TK
Lacaze prepares Lynas for more bids while Scott waits
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rareearthsinvestor

Huge potential helps fuel Wesfarmers play for Lynas
APRIL 25, 2019

On the surface Wesfarmers’ chairman Michael Chaney and CEO Rob Scott seem to have taken an incredible risk in bidding for rare earths producer Lynas. But then step back and you realise that Chaney and Scott have isolated the next boom — much greater electrification. Lynas takes Wesfarmers into the raw materials required for batteries and new appliances but it also has a the potential, longer term, to be a supplier of a fuel for a developing power generation system.

The essence of the Lynas plan to not pretty and is high risk: the storage of low-level nuclear waste in Australia that Malaysia is refusing to store on its own its land. However, in the waste is a substance called thorium. The world is looking for better ways to generate non-carbon electricity and one of the prime candidates is none other than thorium. I hasten to add that thorium is not the only candidate and there is also a lot more work to be undertaken to improve thorium power plants.

We all know that the Lynas rare earths are an essential part of the world’s swing to electrification and batteries. They look set to be a part of a major global growth market but it is a market currently dominated by the Chinese and the western world does not want to be totally reliant on the Middle Kingdom for these essential materials.

Lynas, with its mine in Australia and processing in Malaysia, is incredibly well placed if it was not for the fact that Malaysia no longer wants to store nuclear waste, albeit low-level nuclear waste. There are plenty of places to store the waste in WA but its not a long-term solution given the strong environmental movement in Australia. Longer term, the thorium in the waste must be used.

China also produces radioactive waste from its rare-earths plants and the waste from many of its rare-earths plants is likely to be similar to that which Lynas is currently storing in Malaysia. So, its no surprise that China is at the forefront of the development of thorium nuclear power generators. Back in the 1950s there was a choice of developing thorium or uranium as a nuclear fuel. the Americans chose uranium because it could be used to power submarines. Thorium was put to one side but it’s back now thanks to the events in Japan.

Traditional thorium nuclear reactors have enormous advantages over uranium reactors because, although thorium is still radioactive, the waste produced is not nearly as toxic and requires less storage and thorium can’t be used to make bombs.

But the Chinese are now developing a new generation of nuclear reactors based on thorium. And the early signs are that these new nuclear reactors could transform energy generation. Instead of relying on water for cooling, they rely on molten salt which is far less dangerous. The molten salt cooled reactors can be used inland because they don’t require the same quantities of water. This is very important for China.

The thorium reactors produce very little waste and generate enormous heat which will enable them to produce non carbon electricity and also desalinated water.

Assuming the climate science is right, many areas of the world will have less rainfall and will need desalination plants. The Chinese believe that thorium will provide the answer. China is hoping to make a full thrust into salt-cooled thorium generators in the next decade. Other countries, including Canada, are also working with China on this technology because it looks to have the potential to lower the worlds’ reliance on carbon energy and it does not have the same waste problems as uranium-based nuclear fuels. There will be many more developments and rival fuels in the swing to greater use of electricity.

Already Wesfarmers has taken a small step into non-carbon energy by buying substantial quantities of power from a Western Australia solar farm. In the past decades Wesfarmers was also a major coal producer in Western Australia.

It is a very big step from going from the bags of unwanted thorium waste to thorium power plants in Australia or elsewhere. A lot can go wrong. But if the Lynas waste material proves suitable and the Chinese technology fulfils its promise, then Wesfarmers, via Lynas, has a clear path ahead in the greater electrification boom. The theory might be correct but the application has so far been poor.

It is a takeover thrust that has not proceeded smoothly and it may fall off the rails but if it succeeds it has the potential to be one of the most fascinating strategic moves we have seen in Australia.

BUSINESS COLUMNIST

Robert Gottliebsen has spent more than 50 years writing and commentating about business and investment in Australia. He has won the Walkley award and Australian Journalist of the Year award. 

 

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rareearthsinvestor

'Big bully' Lynas must send waste home

 

Michael Smith

Apr 26, 2019 — 12.00am

Kuala Lumpur |A Malaysian government deputy minister has accused rare earths group Lynas Corp of being "big bullies" and warned it has to send its low level radioactive waste back to Australia by September or lose its licence. Fuziah Salleh, the MP for the city on Malaysia’s east coast which is home to Lynas Corp’s $1 billion rare earths processing operations, also said the government was happy to work with conglomerate Wesfarmers, which wants to buy Lynas, if it agreed to send the company's waste back to Australia.

While Ms Salleh is not a member of Cabinet, which has yet to clarify its position on the Lynas plant, she said she had received assurances on the matter from Prime Minister Mahathir Mohamad. "I am very confident on his position. He agreed with me it would be sent back. That was his commitment to me," Ms Salleh told The Australian Financial Review on Thursday.

Her comments come as both Lynas and its potential suitor Wesfarmers wait for clarification on Dr Mahathir's divided coalition government on both the disposal of existing waste at the plant and whether Lynas or its future owner will have to agree to treat future waste before it leaves Australia. Lynas has become a political hot potato in Malaysia where the dumping of foreign plastic currently dominates tabloid headlines. Ms Salleh, a long-time local opponent of the Lynas plant called the company "irresponsible" for continuing to store waste at its plant on the country's east coast which she said had had long-term health risks for local residents.

“They should just focus, not dilly dally, not give excuses. Just send the waste back," Ms Salleh said during an interview at her office near Kuala Lumpur on Thursday. “They have had five years. They have not been serious about it. I’m very firm about that. If Lynas fail to send the waste out by September their licence should not be renewed. Lynas vehemently denies any wrongdoing and said it has fully complied with Malaysia's regulation and its waste is not a health risk. Sources said Ms Salleh does not speak for the government and pointed to Dr Mahathir's statement last month that the decision was a matter for Cabinet.

Environmental concerns around the storage of waste at the Kuantan plant were thrust back into the spotlight after the Dr Mahathir was swept to power in a surprise victory last May. His Cabinet includes a number of opponents to the way Lynas stores waste although the government's view remains unclear and his senior ministers are divided on the issue. It is believed Ms Lacaze has sought a meeting with Malaysia's Minister of Energy, Science, Technology, Environment and Climate Change Yeo Bee Yin in coming weeks to clarify the situation in coming weeks. Ms Yeo, known as YBY, said in December the company had to remove an estimated 450,000 tonnes of low-level radioactive waste from temporary storage on the Kuantan facility.

She has asked Lynas for a plan to either reprocess or permanently store the waste as a pre-condition for the renewal of it storage licence on September 2. A government source said Ms Yeo had the discretion to decide whether Lynas would have more time to find a storage solution but it was clear it would have to be dealt with after six years of delays. Dr Mahathir then declared in April that Lynas could no longer send raw material from its Western Australian mine to Australia unless it was cleaned up first.

The previous government, which had taken a more favourable view of the Lynas operations despite years of opposition from environmentalists and local residents, ruled Malaysia for 60 years. Malaysian government committees and the country’s Atomic Energy Agency had previously found the company did not breach any local regulations. “I don’t know how they managed to twist the arms of the minister before this.” Ms Salleh said. "Lynas just say what they want to say and keep silent about things that they should not speak up. That is Lynas and I know them and they are big bullies." “I not going so far as saying they have to close down, I'm saying they should not be allowed to operate and generate more waste. They should not be allowed to generate more waste when they are not responsible.”

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rareearthsinvestor

Inside Amanda Lacaze's Malaysian nightmare (Financial Review)

A seismic shift in Malaysian politics has left Lynas chief executive Amanda Lacaze facing a fractured coalition government and some old enemies with powerful new connections. 

Michael Smith

Updated Apr 29, 2019

Kuala Lumpur | Security is light at the sprawling Lynas Corp rare earths processing plant in an industrial estate on Malaysia's east coast.

A chain-link fence surrounds the site where covered stockpiles of residue – a byproduct of the process to extract the products needed to make mobile phones, computers and countless other devices – can easily be seen from the road.

 

The Lynas Advance Materials Plant (LAMP) was built near Kuantan, Pahang, Malaysia. 

While this waste is at the centre of a political storm in Malaysia it is peaceful at the plant, about 30 kilometres from the eastern city of Kuantan. It is a contrast to 2014, when 1000 protesters blockaded the gates of the plant as angry local residents and environmental activists fought to have the company shut down.

"Back then, we got scared. We were worried what people would do when we went out wearing our [Lynas] shirts. Now we can walk freely. We are proud," says Khairul Suhaimi, a burly plant manager, who has been working for Lynas since 2009. "We are strong. We are fighters. We want to be treated fairly."

Lynas survived that battle in a period when staff like Mr Khariul said their cars would be "keyed" because the company was hated so much in the local community. But it now faces a new fight for its survival. The latest campaign is playing out in the corridors of power in Putrajaya – a Canberra-esque city south of the Malaysian capital where the government offices are located – rather than on the streets of Kuantan.

The environmental concerns surrounding Lynas' seven-year-old plant and how it handles the low-level radioactive waste are not new.  But the political landscape has changed, and some of Lynas' old enemies now have more influence than they used to after Mahathir Mohamad's shock election winalmost one year ago.

Lynas chief executive Amanda Lacaze, along with everyone else in Malaysia, admits they did not see the political change coming. "We were not an issue a year ago," Ms Lacaze says. She is right. When The Australian Financial Review visited Kuantan a year earlier – just weeks leading up to the polls which was expected to see former prime minister  Najib Razak's regime regain power – no-one was talking about the company's environmental credentials.

It was the first change of government in Malaysia in the 61 years since the country's independence from Britain. Instead of the old one-party government, which did not have any issues with Lynas, a fractured four-party coalition led by Mahathir was suddenly in power.

Two of Lynas' old enemies, who have been in the frontline of a long-running campaign to get the plant closed down, are now Members of Parliament. They are Fuziah Salleh – an MP for the major city near the Lynas plant - and Wong Tack – a feisty  member of the Democratic Action Party who was once quoted as saying he wanted to burn the plant down. He now says that comment was taken out of context, but he still believes whatever regulations would apply to Lynas in Australia should apply in Malaysia.

However, Lynas' biggest problem is Yeo Bee Yin, a 35-year-old Cambridge-educated politician who is making a name for herself by tackling the illegal dumping of foreign plastic waste in the country. Ms Yin (or YBY as she is widely known) is the Minister for Energy, Science, Technology, Environment and Climate Change, which means she has direct oversight on the Lynas issue.

On the same day in December when a government committee reviewing the plant's operations found it was low risk and had complied with Malaysia's regulations, YBY's office dropped a bombshell. She issued a letter outlining two preconditions for Lynas' to renew its licence renewal on September 2. The company must export an estimated 450,000 tonnes of low-level solid waste known as water leach purification (WLP) residue, and come up with an action plan for the disposal of its other waste known as NUF.

Lynas has appealed and is still waiting for the Minister's office to respond. Malaysian government sources say there is little goodwill between the Australian company and YBY's office but they are not ruling out efforts to reach a compromise. "It is very difficult to please them," one source said when asked about Lynas.

The main gripe from politicians opposed to Lynas is that it has had since 2012 to come up with solutions to recycle, store or export the waste but nothing has happened and they say it did not build the proper facilities from day one. This is something Lynas disputes vehemently, saying it has always complied with local regulations and the conditions of its licence.

Comparisons between another rare earths refinery near the town of Bukit Merah in central Malaysia, which was closed down in the 1990s, have not been helpful for Lynas, which says radioactive levels at that operation was 60 times what its plant produces.

Whether the existing waste stored at the Lynas plant, which is in a huge industrial zone dominated by petrochemical plants, is a long-term health hazard is also a complex issue. While environmental activists say the hundreds living in local fishing villages in the area are worried about the long-term health affects from the plant on their drinking water, it is hard to find evidence of this.

"This issue is created by politicians for different reasons. The politicians who raise concerns are not from here. I am not aware of any complaints and we do not use underground water any more," Zehai bin Shefih, a local village elder, says.

However, Ms Salleh – who has been campaigning against Lynas for years – says many of the locals are unaware of the long-term health risks from the plant's waste which environmentalists say can seep into the ground and well water when there is flooding. Lynas has also done a good job of winning the local community over with its extensive programs supporting local schools, orphanages and other services.

 

Fuziah Salleh, Deputy Minister, Malaysian government has been fighting Lynas for years Michael Smith 

"It is a complex matter. If you are speaking to the middle classes, yes, there is an issue.  If you are speaking ot the lower-income groups where bread and butter is a bigger issue, they don't know about the long life of the radiation. It may not  affect them but it may affect their children," Salleh said in an interview.

The situation has been complicated by the arrival of Wesfarmers, which had its $1.5 billion takeover bid for the company knocked back last month. Wesfarmers boss Rob Scott met Mahathir in April. Shortly after, the Prime Minister said companies interested in buying Lynas had made a commitment to cleaning up the raw material elsewhere before it was sent to Malaysia.

As well as dealing with existing waste at the plant, the other issue is whether the Mahathir government will force Lynas to remove radioactivity from rare earths minerals mined in Western Australia before it is shipped to Malaysia for further processing. The dumping of foreign waste, particularly plastic, in Malaysia is a hot political issue at the moment.

The Australian High Commission is actively involved in lobbying on behalf of Lynas. The Australian government sees the matter as a market access issue and does not want Lynas to be treated unfairly, which would set a dangerous precedent for foreign investment in the country. But Canberra is also unlikely to sacrifice the bilateral relationship with Malaysia by going in too hard with Mahathir on the issue. The May election also means senior politicians are currently unable to go in and bat for Lynas, even if they wanted to.

Yin has written to Australian politicians asking the government to collaborate on the removal of waste from Malaysia. But while she is a senior minister, sources in Kuala Lumpur she does not speak on behalf of Cabinet and Australia was unlikely to ever agree to accept waste from any country.

The big problem for Lynas is the current political environment in Malaysia is an unknown.  There is no precedent for dealing with  Mahathri's Pakatan Harapan (Alliance of Hope) coalition of four parties, with means there are competing voices and complexities that make an outcome difficult to predict. Even 93-year-old Mahathir himself is learning how to deal with this. The last time he was in power, few would question his authority.

Lynas remains hopeful Cabinet, rather than a single minister, will decide its fate. Its supporters argues the science is clear and Mahathir is a rational leader who does not want to jeopardise foreign investment in the country.

"Everything is up to the Cabinet. Cabinet has met on the issue but there is no consensus," says James Chin, director of the University of Tasmania's Asia Institute. 

"YBY is just part of the picture. She is very young, just got married a month ago. She is a well-known environmentalist and comes from an engineering background rather than the green movement. When this issue is brought into the Cabinet, it is a free flow discussion. So anything can happen. "

People who know Lacaze says she is obsessed with doing the right thing by her 600-strong workforce of mostly Malaysian staff at the plant in Kuantan. Former employees, investors and even Wesfarmers say Lacaze has done an amazing job steering Lynas from the brink of collapse into a profitable business.

Her staff have also been on the frontline of the company' campaign to defend its reputation, with around 300 workers and their families demonstrating in Kuala Lumpur last month. Their testimonies, while rehearsed, are passionate and appear genuine.  Many of the workers are engineering graduates who understand the science around the waste disposal process.

"I'm not saying we don't have radiation. But radiation is everywhere. when we use our phones or watch television we are exposed to radiation. Safety is a big concern here. We are the most reviewed company in Malaysia," says Nor Syaqirah Yasmin,  an associate engineer, and one of many women Lacaze has employed at the plant.

However, the local residents behind the Save Malaysia Stop Lynas Movement say they are confident their long campaign to remove what they say is hazardous waste is finally close to success.

"Lynas has always made people believe they can recycle the waste. This is baloney. They have been doing experiments for years. We think they should be given the Nobel Prize for Science if they can achieve some of the things they say they can achieve," Tan Bun Teet, the chairman of Save Malaysia Stop Lynas, says.

"The villagers have been brainwashed. They don't know anything abut heavy metal poisoning."

The opinion of local street vendors and business leaders is somewhere inbetween. Many say they are more concerned about jobs and the economy and anxiety about environmental issues at the Lynas Advanced Material Plant (LAMP) has subsided.

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