiner has also written about the environmental concerns. The Malaysian government served as an early and enthusiastic supporter even granting the company a 12-year tax holiday to lure potentially a large export earner (projected at $1.7bn).  The rapid rise in RE prices over the past twelve months combined with China restricting exports has serves as an impetus toward completion of the project.

Documents leaked by engineering firms involved in the project suggest a catalog of cost cutting actions by Lynas and its Australian construction management contractor UGL Ltd have potentially put the local environment at risk of toxic contamination. RE elements, commonly found in association with radioactive thorium require a chemical leaching process with strong acids at temperatures of about 200 degrees F for separation. The 250 acre plant, built on a tropical swamp has resulted in the accusation of adopting construction techniques which do not take the environmental or material handling challenges into proper consideration. For example, engineers say the concrete shells for 70 containment tanks (some larger than a double-decker bus) include structural cracks and air pockets. The specific accusations include Lynas  cutting corners on external moisture barriers exposing the concrete to the ingress of moisture from the reclaimed swampland underneath. A Malaysian contractor, Cradotex has apparently refused to fit watertight fiberglass liners until Lynas satisfactorily solves the moisture problem. At the same time,  AkzoNobel the Dutch maker of the fiberglass tanks says it will refuse to certify the use of their coatings if the problems cannot be fixed. But the problems extend beyond these two issues. Engineers believe the company has under-specified the piping used to process the corrosive fluids, opting for plain steel grades instead of more expensive stainless steel or with ceramic or rubber liners.

Lynas naturally refutes the allegations. They have reiterated that the plant will meet all Malaysian safety standards. But one has to wonder if the citing of the refinery in Malaysia  in and of itself served as attempt to avoid more strict Australian EPA standards. Locals have rioted since March in an attempt to shop production. They believe the project will cause environmental harm.

RE consumers hoping to have a non-Chinese source by next year should consider alternative options. The Malaysians have called in experts from the Atomic Energy Agency to assist. The project may take a twelve month delay to meet all conditions and a green light to continue construction.  Meanwhile RE prices will likely continue to rise as China restricts exports further in the face of vast toxic and radioactive waste sites after thirty years of largely unregulated RE extraction and refining.

By the time Lynas’ Malaysian plant is finally commissioned a host of other plants notably Molycorp in the USA, but also in Vietnam, Mongolia and India could be nearing operation resulting in much greater availability and a fall in prices.

–Stuart Burns

Leave a Comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.