Lynas hit by Malaysia waste ultimatum

By InvestSMART · 12 Dec 2012

By InvestSMART ·
12 Dec 2012

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LYNAS has insisted the legal status of its controversial rare-earths refinery remains intact despite being forced into its fourth trading halt in a month, after the Malaysian government called on the miner to dispose of all the plant's waste.

Executive chairman Nick Curtis said the company called the halt to prevent volatility in the share price and to clear the "noise" that was being generated by being kicked around as a "political football" in Malaysia ahead of the country's hotly contested election. Trading is expected to resume on Wednesday.

The halt was made on Tuesday morning after four Malaysian government ministers put out a strongly worded joint statement late on Monday reiterating the requirement that Lynas remove all radioactive residue from its Kuantan processing plant, or face having its temporary licence revoked. "The government will not compromise the health and safety of the people and the environment, in dealing with the issue of Lynas," the statement said.

It followed reports in Malaysia's Chinese-language media that Lynas' local managing director, Mashal Ahmad, had said waste from the Kuantan plant could not be exported because of international laws. But Lynas said the reports were inaccurate and that it would convert the residue into a commercially safe building product called synthetic aggregate, which would be exported if not allowed to remain in Malaysia.

"There is no legal impediment, no change in our legal status with respect to the operations, we continue to commission the plant . . . nothing that has been said in this statement has any impact on the prior legal approvals we've had," Mr Curtis said on Tuesday.

Shares in Lynas have plunged more than 60 per cent since February as a result of extended delays and uncertainty over the project.

Legal challenges by Malaysian activists concerned about the environmental impact of the processing plant have resulted in repeated trading halts. The shares last traded at 60.5¢.

Shares in Lynas' closest rival, the US-based Molycorp, surged 20 per cent in New York on the news.

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Frequently Asked Questions about this Article…

Why did Lynas call a trading halt and when will trading resume?

Lynas called a trading halt after the Malaysian government demanded the company remove all radioactive residue from its Kuantan processing plant, prompting regulatory and political scrutiny. Executive chairman Nick Curtis said the halt was to prevent share-price volatility and clear the "noise" ahead of a hotly contested election. Trading was expected to resume on Wednesday.

What was the Malaysian government’s waste ultimatum to Lynas?

A joint statement from four Malaysian ministers said Lynas must remove all radioactive residue from its Kuantan refinery or face revocation of its temporary licence, emphasizing the government will not compromise public health and environmental safety.

Did Lynas say it can export its radioactive residue?

Local reports claimed Lynas' Malaysia managing director said waste couldn't be exported due to international laws, but Lynas said those reports were inaccurate. The company said it would convert the residue into a commercially safe building product (synthetic aggregate) and would export it if it was not allowed to remain in Malaysia.

What is the synthetic aggregate solution Lynas mentioned for its waste?

Lynas said it plans to convert radioactive residue into a commercially safe building product called synthetic aggregate. According to the company, this product could be used commercially and exported if Malaysian authorities do not permit the residue to stay in the country.

Has Lynas’ legal status or approvals been affected by the Malaysian ultimatum?

No. Executive chairman Nick Curtis stated there is no legal impediment and no change to Lynas' legal status with respect to operations. He said nothing in the ministers' statement impacts the prior legal approvals the company holds and commissioning of the plant continues.

How have Lynas shares performed recently and what’s driving the decline?

Lynas shares have plunged more than 60% since February, driven by extended delays, uncertainty around the Kuantan project and repeated trading halts linked to legal and environmental challenges in Malaysia. The shares last traded at 60.5 cents in the article.

Why has Lynas faced repeated trading halts?

Repeated trading halts have been prompted by legal challenges from Malaysian activists worried about the environmental impact of the processing plant, along with regulatory pressure and media coverage that increased market volatility.

How did Lynas' rival Molycorp react to the news?

Molycorp, Lynas' closest rival based in the US, saw its shares surge about 20% in New York on the news, reflecting investor interest in alternative rare-earths suppliers amid the Lynas uncertainty.