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Radioactive waste question bungled by Lynas rare earths company

The radioactive residue produced is the responsibility of the company and if necessary, it will be returned to its place of origin.

And what might be the place of origin’s attitude?

“National legislation stipulates,” the WA minister for mines and petroleum has stated, “that Australia will not accept responsibility for any waste product produced from offshore processing of resources purchased in Australia such as from iron ore, mineral sands, and the rare earths produced by Lynas Corporation”.

“The Malaysian finding that Lynas must take the radioactive waste back to Australia may be the straw that breaks the camel’s back with the Lynas effort. This slight detail requires the governments of both Australia and the state of Western Australia to acquiesce in taking the waste from a plant that should have been built in Australia in the first place but wasn’t

LAMP going out for Lynas, 9 News, by Greg Peel, As recent FNArena articles on the subject of the rare earth metals space have noted, the global race to compete with China on rare earth element (REE) production has now come down to a mere handful of names including two stand-outs, and a big chunk of daylight to third. (See, for example: Rare Earths Done And Dusted? No, It’s Xeno-Time). Those two companies are Molycorp in the US and Australia’s own Lynas Corp . A year ago, it looked like Lynas had moved ahead of Molycorp.

According to research and opinion from REE specialist Hallgarten & Company, that is certainly no longer the case. Indeed, Lynas shareholders may be in some trouble. Lynas’ Mt Weld mine in Western Australia ranks as one of the richest major light REE deposits in the world. Light REEs such as lanthanum, cerium and neodymium are not as valuable as heavy REEs such as dysprosium but with an advanced project and significant scale, Lynas looked set to be a prominent player in the global REE market, with a big jump on the field outside of Molycorp. A few years ago Lynas became somewhat of a test case for sovereign investment in Australia’s mining industry when the federal government ruled a Chinese enterprise could not acquire a stake in the company, thus setting the guidelines for future Chinese investment. Not being able to source funds from China was not an issue for Lynas. REE prices began to accelerate into space and funding was thus easy to secure outside of China. ….

Having a REE deposit is one thing, but the real money to be made from REEs is in the processing ? a complex and highly costly business. Lynas could have chosen to build its processing plant in Western Australia, thus providing tax income and jobs and possibly attracting some incentives from the state and/or federal government. But Lynas decided to go offshore to find a cheaper alternative. One alternative would have been to build the plant in low-wage China, but given China controls the global REE market there would be a certain risk. Instead, Lynas chose to build its plant in low-wage Malaysia, where from 1982-1994 Mitsubishi Asian Rare Earths had processed REEs as a by-product of tin mining.

As former prime minister Paul Keating will recall, Australia and Malaysia do not have the rosiest of friendships. And we seem to run into problems when it comes to “offshore processing”. The Lynas Advanced Materials Plant (LAMP) has been under construction in Kuantan, Malaysia, for over two years and is all but completed, with the testing phase having reached 85% completion by the end of the March quarter. It is not clear just how much money Lynas saved by choosing Malaysia over Western Australia, but whatever it was, Hallgarten suggests that benefit has now been more than wiped out by the fall in the LYC share price. Lynas has had to suffer along with all REE hopefuls from the recent bursting of the REE price bubble….

Lynas did not seek to draw on past experience. REE deposits most often include levels of radioactive elements in the mix, such as uranium and thorium, which need to be separated and dealt with as waste. In 1982, the aforementioned Misubishi Asian Rare Earth began operations in Malaysia with a plan that the local state government would keep the waste as a potential source of nuclear energy. However both parties were subject to strident protest from local villagers, opposition politicians and non-government organisations when the tailings began to pile up in a field, emitting 88 times the safe level of radioactivity. The company initially began a clean-up, but by 1994 had decided it was all too hard and shut down the plant.

The ore from Mt Weld contain traces of thorium, which by all accounts are not significantly dangerous within the processing operation. However they still provide waste which needs to be dealt with, and that’s why LAMP approval has stalled. Last July, the Malaysian Atomic Energy Licensing Board (AELB) required Lynas to satisfy eleven conditions before the LAMP could proceed, including a long-term solution for the radioactive waste. In its first proposals to the AELB, Lynas failed to meet any of the conditions. By September the Malaysian government had called on a review from the International Atomic Energy Agency and put the plant on ice……

Lynas pressed on with construction, and the LAMP is all but ready. The Malaysian government has been the big winner ? no Malaysian job has been lost but the government is seen to be playing a responsible role with regard to the waste. Lynas has spent a good deal of money…..

Lynas won a reprieve in February, nevertheless, when the AELB granted a temporary operating licence (TOL). The AELB will monitor the plant over the next two years in which time Lynas must show it can limit radiation to the safe levels the company originally claimed it would. Assuming this can be done, it might seem like Lynas is of the hook. Accept for a certain conundrum.

Lynas can only satisfy the AELB by detailing all aspects of a permanent disposal facility, whether or not the company is able to reprocess low level radiation waste into a commercial product. The radioactive residue produced is the responsibility of the company and if necessary, it will be returned to its place of origin.

And what might be the place of origin’s attitude?

“National legislation stipulates,” the WA minister for mines and petroleum has stated, “that Australia will not accept responsibility for any waste product produced from offshore processing of resources purchased in Australia such as from iron ore, mineral sands, and the rare earths produced by Lynas Corporation”.

And fair enough too, suggests Hallgarten. Analyst Christopher Ecclestone lays it on the table:

“The Malaysian finding that Lynas must take the radioactive waste back to Australia may be the straw that breaks the camel’s back with the Lynas effort. This slight detail requires the governments of both Australia and the state of Western Australia to acquiesce in taking the waste from a plant that should have been built in Australia in the first place but wasn’t because Lynas wanted to make jobs elsewhere (and in a country that has been proven to be anything but friendly). We will need quite a lot of convincing as to why the Australians should cave in on this one. As we have often said in the past the value added in REE is in the processing not in the mining. Thus we might also ask the question as to where the real profits of the value chain are dropping off? If they are falling off in Malaysia and the government there is getting the tax windfall then how much is in the equation for the Australian economy or its taxpayers?

“It is hard to see why such a limited job generator as Lynas, which quite clearly snubbed an onshore processing option, should get a free pass and we do not believe that it will.”…..

It would appear, however, that Lynas has hit a Catch-22. Or maybe a Catch-90 (thorium’s atomic number). Malaysia won’t let Lynas process REEs unless it sends the radioactive waste back to Australia and Australia will not accept radioactive waste, as a matter of policy, from Australian mineral processing conducted offshore. Both the Federal government and WA government are nevertheless happy to deal with the waste if the processing plant is onshore.

There is a very real possibility Lynas will have to bring its LAMP to Australia…. http://finance.ninemsn.com.au/newscolumnists/greg/8511842/lamp-going-out-for-lynas

September 1, 2012 - Posted by Christina Macpherson | Uncategorized