Shares of Lynas (LYC-A) closed 19% higher at A$1.59 on the Australian Stock Exchange following news that, after a year of delay, the Malaysian government has approved a temporary operating licence for the rare earth separation plant the company has almost finished building near the port of Kuantan in Pahang State.
Malaysia’s Atomic Energy Licensing Board granted a two-year operating licence on Feb. 2, paving the way for the Australian miner to complete the $230-million separation plant that will process rare earth concentrates from Lynas’ Mount Weld mine and concentration plant in Western Australia 35 km south of Laverton. Management now expects to offer the first finished product for sale in this year’s second quarter.
Activists in Malaysia have protested the proposed facility for many months, claiming the plant could potentially expose local residents radioactive waste leaks. Concerns about the project escalated following the Japanese earthquake in March 2011. The material from Mount Weld contains low-level, radioactive thorium.
Under the licence conditions, Lynas must submit plans for a permanent disposal facility for tailings within 10 months and pay the government $50 million in installments as a financial guarantee.
The licensing board said it will set up an independent monitor that will review project safety and scrutinize production, and has made it clear that the licence can be suspended or revoked if the company fails to meet conditions on handling potentially hazardous waste.
The last rare earth refinery in Malaysia was closed in 1992 after local residents claimed it caused birth defects and leukemia among residents, according to a report by The Associated Press.
Lynas has completed nearly 91% of the new processing facility and will transport rare earth concentrate by road from Mount Weld to Fremantle port before exporting the material to east-central Malaysia. Lynas commissioned its concentration plant about 1.5 km from the mine near in May 2011. Lynas believes its Kuantan facility will be ready to receive shipments of concentrate from Australia in this quarter.
According to Lynas Mount Weld remains the world’s richest source of rare earths, with over 1.4 million tonnes of rare earth oxides at an 8.1% grade.
“Overall, this licence is a good thing for the rare earths industry, even if we continue to rate Lynas shares a ‘sell,’” writes Jon Hykawy, an analyst at Byron Capital Markets. “We continue to believe that simply selling separated and purified oxides will be insufficient to justify the company’s current market capitalization.”
Hykawy has a 12-month target price on the stock of A60¢ per share. At presstime in Australia the company traded at A$1.43 per share.
Be the first to comment on "Malaysia gives Lynas temporary REE plant licence"