Lynas trying to protect bottom line, says Yeo

Lynas stock on‘Buy’ call even after MESTECC requires the radioactive waste to be removed


Australian rare-earths miner Lynas Corp Ltd’s attempt to combat Malaysia’s call to remove its radioactive waste from Malaysia or risk being shut down is merely an effort to protect its bottom line and avoid fulfilling its commitment to the Malaysian government, Energy, Science, Technology, Environment and Climate Change (MESTECC) Minister Yeo Bee Yin (picture) said.

In a letter to Lynas employees yesterday, the minister addressed a protest made by some 130 Lynas employees at the Parliament on Tuesday, during which the workers called on the government to save their jobs.

This follows Lynas’ statement last Wednesday that it would consider legal action against the ministry’s recent decision that Lynas must remove the radioactive water leached purification (WLP) waste from its Lynas Advanced Materials Plant (LAMP) in Gebeng, Pahang, if it wishes to renew its operating licence in Malaysia.

Yeo referred to a recent Australian Financial Review report citing CLSA Ltd analyst Dylan Kelly, who said in a note to clients that the cost of transporting the waste back  to Australia is estimated at A$60 million (approximately RM181.5 million), of which insurance will cover around A$46 million.

The balance of about A$14 million represents about 10% of Lynas’ earnings before interest, tax, depreciation and amortisation of A$129 million recorded in 2017 to 2018.

“I really hope you can put things into perspective according to these figures — it only takes 10% of Lynas’ earnings of one year to send out waste that has been accumulated in Malaysia for six years,” Yeo stated.

She added that even after the ministry’s requirement for the radioactive waste to be removed from Malaysia, brokers such as UBS Group AG and CLSA maintained a ‘Buy’ recommendation on Lynas shares, while UBS set a price target of A$3.10 on the stock — nearly double its current share price of A$1.62.

“What (these points) show you is that the whole drama the Lynas management is trying to stage — the myriad of paid advertorials in all major newspapers, the press conferences that paint a bad picture of the ministry and so on — eventually boils down to this: To protect the company’s bottom line by not honouring the commitment made.

“As a minister, my job, on the other hand, is to protect the public interest and people of Malaysia. I would like you to know that I did not ask more than what your employer had committed back in 2012.

“Therefore, it is my hope that Lynas will honour their words and start the process of shipping out WLP residues from Malaysia,” Yeo said.

According to MESTECC, whose decision was based on an executive review committee’s report on the operations of LAMP, the on-site residue has been accumulated for six years since operations at LAMP commenced in 2012 and have been stored at the LAMP temporary residue storage facility.

The two primary residues at LAMP are radioactive WLP waste totalling 451,564 metric tonnes and non-radioactive neutralisation underflow residue totalling 1.11 million metric tonnes.

Yeo said there is currently no viable near-term solution to manage the accumulated residue, which is stored at the open landfill temporary site.

The risks to the surrounding communities and environment grow with the increasing amount of accumulated residue, as the waste is exposed to the threat of natural disasters such as major flooding.

Yeo noted that Lynas had twice made the commitment to Malaysia to remove its waste, first in a letter of undertaking by Lynas in February 2012 and then in a letter of undertaking by Lynas Malaysia Sdn Bhd in a March 2012 letter.