Shares of Lynas Corp. (LYC-A, LYSDY-O) closed 19% higher at A$1.59 on the Australian Stock Exchange following news that, after a year of delay, Malaysia has approved a temporary operating licence for the rare earth separation plant the company has nearly finished building near the Kuantan port in Pahang state.
Malaysia’s Atomic Energy Licensing Board granted a two-year operating licence on Feb. 2, paving the way for the Australian mining company to complete the $230 million separation plant that will process rare earth concentrates from Lynas’ Mt. Weld mine and concentration plant in Western Australia, about 35 km south of Laverton. Management now expects to offer the first finished product for sale in the second quarter of this year.
Activists in Malaysia have protested the proposed facility for many months, claiming the plant could expose local residents to potential leaks of radioactive waste. Concerns about the project escalated following the Japanese earthquake in March 2011. The material from Mt. Weld contains low-level radioactive thorium.
Under the conditions of the licence, Lynas must submit plans for a permanent disposal facility for tailings within ten months and must 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 have 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 Associated Press.
Lynas has completed nearly 91% of the new processing facility and will transport rare earth concentrate by road from Mt. Weld to Fremantle port before exporting the material to east-central Malaysia. Lynas successfully 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 the first quarter of 2012.
According to Lynas, Mt. Weld remains the world’s richest source of rare earths with over 1.4 million tonnes of rare earths oxide (REO) at a grade of 8.1%.
“Overall this license is a good thing for the rare earths industry, even if we continue to rate Lynas shares a sell,” 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 A$0.60 per share. At presstime in Australia the company was trading at A$1.43 per share.
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