This article first appeared in Forum, The Edge Malaysia Weekly on November 18, 2024 - November 24, 2024

Malaysia is not new to the rare earth industry. Historically, the country has been a significant player, exporting rare earths produced from monazite. However, the industry faced setbacks due to environmental concerns, most notably the closure of Asian Rare Earth due to the high concentration of thorium in its tailings, which caused irreversible damage to surrounding communities.

Malaysia is blessed with two types of rare earth element (REE) deposits: mineral-based rare earths and ionic clay rare earths. Usually, mineral-based rare earths have higher head grades or rare earth mineral content, typically measured in percentages, making them economical to mine via open pit mining methods. Mineral-based rare earths, like those extracted by Lynas and Northern China Rare Earth, generally have a higher head grade but consist predominantly of light REEs. On the other hand, ionic clay rare earths are usually found in much smaller volumes and are measured in parts per million, that is, much less compared with mineral-based rare earths. As such, conventional mining methods are not suitable for this type of rare earth. The in-situ leaching method, employed for ionic clay rare earth extraction, is environmentally advantageous as it does not involve massive land clearing. This method aligns with global demands for low-carbon and net zero products, and will help Malaysia to position itself as a leader in environmental, social and governance (ESG)-compliant rare earth production.

In 2014, the Academy of Sciences Malaysia published the “Blueprint for The Establishment of Rare Earth-Based Industries”, which laid the groundwork for revitalising the sector. This blueprint emphasises the importance of technological innovation, sustainable practices, and the development of a skilled workforce to support the industry’s growth. Despite a quiet period following this publication, the emergence of a Malaysian company as a pioneer in ionic clay rare earth mining marked a significant turning point for Malaysia. It accelerated the government’s efforts in the rare earth sector, beginning with the inclusion of rare earth elements in the National Mineral Industry Transformation Plan 2020-2030 framework and followed by the establishment of a standard operating procedure (SOP) for non-radioactive rare earth elements (NR-REE).

However, the industry faces significant challenges, including geopolitical tensions and price volatility. Government intervention is crucial to creating a conducive environment and providing financial support to weather these uncertainties. Drawing from the experiences of developed countries can offer valuable insights.

The journey of developed countries in promoting and encouraging rare earth mining offers valuable insights for Malaysia. Countries like the US, Australia and Japan have taken proactive measures to ensure a steady supply of rare earth elements, recognising their strategic importance in technology and defence sectors.

•     The US: The US government has recognised the critical nature of rare earths and has taken steps to reduce dependence on foreign supplies. Initiatives include the Defense Production Act, which allows the government to invest in domestic production capabilities. Additionally, the US has provided grants and loans to companies developing rare earth processing technologies, fostering innovation and ensuring a secure supply chain.

•     Australia: As a significant player in the rare earth industry, Australia has leveraged its abundant resources to become a key supplier of rare earth elements. The Australian government has supported the sector through policies that encourage exploration and development. For instance, the Critical Minerals Facilitation Office was established to streamline project approvals and attract investment. Moreover, Australia has collaborated with international partners to develop processing capabilities, thus moving up the value chain.

•     Japan: Japan’s approach has been driven by the need for resource security, given its lack of domestic rare earth resources. The Japanese government has invested in overseas mining projects and established partnerships with countries like Australia and Vietnam. Japan has also focused on developing recycling technologies to recover rare earths from electronic waste, reducing reliance on primary sources.

These countries’ experiences highlight the importance of government support, international collaboration and technological innovation in building a resilient rare earth industry. For Malaysia, adopting similar strategies could be crucial in overcoming challenges and securing a competitive edge in the global market.

To survive market brutality, Malaysia must differentiate its rare earth products by emphasising their low-carbon, net zero and ESG-compliant characteristics. Investing in human capital, particularly in research and development, is essential. The refinement of rare earth oxides into individual metals is not a matter of rocket science but requires time and expertise to achieve cost-effective, high-recovery processes.

Policymakers should adopt a risk management perspective when crafting the direction for Malaysia’s rare earth industry. The geopolitical nature of these products means that substantial financial resources are necessary to navigate market volatility.

One illustrative case study is Lynas Corp. Its journey in mastering refining capabilities took years of research, development and overcoming regulatory hurdles. Lynas’ success underscores that achieving high recovery rates and cost efficiency in refining rare earths is a gradual process that requires persistent effort and investment.

For Malaysia to establish itself as a global leader in the rare earth industry, concerted efforts from both the government and private sectors are required. The government must continue to foster a supportive environment, provide financial backing when needed and promote sustainable practices. Private entities should focus on innovation, sustainability and building a skilled workforce.

Lim Wei Hung is an executive director of Southern Alliance Mining Ltd and a founder of MCRE Resources Sdn Bhd

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