Aussie firm builds rare earth plant in Kuantan

Something we will have to pay close attention to: an Australian firm, Lynas Corporation, is building an ‘Advanced Materials Plant’ in Gebeng, Kuantan to process rare earth concentrate.

View Larger Map

Malaysians now are familiar with rare earth and the problem of radioactive waste after what happened in Papan. Lynas, however, argues that its radioactive levels will be safe (see response below).

The firm appears to have engaged public relations firm Fox Communications to handle the Malaysian public.

Lynas had a concentrate plant in China but the firm moved that back to Australia, where it owns large rare earth deposits. If the raw materials are in Mt Weld, why would it choose Kuantan as the site for its ‘advanced’ processing plant?

Let’s look at the reasons given by Lynas for choosing Kuantan:

Lynas owns the richest deposit of Rare Earths in the world at Mt Weld, 35km south of Laverton in Western Australia. A feasibility study has been completed on the Rare Earths deposit and all Australian approvals required for project development have been received.

In past years, Lynas has observed a trend in Chinese Government policy decisions which is leading to an increase in Government control of the Rare Earths industry in China and the tightening of supply due to the imposition of mining production quotas, and the reduction and restrictions on trading of the existing export quota. These policy decisions have followed the removal of VAT rebates for exports of Rare Earths oxides and an increased enforcement of China’s stringent environmental standards which resulted in the closure of non-compliant Rare Earths plants.

Shortly after the introduction of production quotas in China the company determined it was prudent to investigate potential sites other than China that would be suitable for the company’s proposed processing plant for Mt Weld ore. The drivers for this decision were the:

* Increasing Government control of the Rare Earths industry in China, thereby increasing the project risk for our plant
* Escalating operating costs in China due to the Government policies noted above, and also inflation affecting cost of reagents, utilities and labour
* Favourable tax environments available in alternative countries
* Opportunity to reduce cost base denominated in Renminbi, and thereby benefit from a strengthening Chinese currency

The first stage was to relocate the concentration plant from China back to Mount Weld, and the next phase was to develop an Advanced Materials Plant to process the concentrate through to the final product.

Following a detailed evaluation of several possible sites, Kuantan, in the state of Pahang, Malaysia, was chosen for its favourable investment climate, the high quality workforce, the excellent infrastructure servicing the proposed site and the readily available reagents used by the Plant.

Lynas has been granted the “strategic pioneer status” by the Malaysian Industrial Development Association (MIDA), which has a number of associated benefits including a 12 year tax free period.

On top of all the infrastructure made available, Lynas gets 12 years tax free. How generous of the government!

Lynas makes it sound as if we should be honoured it chose Malaysia. The status of construction can be found here. The plant, which is being built at the Gebeng Industrial Estate, Kuantan, will have an initial annual capacity of 11,000 tonnes of rare earth oxides.

Meanwhile, China, which accounts for 97 per cent of global production, is tightening its environmental regulations. Does Malaysia have similar environmental standards – and crucially the monitoring and enforcement – to protect the environment and surrounding communities?

This is what Cindy Hurst wrote for the Institute for the Analysis of Global Security (IAGS) in March 2010.

New regulations to protect the environment

China does not have pollutant discharge standards for the rare earth industry. Environmental issues behind the mining of rare earth elements are a huge concern. The differences between Western mining efforts and those seen in China today are staggering. Aware of the problem, the local government is reporting to be trying to find ways to improve the situation.

In July 2009, the Ministry of Environmental Protection organized the “Rare Earth Industry Pollutant Discharge Standards.” These new standards will hopefully “eliminate backward production abilities and promote the upgrading and updating of China’s rare earth industry.”

The Ministry of Environmental Protection set discharge standards for six types of atmospheric pollutants – sulfur dioxide, particles, fluoride, chlorine, hydrogen chloride, and sulfur trioxide. For water pollutants, discharge standards were set for 14 types of pollutants, including fluoride, total phosphorous, total carbon, total nitrogen, and ammonia nitrogen. In many southern regions with lakes, the new standards implement special discharge limits for ammonia nitrogen discharge concentrations. These new standards are split into two parts, one part for existing enterprises and the other part for newly built enterprises.

Under the new standards, rare earth enterprises are required to increase their investment in environmental protection and improve production technologies and costs.

Of course, whether or not these new standards are ever successfully fully implemented remains to be seen. Based on China’s production of 150 tons of rare earth elements, the cost for producers to implement some of the environmental protection efforts would be 1.1 billion yuan ($161 million) and there would be additional annual environmental protection costs of about 280 million yuan ($41 million) for the concentration of water pollutants discharged industry-wide. This would add a cost of 1,000 to 1,500 yuan ($145 to $220) to production for every ton of product.59 If producers believe their investments toward meeting these standards are not secure and the Chinese government does not provide some type of financial incentive, the Chinese government might be hard pressed to fulfill these standards.

Only time will tell if cleaning up the environment in China is achievable.

China has a history of pressing forward in its economic ventures with no regard for the environment. China could easily create more stringent environmental regulations as a front to cover up its poor image. If China were to place environmental issues and regulations high on the priority list, it would mean higher costs to run the industry and less production. This could force the international community to push hard for alternatives, potentially hurting China’s superior status in the rare earth industry. China is able to operate its rare earth mines at one third the cost in part because of the country’s lax environmental standards. Additionally, efforts to clean up China’s environment will require government funding and increased oversight, and would likely cost billions of dollars. According to renowned Australian rare earths expert Dudley Kingsnorth, “I think it will be at least 10 years before China will match our standards.”

How about Malaysian standards? What’s more, it’s one thing to have stringent environmental standards and quite another to have tight monitoring and enforcement and strong penalties.  What has Malaysia’s record in punishing environmental violators been like?

This is Lynas’ response posted on a Facebook site addressing some of the concerns:

Dear Writestreet,

First of all, I would like to note that this is an official Lynas response to your blog, ‘Lynas Outfoxed’.

The people at Lynas have a strong set of values, these include operating in an honest, candid and transparent manner, as well as always to respect and contribute to the communities in which we live. Therefore we feel an obligation to respond to your blog to address some statements within your blog which Lynas believe are factually incorrect statements, statements which are taken out of context, and statements which are misleading.

The session you described was organised and chaired by Perbadanan Kemajuan Negeri Pahang (PKNP), not Lynas. The Department of Environment (DoE), The Atomic Energy Licensing Board (AELB), and Nuclear Malaysia (NM) were not guests, they were there to present detailed explanations of the processes they undertook in studying the Lynas project, to present their findings and approvals on the project, and to explain their ongoing role in monitoring the operation. A final presentation was given by the Executive Chairman of Lynas.

Your statement “The Lynas guys said the level of radioactivity was not as bad as the situation in Bukit Merah, Ipoh when the Asian Rare Earth was processing rare earth” fails to state that the DoE, the AELB and NM also stated this. The raw material from Mount Weld in Australia is not the same as that processed at Bukit Merah. The Asian Rare Earth raw material was tin mining tailings. This contained high levels of thorium, which was the source of the radiation. The Lynas operation will use a raw material that has naturally low levels of thorium (50 times lower than the tin tailings used by Asian Rare Earth). This is due to the unique geology at Mount Weld. As a result, the Lynas raw material is safe, non-toxic and non-hazardous.

The radioactive level of Lynas residue is only 1/300th of the Asian Rare Earth residue (1900 vs 6.7 Bq/gram). The material processed at Bukit Merah could not be processed in Australia, Malaysia, or China today. Lynas have approvals to process the Mount Weld raw material in Malaysia, China and Australia (all of these approvals are open for inspection by appointment at our office in Gebeng). I will come back to why we chose Malaysia.

Lynas was well aware of Dr. Jayabalan’s presence and we were pleased he had an opportunity to ask questions to the approval authorities and to Lynas – this is in line with our values. We respect his experience at Bukit Merah.

Allow to me comment on your “excerpts of what was said that day”:

“The rare earth is being brought in from Mount Weld in Australia through Kuantan port, processed in Gebeng, and then taken back to Australia”.

This is incorrect. Concentrate shall be brought in containers from Mount Weld in Australia through Kuantan Port. It will then be processed at our Plant in Gebeng. The products will then be exported to Japan, Europe and the US. Malaysia is an excellent distribution hub.

“Why bring the rare earth to Malaysia, why not processs it in Australia? The skills and engineering requirement cannot be met by the human resource in Australia and there is no open space in Australia for such a plant”.

Your reported answer to this question is not what was presented by Lynas. Lynas obtained all approvals for this project in Australia. However, Australia does not have the industrial infrastructure required for this project as can be found at Gebeng, Malaysia. Lynas could not find in Australia a location that has established industrial land, local production of required industrial chemicals, gas, electricity and a plentiful supply of water for the plant. Lynas had previously obtained approvals for this plant in China. However, the Chinese government imposed export limits on all final products as well as imposing export taxes. Lynas was not willing to invest in China and then to have the export of final products controlled by the Chinese government. Lynas subsequently identified Malaysia as the best global location for this plant. It is a credit to Malaysia that there are great port facilities, industrial land, good chemical supplies, reliable utilities, a clear legal framework, strict and clear regulations, good education standards at secondary, technical and university levels and a government with a vision for value added industry.

“Is the waste product radioactive? Various answers were given at various points in time – technically it is not radioactive; the radioactivity level is 300 less than that in Bukit Merah; yes, it is radioactive”

Allow us to clarify. There are three residues produced by the plant. The low level of naturally occurring radiation only goes to one of these residues, not the other two. Nuclear Malaysia presented on the levels of naturally occurring radiation we are all exposed to every day, and provided the following information on annual radiation exposure, in mSv/yr, in every day human activities:
• Smoking a pack of cigarettes daily 150
• Medical or dental x-ray 0.39
• Living in a masonry home 0.07
• Sleeping next to someone for 8 hour 0.02
• Watching television 2 hour daily 0.01
• Air travel, every airborne hour 0.005
• Using a computer terminal 0.001

On average a person receives exposure to natural radiation of 2.4mSV/annum from the environment in which we all live. People emit radiation, which is why sleeping next to your husband or wife increases you exposure to natural radiation by 0.02 mSv/year.

The radioactive level in the residue containing the low level of naturally occurring radiation is safe. The safe level is established and monitored by the Malaysian authorities based on Malaysian standards. Malaysian standards are identical to Australian and international standards. The standard sets the additional exposure limit for the public at 1 mSv/year and 50mSv/year for workers, this is in addition to the background radiation around us. At these levels, there is no risk to health. In the case of the Lynas Advanced Materials Plant, the public exposure will be zero, whereas the average exposure for an employee at the Lynas Advanced Material Plant will be only 0.2mSv/year.

“What will happen to the waste once you decide to close the plant – are you going to ship it back to Australia? No answer given. They didn’t want to talk about the waste at all.”

The authorities presented information on residue management during the session:
1. The Radiological Impact Assessment completed by NM on the storage of these residues shows them to be safe and pose no risk to the public. However, Lynas has taken the additional safety steps of placing these residues in safe, reliable engineered storage cells that are designed so that there is no possibility for any leakage of material into the environment. These storage cells are monitored and regulated by both Lynas and the AELB to ensure full compliance within the approval conditions.
2. To ensure long term sustainability of our operation, Lynas is committed to convert the residues into safe, saleable industrial products. The two products which do not contain the naturally occurring radiation have been identified for gypsum applications. For the residue containing the low level naturally occurring radiation, Lynas has already embarked on a programme of research and development to use the residue in safe by-products. The R&D is being undertaken together with the local universities, Nuclear Malaysia, and Australian Nuclear Science and Technology Organization (Ansto). The progress of this R&D is being reported to the AELB and DoE.
3. What will happen if no application can be found for the residue? Lynas is subjected to strict conditions by the AELB. One of the conditions refers to the end of life of the plant and Lynas must obtain a decommissioning license which includes the safe storage of any of the remaining residues. Lynas has agreed to place funds with the Malaysian government to ensure safe management of any remaining residues as required by the AELB.

“In the case of a problem during waste handling, an accident, contamination, etc, what will happen? We do not anticipate any problem at all.”

We have discussed residue management above. The Lynas Country Manager explained the standard procedure should a container of raw material be involved in an accident causing a spillage. These are standard procedures used by many industries. Remember the Material Safety Data Sheet compiled by independent experts show the Mount Weld raw material is safe, non-toxic and non-hazardous.

With regard to the relocation of the proposed plant – Lynas was initially directed by MIDA to locate in Kemaman in 2006. Lynas designed the plant for the specific Kemaman location. Lynas obtained all approvals required by the authorities for this location including AELB, DoE and Majlis Perbandaran Kemaman (MPK) approvals. While waiting for the Terengganu government to allocate the land, Malaysian Industrial Development Authority (MIDA) asked Lynas to consider relocating to Gebeng, to which Lynas agreed.

Your statement “Rare earth in itself is not dangerous but once you process it, it releases radioacvitve gases and the waste is radioactive” is incorrect. It is other elements contained within the minerals of the raw material, specifically thorium, which is radioactive. It is the thorium that goes to one of the residues as discussed above. It is for this reason why the starting raw material is so important when processing to produce these products. The fact that the Mount Weld raw material contains such very low levels of thorium makes it safe, non-toxic and non-hazardous.

The Lynas Advanced Materials Plant is designed to the world’s best practice and meets all of the safety and environmental standards for Malaysia as well as Australian and International standards. The authorities (e.g. AELB and DoE) monitor the operation closely to ensure full compliance.

As noted above, Lynas values and respects the communities in which we operate, and we are happy to answer any questions in relation to the above. We can be reached by email on [email protected].

I trust the above clarifies.

Regards,

Dr Matthew James
Corporate Communications

10 January