UPDATE 2-Malaysia says Lynas rare earths plant must meet conditions

Thu Jun 30, 2011 5:22am EDT

Related Topics

* Could take a year for Lynas to get licence -govt source

* Lynas says to meet panel's recommendations

* Lynas has to come up with long-term waste management plan -panel (Adds Lynas comment, details)

By Niluksi Koswanage

KUALA LUMPUR, June 30 (Reuters) - Malaysia on Thursday asked Australian rare earths miner Lynas Corp to meet recommendations by an independent review panel on its $230-million plant, while the firm reaffirmed a year-end target for the start of production.

The plant will shore up global supplies of rare earths but is a hot political issue for Malaysian Prime Minister Najib Razak's government as the opposition plays up public concern over safety and environmental issues stirred by the plant.

The review panel set up by the Malaysian government to ease these fears on Thursday identified 10 technical issues in the Lynas plan that needed to be addressed.

Among the recommendations, the panel said the Malaysian Atomic Energy Licensing Board (AELB) needed to come up with a long-term waste management plan for the project, and for Lynas to submit an end-of-life decommissioning plan for the plant.

The panel, made up of four officials from the International Atomic Energy Agency (IAEA) and five independent experts, also asked AELB to improve its communication and education of the public.

The plant meets international radiation safety standards, but the panel said the Malaysian government needed to address the issues it identified.

"We will follow the panel's recommendations to the T," said Rebecca Fatima Sta Maria, secretary-general of the international trade ministry, which oversees foreign direct investment in Malaysia.

Lynas will contribute half a percent of its gross sales from the plant towards a decommissioning fund in anticipation of the plant's end-of-life programme, she added.

Lynas shares, which were on a trading halt ahead of the IAEA panel's findings, have fallen 3.9 percent so far this year, outperforming a 5.7 percent slide in the broader market . Analysts expected the shares to fall when trade resumes Friday.

HOPEFUL

Lynas has so far obtained a site and construction license. It needs to next obtain a pre-operating and operating license before it can begin operations.

Executive Chairman Nicholas Curtis said Lynas would meet the panel's recommendations.

"We believe the plant will be commissioned by the end of 2011," Curtis told reporters. "We expect to deliver some product to customers in the first half of 2012."

A government official told Reuters that it would take a year for Lynas to comply with the requirements.

"It would be a year or so, maybe even more depending on how long Lynas takes," said the official, who spoke on condition of anonymity.

Construction of the rare earths processor in the central state of Pahang was half-finished with completion set for September, Lynas said. It had hoped to get the pre-operating license in the same month.

The Malaysian plant was supposed to process rare earth concentrate shipped in from the firm's Mount Weld site in Western Australia. The site was scheduled to produce its first feed of ore in late March.

"We have always projected that...full ramp-up will occur by the second half of 2012. We believe that schedule is intact," Curtis said.

Project critics fear the plant could lead to a repeat experience of events surrounding a controversial rare earths factory run by Mitsubishi Chemical in the northern state of Perak, shut in the 1990s after allegedly being linked to birth defects and at least eight leukaemia cases.

Lynas' strategy would make it a key global supplier after top rare earths producer China last year imposed export quotas to retain resources.

"The fact that they're going forward (with construction) gives some comfort that they'll be able to address all the concerns," said Matthew Trivett, an analyst at Patersons Securities.

"There's going to be an extra level of scrutiny, which will come at a cost," he said.

Company officials said annual output from the Malaysian plant would hit 22,000 tonnes, meeting roughly a third of total global demand outside China by 2013. (Additional reporting by Sonali Paul in Melbourne; Writing by Liau Y-Sing and Min Hun Fong; Editing by Clarence Fernandez)

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