The International Atomic Energy Agency in Vienna said Thursday that the design and planned operations policies of a giant rare earth refinery being built in Malaysia meet international standards.
But the agency also made 11 recommendations, including the drafting of a detailed plan for long-term disposal of the refinery's radioactive waste, and suggested that the agency, an arm of the United Nations, do a follow-up review on compliance with these recommendations in a year or two.
The Malaysian government announced that Lynas, the Australian mining company that is building the facility, would need to comply with all of the recommendations from the agency before the refinery would be allowed to start operations.
Nicholas Curtis, the executive chairman of Lynas, welcomed the agency's report. "Today the I.A.E.A. validated Lynas's fundamental approach to put community and operational safety first in everything we do," he said.
Mr. Curtis said that while considerable work would need to be done, he believed that Lynas could meet the agency's recommendations. "Lynas is confident that completion and commission of the plant will be achieved before the end of 2011," he said.
Two Malaysian ministers said in a joint statement that Lynas would not be allowed to start up the refinery until a long-term waste disposal and refinery decommissioning plan was in place.
"Until this is done, the status quo remains: there will be no importation of raw materials into the country, and no operational activities will be allowed on site," said the minister of international trade and industry, Dato Sri Mustapa Mohamed, and the minister of science, technology and innovation, Datuk Dr. Maximus Johnity Ongkili.
Lynas requested a halt in trading of its shares on the Australian Stock Exchange at the start of the day in expectation of an important announcement, and the shares did not trade all day.
David Fuller's view Refining metals remains a dirty and dangerous
process which we cannot live without. Refining rare earths metals is particularly
hazardous; consequently it is a NIMBY issue. Otherwise, Lynas would have presumably
built its large refinery in Australia.
I credit Lynas for building its plant in a democracy rather than an authoritarian kleptocracy where a license might only require a large bribe, in addition to royalties. However, elected politicians in Malaysia will certainly be sensitive to safety issues, not least given their environmental experience with Mitsubishi Chemical's rare earths refining factory which was closed in 1992 and the company's cleanup continues.
The problem for Lynas: How far do you go in responsibly ensuring environmental safety without making the plant uneconomic? This is a difficult question to answer because we are not talking about baking muffins. There is no such thing as a green rare earths refining factory. However we can be sure that Lynas will at least have to meet all planning and operations conditions specified by the International Atomic Energy Agency.
How will this affect Lynas (weekly & daily), in which a number of subscribers and I have an investment interest? For those who prefer to buy following setbacks, it was already looking interesting following mean reversion towards the medium-term trend approximated by the 200-day moving average.
However, I assume the share price will be hit tomorrow because we can expect further developmental expenditure and a potentially lengthy delay before Lynas' Malaysian refinery is operable and generating revenue. Consequently, this is bad news in the short and possibly medium term but another opportunity to buy the share more cheaply for its longer-term prospects.
Here is a second article by Keith Bradsher: The Fear of a Toxic Rerun, which appears to have been written just be for the one posted above. It details some of the issues of concern at Lynas' Malaysian plant. (See also yesterday's comments - any other insights on Lynas or rare earths in general are always appreciated.)